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.
NAMA Wine Lake 
What do you call a financial institution that thinks a loss of €33 million doesn’t need to be reported properly?
Nationalised!
The incompetence at PTSB was present long before any Government bailout.
Yup – and that incompetence was solely an issue for the bondholders, the shareholders and the depositors.
Unfortunately that is now no longer the case!
As an aside, with PTSB, as with Anglo and INBS, I think the word “bailout” is the antithesis of the Dante-esque infernos that takes place within their walls :-(
Dpes the €33 million “computer error” at PTSB (Permanent TSB) form any part of the €4 billion PCAR figure for IL&P (Irish Life and Permanent TSB) announced in March 2011?
Loss??
I’d like to see the proof.
The profit margins on the variable rate were most likely higher than the profit margins on the fixed rates,
especially seeing that PTSB has one of the highest variable rates in the market,
and especially seeing as most of these mortgages were fixed during the Celtic tiger when banks were willing to settle for lower profit margins on their mortgages.
The regulator should have a deep look into this one.
According to the letters of offer,most of these mortgages were going to automatically revert to a nice low tracker after the fixed rate expired.
These trackers were loss making for the bank.
Seeing as only 4 customers complained about this, it is evident that the bank sneakily got most of these customers to unknowingly forfeit their trackers for good.
This saved the bank way more than the 33 million that the bank claim that they have lost.
I cant see how how the bank could have made a loss from this convenient little stunt.
I would really love to see the hard figures.
Hidden away at the bottom of page 189 of the annual report….
Where’s Gillian’s shades? …. She doesn’t look dressed without them!
She was a travel agent for chrissake … Who put her in charge of the Permanent?
Are they of the rose tinted variety, WSTT?
@WSTT here you go glasses perched,channelling her inner Anna Wintour.
Shame she did not just click and go a long time ago…in fairness it was a very successful travel business.Given the ongoing investigations,she’s probably asking herself the same question,specifically regarding the back to back loans.
Some have suggested that one of the main reasons for the false starts,low ball bids is ongoing concerns about investigations,possible fines,etc.
Must be some carpet they brushing all this under,sure it’s Ireland,they just nationalize these problems,time will pass people forget.This is the major impediment to any successful sale,it’s viewed as a contingent liability by the naieve yanks who are unfamiliar with the nuances and glacial pace of ALL irish white collar investigations,someone should have a quick word tell them its a non issue.Alternatively,issue a report with a few reccomendations to be ignored,shelve it and get on with closing or selling this sinkhole.
“The €7.2 billion “window-dressing” deposits were transferred to Anglo in the run-up to the bank’s financial year end on September 30th, 2008, to make the bank’s financial position look healthier than it actually was.
The money came from Anglo in circular transactions that went into Irish Life Permanent’s banking division Permanent TSB and were returned to Anglo through Irish Life Assurance.”
Hi di hi and all that.
http://www.siliconrepublic.com/start-ups/item/16386-gillian-bowler-launches-new
http://www.irishtimes.com/newspaper/finance/2011/1125/1224308107774.html