KBC Ireland reimburses up to € 12.9 million in legal costs in the event of arrears


KBC Bank Ireland is preparing to reimburse up to € 12.9 million in legal fees and interest to borrowers in arrears on 4,500 mortgages.

Most would see their mortgage account balances go down, although a limited number would receive direct payment.

It comes after the Central Bank of Ireland (CBI) ruled in November last year that mortgage lenders cannot charge legal fees on delinquent clients if they cooperate and engage with their lenders.

The regulator also concluded that charging interest on applied legal fees violated EU regulations on consumer mortgage contracts.

Permanent TSB (PTSB) and EBS, which is part of the AIB group, also each decided this year to reimburse borrowers for legal fees.

“At the end of 2019, after consultation with the CBI, KBC Bank Ireland changed its policy regarding the application of legal fees and third party fees to overdue mortgage accounts, including accrued interest on these fees,” the bank said in a statement. response to questions from the Irish Times.

“KBC has decided to apply this policy change retrospectively, ensuring that clients benefit from the same results, and during 2020 it conducted a review of all affected mortgage accounts. KBC has identified clients whose mortgage balances will be adjusted downwards accordingly.

The bank began writing to 7,000 customers in 4,500 mortgage files affected by the matter.

The average adjustment of the balance for legal fees is approximately € 2,875 on all the initial cases processed, including the interest that had been invoiced. Although this indicates a total figure of 12.9 million euros for the bank, sources said the final figure when all cases were dealt with would likely be lower.

The cost of repayments will be absorbed by the existing loan loss allowances that have already been charged against the non-performing loans, meaning the bank will not have to suffer an additional financial blow.

The PTSB said in September that it was reimbursing legal costs, an average of € 2,400, plus interest, to nearly 400 borrowers who had past arrears, following a review of inherited cases.

Meanwhile, EBS has reimbursed 11,000 borrowers an average of € 400 in interest on legal fees and other third-party fees applied before engaging with the Central Bank last year.

KBC Bank Ireland, part of the Brussels-based KBC group, recorded a net loss of 41 million euros for the first nine months, due to a provision of 95 million euros made in the first half of the year. year for an expected increase in bad debt losses to the economic shock of Covid-19.

The lender extended payment interruptions to 6,900 borrowers between March and September as part of an industry-wide initiative to ease financial hardship caused by the pandemic. While most have rolled back the relief measure, managing director Peter Roebben said last month that “a number of customers” would need more forbearance and restructuring.

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