AIB How is AIB calculating the interest on the 12%?
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Tedmonster
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Was just checking the AIB Website to see if it their Tracker statement has changed and just read their statement on the decision again.
Does their own statement go against how they calculated the interest ?
Refunding by cheque interest charged. This was compound interest ?
Application of the FSPO Decision
The FSPO has made a decision in relation to a complaint where the customer did not have the option of choosing the then prevailing tracker rate at the end of a fixed rate period. This issue occurred between October 2008 and December 2013 when AIB had withdrawn tracker rates.
Earlier this year we announced that we had made an additional provision, to cover the application of the FSPO decision on an individual tracker complaint to a wider customer group of c. 5,900 accounts. The rollout of this decision relates to a group of customers we have written to previously (when we wrote to affected customers in 2018 on this topic we provided a payment of €1,615).
The FSPO made an award on an individual FSPO complaint. The award is a 12% write down of the capital balance at the time the fixed rate period ended and a refund of interest charged on that 12% capital amount.
Given other customers had similar terms and conditions and circumstances as this complainant, we have decided to apply the award given in this FSPO decision to these customers. The application of the FSPO decision is to provide a fair and proportionate remedy.
We have reviewed each account individually and calculated the balance adjustment and interest payment required in each case. This relates to reducing a mortgage account balance by 12% from the date the fixed rate period in question ended, refunding by cheque interest charged on that 12% capital amount during the intervening period and adjusting the repayments going forward given the capital reduction. Where accounts are closed the adjustment will be made by a cheque payment.
Does their own statement go against how they calculated the interest ?
Refunding by cheque interest charged. This was compound interest ?
Application of the FSPO Decision
The FSPO has made a decision in relation to a complaint where the customer did not have the option of choosing the then prevailing tracker rate at the end of a fixed rate period. This issue occurred between October 2008 and December 2013 when AIB had withdrawn tracker rates.
Earlier this year we announced that we had made an additional provision, to cover the application of the FSPO decision on an individual tracker complaint to a wider customer group of c. 5,900 accounts. The rollout of this decision relates to a group of customers we have written to previously (when we wrote to affected customers in 2018 on this topic we provided a payment of €1,615).
The FSPO made an award on an individual FSPO complaint. The award is a 12% write down of the capital balance at the time the fixed rate period ended and a refund of interest charged on that 12% capital amount.
Given other customers had similar terms and conditions and circumstances as this complainant, we have decided to apply the award given in this FSPO decision to these customers. The application of the FSPO decision is to provide a fair and proportionate remedy.
We have reviewed each account individually and calculated the balance adjustment and interest payment required in each case. This relates to reducing a mortgage account balance by 12% from the date the fixed rate period in question ended, refunding by cheque interest charged on that 12% capital amount during the intervening period and adjusting the repayments going forward given the capital reduction. Where accounts are closed the adjustment will be made by a cheque payment.
misstealeaf
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It would appear so- it looks like an error on AIBs part if you ask me. I'd think that it was a genuine error as opposed to them deliberately doing it. Cos it's so obvious they couldn't have thought they'd pull the wool over peoples eyes.
Just off the phone from help line as we still haven’t received our cheque. I asked about the interest calculation, the guy I spoke to said the amount remains static but you will be refunded 4% interest or the you’re interest charged if that was higher... is this correct or updated?
Wo
Wouldn't bet on it, AIB is the Darth Vadar of banking. They don't do innocent mistakes. I cannot figure why they would engage in such childish and futile exercise to con people. You miss your payments or take a repayment holiday then just see which applies, simple or compound interest!
Tedmonster
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misstealeaf
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I really just can’t understand how they deem themselves to be implementing the ombudsman decision.
Brendan Burgess
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Hi PT
I wrote to the Ombudsman immediately.
They wrote immediately to AIB but gave them 10 working days to reply.
If AIB has an argument, then it will take a bit of time.
Brendan
I wrote to the Ombudsman immediately.
They wrote immediately to AIB but gave them 10 working days to reply.
If AIB has an argument, then it will take a bit of time.
Brendan
Tedmonster
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I think you could be fairly confident that they will have an argument and leave it until the 10th working day to respond
Brendan Burgess
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There argument goes something like this, but they did not put it in writing to me so I am not sure. It is so ridiculous that they could not be arguing this... on second thoughts...
The write down would have been amortised over the life of the loan.
Therefore we should apply the interest to the written down amount.
But it's simpler to just pay simple interest on the unamortised amount
I think that when they go to write it down, they will see how ridiculous it is.
Brendan
The write down would have been amortised over the life of the loan.
Therefore we should apply the interest to the written down amount.
But it's simpler to just pay simple interest on the unamortised amount
I think that when they go to write it down, they will see how ridiculous it is.
Brendan
If the average difference between the figures for compound interest and simple interest is say, €3,000, then AIB could save in the region of €18m by applying simple interest.
I think they are trying to pull a fast one and didn’t bank on so many payees being on this forum and therefore being in a position to call them out.
Even their explanation of how they calculated the interest in the Q&A document is convoluted - using terms like “static” etc instead of simply stating “we used a simple interest calculation on the 12% to calculate the amount”.
AIB are, I believe, chancing it and in so doing, pushing the bounds of credibility.
I think they are trying to pull a fast one and didn’t bank on so many payees being on this forum and therefore being in a position to call them out.
Even their explanation of how they calculated the interest in the Q&A document is convoluted - using terms like “static” etc instead of simply stating “we used a simple interest calculation on the 12% to calculate the amount”.
AIB are, I believe, chancing it and in so doing, pushing the bounds of credibility.
Brendan Burgess
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Hi Jay
"static" is one of their favourite words.
In their defence of claims by AIB staff who were on a fixed preferential rate of 3% since the 1960s, they deny it was fixed, claiming that it was a variable rate which had remained "static".
Brendan
blue_steel
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Any chance the Ombudsman will be so annoyed by AIB not implementing his decision in full that he will throw in an order to move the 5600 to a tracker at 1.5% as a punishment. 
David_Dublin
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This is genius. Even for AIB this is just too funny.
Jellytot2019
Registered User
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Hi Brendan
Hoping you might be able to give me some advice. My appeal with BDO was denied and I raised a case with the FSPO.
As I sold my house in 2018, I received a cheque last week for the capital write down of 12% and the interest refund. However looking at October2019 calculator the interest refund received is lower than what I was expecting- most likely due to the issue with simple vs compound interest.
I received a letter from the FSPO this morning in relation to my case asking me to respond within 10 working days if possible. I have copied below what the FSPO are asking of me.
"a) You are satisfied with the Provider’s payment and your complaint with this office is
therefore resolved. In such circumstances we will note that the matter has been settled
and your complaint to this office will be closed, or;
b) You are dissatisfied with the Provider’s payment and you wish to progress your
complaint with this office."
I am relieved to have received reimbursement from AIB but the difference in interest refund as I have calculated is approx 1200 euros which is not insignificant. Would you advise that I inform the FSPO of my dissatisfaction and choose (b) below? I see you have already raised this issue with the FSPO separately.
TIA
Hoping you might be able to give me some advice. My appeal with BDO was denied and I raised a case with the FSPO.
As I sold my house in 2018, I received a cheque last week for the capital write down of 12% and the interest refund. However looking at October2019 calculator the interest refund received is lower than what I was expecting- most likely due to the issue with simple vs compound interest.
I received a letter from the FSPO this morning in relation to my case asking me to respond within 10 working days if possible. I have copied below what the FSPO are asking of me.
"a) You are satisfied with the Provider’s payment and your complaint with this office is
therefore resolved. In such circumstances we will note that the matter has been settled
and your complaint to this office will be closed, or;
b) You are dissatisfied with the Provider’s payment and you wish to progress your
complaint with this office."
I am relieved to have received reimbursement from AIB but the difference in interest refund as I have calculated is approx 1200 euros which is not insignificant. Would you advise that I inform the FSPO of my dissatisfaction and choose (b) below? I see you have already raised this issue with the FSPO separately.
TIA
Jellytot2019
Registered User
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Hi Brendan
Forgot to mention I did contact Aib and requested a breakdown of the calculations- I have yet to receive this.
Kind regards Jellytot2019
Forgot to mention I did contact Aib and requested a breakdown of the calculations- I have yet to receive this.
Kind regards Jellytot2019
Brendan Burgess
Founder
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You are not happy, so you should say so.
Brendan
Brendan
Hi Jellytot19
i also requested from AIB the calculations of how they calculated the interest. I received it last week from them. I forward this to an Actuary we are working with and he said they had used simple interest and interest should have been 7.6k higher
i went also back to the FSPO office and asked them to reopen and investigate our case which they have confirmed they are going to do.
i also told the FSPO office that I had an issue with the interest calculations and I forwarded them the calculations from AIB and the full calculations from the Actuary
i also requested from AIB the calculations of how they calculated the interest. I received it last week from them. I forward this to an Actuary we are working with and he said they had used simple interest and interest should have been 7.6k higher
i went also back to the FSPO office and asked them to reopen and investigate our case which they have confirmed they are going to do.
i also told the FSPO office that I had an issue with the interest calculations and I forwarded them the calculations from AIB and the full calculations from the Actuary
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