The Financial Services Ombudsman today criticised what he termed as “unwarranted and unsolicited” moves by Irish banks to entice people off low-rate tracker mortgages.

In his first annual report, Bill Prasifka said his office had witnessed a sharp rise in the number of complaints relating to banks offering financial inducements to customers in return for switching mortgage contracts.

Trackers use the European Central Bank's benchmark rate of 1% plus a margin and even though the ECB rate is very low, inter-bank rates are still lower.  The cost to banks of tracker mortgages has risen however, as the interest on loans is fixed at a set margin above the European Central Bank base rate, which no longer reflects the banks’ own total costs. “It is very hard to see how banks trying to entice people off their tracker mortgages were acting in the best interest of their customers,” Prasifka said.

The report showed complaints by consumers about financial institutions rose by 28%, to 7,619 last year. Some 4,668 complaints were made against firms in the insurance sector and 2,951 complaints against financial institutions such as banks and building societies.

The following is a summary from the report:

• 7,619 complaints were received – a significant increase of 28%;

• 6,255 complaints were concluded. This includes 2,095 complaints concluded after initial referral of the Complainants back to the Financial Service Provider and no further action was required by the Office;

• 3,805 complaints overall were resolved in the Complainants’ favour when taking the above figure into account – 61% overall;

• Approximately 25,000 complaints have been received since this Office was set up in April 2005;

• Over 17,000 telephone calls were received while over 200,000 visits were made to the website;

• Statutory levies totalling €5,891,521 were collected;

• IT systems work well and revisions were made where appropriate to the complaints handling systems and administration procedures;

• The administration of the office continues to be highly effective even though it is more challenging to maintain throughput in the current climate;

• It is estimated that conservatively over €60m has been made good to consumers as a result of the Office’s work since 2005. The cumulative knock-on effect this work has on the financial industry in getting matters resolved which do not come to the Office is a further major benefit;

• The profile of the Office during 2009 was high, not alone from media profile but from the increasing number of complaints and information requests received, as well as dealing with very significant complex matters;

• There were some major High Court Findings in favour of the ombudsman and at year end a Supreme Court judgment was awaited.

The Office is funded by statutory levies on Financial Service Providers. The Office’s running costs for 2009 were €5,131,945. Collection of the levies was satisfactory. Running costs said to be under very tight control.

Annual Report 2009