Permanent TSB lost €33m due to “computer error”

It’s normally urban myth when you hear about people profiting from websites mistakenly offering flat screen TVs for €3.99 when they really meant to offer them at €399. In practice, what usually happens is when the website learns of the mistake which is when the first customer complains that he is not getting his TV for €3.99, the company cancels the orders at the incorrect price. Not so, state-owned Permanent TSB, which in 2009 allowed borrowers to switch to lower interest rate mortgages without any fee. In a court judgment from Dublin’s High Court in August 2012 which has just been published today, it is revealed that Permanent TSB lost a staggering €33m when, in January and February 2009, it allowed mortgage customers to switch from fixed rate to lower variable rate mortgages free of charge.

The judgment states:

“While ILP honoured the no penalty quotations, the uncontradicted evidence before me was that this computer error was extremely costly for ILP – with a net loss of over €33m.-and that ILP suspended switching in February 2009 when the problem was discovered until it could be rectified.”

The offer to borrowers to change mortgages was via a promotion on the Permanent TSB website and this is why it is referred to as  a computer error. But “Computer error”? This looks like a colossal management failure.

The judgment published today deals with a number of PTSB’s mortgage borrowers who switched from fixed rate mortgages to variable rate mortgages, and the mortgage borrowers claimed that they were then not allowed revert to tracker rates when the original fixed period expired. The Financial Ombudsman upheld the complaints of the four sets of borrowers, and PTSB appealed the decision to the High Court. The High Court partly upheld the determination of the Financial Ombudsman though it overturned elements of his determination.

One of the worst business mistakes in modern times was the 1992 Hoover promotion where free flights were offered with every vacuum cleaner purchase. The company had to spend GBP 50m on flights on the back of just GBP 30m of sales of vacuum cleaners. Heads rolled, Hoover was taken over by another company and the case became celebrated worldwide for “how not to do business”. This error at PTSB from 2009 has cost the State €33m – it’s the first I have heard of it, and as far as I can tell from online searching it has not been reported before. Most tellingly, there is no apparent reference to the incident in the 2009 Annual Report for Irish Life and Permanent, the old name for the group which included Permanent TSB.

Is this what we now do in this country with this scale of cock-up, brush it under the carpet and not talk about it?

The Permanent TSB spokesperson had no comment on the matter at time of writing.

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Shock as NAMA has receivers appointed to McCabe Builders

A couple of weeks ago, Iris Oifigiuil had a notice that the recruitment and manpower agency MCR was seeking to have McCabe Builders (Dublin) Limited wound up on 5th September 2012 in Dublin’s High Court. It seems that NAMA got there first and had receivers appointed to the company on Friday last, 31st August 2012. NAMA has had Jim Hamilton and David O’Connor of BDO appointed as receivers. The appointment notice is dated 4th September 2012 and hasn’t yet been reported in Iris Oifigiuil but thanks to Eamon Browne on Twitter, there is a photograph of the notice in today’s Irish Examiner.

As a key company in John McCabe’s empire, the move comes as quite a surprise as it was understood that McCabes were cooperating with NAMA, after the sale of a site on Arlington Street in St James’s in central London last year and 159 City Road, also in London. McCabes are behind the development of the exclusive Abington Estate in Malahide, north Dublin, former home to Boyzoner Ronan Keating before the missus kicked him out and of Anglo’s David Drumm.  John McCabe has been behind the development of a number of hotels in Ireland and had a stake in the Chartbusters chain. He was one of the Maple 10 or Anglo Golden Circle and back in 2010, it looked as if a Swiss outfit called Western Gulf Advisory was going to take a rescuing stake in his companies, but nothing apparently came of it. John McCabe himself is believed to be doing business in the Middle East, the latest unconfirmed reported received on here was that he was operating in Oman.

Appointment of receivers by NAMA in this case will come as a surprise to many.

Remember you can see a comprehensive list of Irish foreclosure action by NAMA here and in this regularly updated spreadsheet.

UPDATE: 7^th September, 2012. In today’s edition of Iris Oifigiuil, we get further details on the McCabe receiverships. Four companies have had receivers appointed. The four companies are McCabe Builders Limited, McCabe Builders (Dublin ) Limited, J&M McCabe Properties Limited and HJP McCabe Construction Limited. In each of the four companies, receivers were appointed on 31st August, 2012 and the receivers in each of the four cases are Jim Hamilton and David O’Connor of BDO.

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Welsh politicians accuse NAMA of dragging its heels

NAMA is now upsetting politicians on an international scale with a report that both a Welsh council and a Welsh member of the British parliament are getting antsy with delays by NAMA in deciding the future of a major development site in the town of Denbigh in north Wales.

The site – owned by British developer, Nathan Kempin’s Cathco property company – was earmarked for a new shopping centre. The local council and their MP are concerned that 200-300 construction jobs and a subsequent 250 retail jobs are being jeopardised by delays in moving the development forward. Cathco is in administration and another company Conygar Investments is seeking to acquire the site.

The local MP Chris Ruane is quoted as saying “it is disappointing that there is still no movement on this site despite there being interest from developers and national companies”

Of course there might be valid reasons for delays on NAMA’s part, and the Agency is mandated to get the best price for property securing its loans, and it’s not beyond the ken of developers to use the media to chivvy NAMA along.

It is remarkable though that we don’t very often hear Irish politicians making their voices heard on stalled NAMA developments here. You could probably count on the fingers of one hand Irish politicians that have spoken out, which is indeed remarkable given the preponderance of Irish developments and property in the NAMA portfolio.

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