Two single mothers who took out a mortgage with PTSB have been forced to pay hundreds of euro more each month in interest repayments after their bank sold their loan to another company without any explanation and no apparent justification.
In an era of surging interest rates, hundreds of thousands of homeowners in Ireland have found themselves substantially out of pocket, but one reader who contacted Pricewatch recently feels particularly aggrieved after being forced to pay a very high price for a boardroom deal over which she had absolutely no control.
This reader, who we shall call Siobhán, has been left enraged by the decision of PTSB to sell her loan to Pepper Finance, which is now charging her almost twice what she would be paying had the loan stayed where it was.
Siobhán bought a property in Galway with a friend called Meabh seven years ago. They are both single parents and have known each other for more than 30 years.
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The idea was they would rent it out for a spell and then use it for their children when they went to college. For most of the time they have owned the property, everything has gone according to that plan.
[ Mortgage servicer Pepper Finance sees Irish profits drop despite big revenue riseOpens in new window ]
Then last year news broke – if that is not too grand a phrase – that Permanent TSB had reached an agreement to sell a portfolio of its loans to another financial institution, with the loans sold to be managed on a day-to-day basis by Pepper Asset Servicing. While the news made headlines on the business pages of Irish newspapers, it was pretty niche and might otherwise have escaped the attention of Siobhán and Meabh.
It was, however, soon to become far too central to their world.
As it stands, Siobhán and Meabh have about €105,000 left on their mortgage, and the property they bought for less than €200,000 is now valued at about €300,000.
While their investment has clearly been a success, what matters more is that it has also provided a stable home for their children as they complete their studies in the west.
“We are both single parents and have five children between us, of whom four have [attended] or are attending university in Galway and are living in the property,” Siobhán says.
But things started to go awry from the beginning of this year, with their interest rate almost doubling for no other reason than their loan was sold and is now being managed by Pepper Finance, a company which does not offer any fixed rates and typically charges among the highest variable rates on the market.
As a result, Siobhán and Meabh are now paying hundreds of euro more each month than they would have been had the loan not been sold from under them or if it had been taken over by another provider. Over the course of a year, they will be worse off by about €3,000 through no fault of their own.
‘For data protection reasons, the bank is not allowed to disclose confidential information relating to any individual borrower’
— PTSB
They are now paying an interest rate of just over 9.5 per cent, which is wildly out of sync with the rates on the table from pillar banks.
“If we had stayed with PTSB we would be paying 5.65 now,” she says. “This was an involuntary transfer of our mortgage. We were not in arrears and never had been. We did avail of the six-month Covid mortgage break, which was advertised at the time as having no negative future consequences for credit ratings.”
Siobhán says that an updated FAQ on the PTSB website says the bank is “required by regulators to reduce the percentage of loans which are classified as non-performing loans (NPLs) or are at risk of becoming NPLs as defined by European regulatory guidelines. Your loan is being transferred in order to continue to meet these regulatory requirements. Your loan is unaffected by the transfer to Pepper and all terms and conditions transfer with your loan.”
The FAQ also says loans which are meeting the agreed terms and conditions with payments up to date are included in the transfer if the loan is “being repaid on an interest-only or part-capital and interest basis. Whilst these loans are currently meeting their monthly payment terms, there is a significant risk that the outstanding capital balance of loans in this cohort may not be repaid in full when the loan reaches maturity. That is why such loans are included in this transfer.”
Siobhán says this paragraph was “not included on the PTSB’s earlier version of the website”.
She also points out that PTSB says in the FAQs, in response to a question as to whether a monthly loan repayment would remain the same after the transfer to Pepper, that the “monthly payment will continue in line with current interest rates and the agreed terms and conditions applicable to your loan”.
It also says there would be no impact on the amount of money owed or on the loan contract. “Your mortgage balance and terms and conditions will not be affected by the transfer to Pepper.”
Our reader says the lines above “clearly imply that there should be no negative consequences of the transfer of our mortgage from PTSB to Pepper”.
She says that if PTSB “is so concerned about loans becoming non-performing, what percentage of loans that they have sold to Pepper [is] now in danger of becoming non- performing as a result of paying 9.55 per cent interest? What is the role of the Central Bank and ombudsman in protecting people in this situation?”
She points out to us and in a complaint she has lodged with the Financial Services and Pensions Ombudsman that the loan is not non-performing – and never has been – and is not in negative equity or anything close to it.
[ PTSB sells further €700m of buy-to-let mortgagesOpens in new window ]
She stresses that they are also paying both interest and capital on the loan.
She and her friend are – as she noted – single parents, and both have successfully battled significant health challenges. She wonders whether other borrowers had their fully-performing loans sold on to Pepper and are experiencing this radical shift in interest rates.
She asked us, if herself and her friend apply to PTSB to move the mortgage back to them at the lower rates of interest, “under what circumstances are they obliged to accept our application and who will bear the costs associated?’’
We could not really answer these questions, but we went to PTSB in search of an explanation as to what happened, and to see if it believed these former customers had been treated fairly.
PTSB responded with the following statement.
“For data protection reasons, the bank is not allowed to disclose confidential information relating to any individual borrower,” it began.
“The FAQ document to which you refer relates specifically to sales of non-performing loans (NPLs) and it does not relate to sales of other loans. Loan sale transactions undertaken by PTSB in recent years have included transactions involving both NPLs and performing loans. This means it is incorrect to infer that a loan is a non-performing loan solely on the basis that the loan was sold by PTSB.”
The fact that the bank has acted in this fashion without any justification or explanation to the customer is shocking to me and will be shocking to our readers
By way of example, in September 2022, PTSB announced the sale of a portfolio of predominantly performing Buy-To-Let loan accounts and in February 2023, the legal title and servicing of these loans transferred to Pepper. The bank notified all affected customers in September 2022, enclosing an FAQ booklet.
“As this transaction was not an NPL transaction, it did not include reference to NPLs, unlike the NPL FAQ document which you cite. The terms and conditions of all loans within the portfolio transferred with the loan. After a loan has been sold, the interest rate applicable to the loan is determined by the new lender and not by PTSB.”
The statement concluded by saying that “in respect of former PTSB customers whose loans were sold and who wish to switch their loan to another lender, the bank invites applications from home loan and Buy To Let customers and will consider these applications in line with its lending criteria. Customers who are seeking more information on switching to PTSB should contact the bank or visit our website for further information.”
We will let readers judge whether this statement addresses our readers’ concerns.
We did, however, point out to the bank that, in our view, the response completely fails to address the fact that this customer has ended up being penalised by in excess of €3,000 a year directly as a result of PTSB’s decision to sell her loan.
The fact that the bank has acted in this fashion without any justification or explanation to the customer is shocking to me and will be shocking to our readers.
We also wonder how could any PTSB customer or would-be customer have any confidence the bank will not treat them in an equally shabby and costly fashion in the future?
It is also interesting that PTSB declined to discuss the specifics of this case on GDPR grounds when it has discussed and dealt with issues connected with many of its customers who have contacted Pricewatch on many, many occasions in the past. We can’t help but wonder why GDPR applies now but not in the past?
