Bank of Ireland is to make a €150m to €175m provision this quarter to cover compensation for an additional 6,000 mortgage customers it overcharged.

Irish banks are under threat of being penalised by the government if they do not compensate at least 20,000 borrowers who should have paid less on their mortgages.

The industry-wide compensation scheme concerns customers who should have been given the option of a cheaper tracker mortgage that follows the low European Central Bank rate or kept on a better rate years ago.

Approximately 4,300 customers will shortly be written to by the Bank with an offer of compensation. These letters will also set out the range of options which are open to customers and the Bank aims to compensate all of these customers, subject to their agreement, by the end of this year.

For additional impacted customers, it is the group’s objective to fully resolve the Tracker Mortgage Examination Review, and to take an approach which seeks to respect our legal and contractual commitments and also ensure fair outcomes are achieved for customers, consistent with the customer centric culture the group aspires to.

On this basis, the group has therefore agreed to include an additional c. 6,000 accounts within the scope of the compensation scheme. The group will ensure that all impacted customers who continue to have an open mortgage account will be returned to their correct tracker rate as soon as possible, and aims to compensate all these customers, subject to their agreement, as quickly as possible, starting before the end of 2017.

Bank of Ireland group chief executive Francesca McDonagh said: “Since taking up the role of CEO at Bank of Ireland in October, making progress on the tracker issue has been a top priority. We have since made substantial progress in relation to the issue.

“The bank is also confirming today that c.6,000 additional customers will be part of the compensation scheme. This now gives us a clear picture of the number of impacted customers. The compensation process is commencing, and our priority is to ensure that all impacted customers are compensated as quickly as possible.

“I believe that the way in which we address this issue will define the customer centric culture we aspire to at Bank of Ireland and this is why I have made resolving this issue my personal priority since joining the Bank.

“I unreservedly apologise to all impacted customers for the financial loss and anxiety this has caused them and their families.”

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