* Only a quarter of 13,000 overcharged customers compensated
* Irish finance minister to "admonish" bank chiefs next week
* Central bank expects all redress to commence by year-end
(Adds detail, quotes)
By Padraic Halpin
DUBLIN, Oct 18 (Reuters) - Ireland will raise taxes on banks
if they don't move faster to provide compensation for the
"scandalous" overcharging of thousands of mortgage customers,
Prime Minister Leo Varadkar said on Wednesday.
Ireland's central bank has identified at least 13,000
customers who should have been given the option of a cheaper
"tracker" mortgage or kept on a better rate years ago. It has
ordered lenders to repay the difference and offer compensation.
"The government believes the behavior of the banks is
scandalous and we also believe the banks have been dragging
their feet in solving this problem with a real human cost,"
Varadkar told parliament.
Tracker mortgages, which follow the European Central Bank
rate, were sold in Ireland prior to the financial crisis and
have proven significantly cheaper than variable or fixed rate
mortgages as ECB rates have long been at record lows.
The regulator said on Tuesday that while banks had rectified
the rate for 98 percent of accounts, only a quarter had been
compensated. Varadkar said Finance Minister Paschal Donohoe
would meet the heads of the banks to "admonish" them next week.
"I want to state that the government will take further
actions if we don't see further progress and much more quickly,
whether that's through enhanced powers for the central bank or
increased taxation imposed on the banks."
According to the central bank, 23 mortgage holders lost
their homes as a result of the banks' failings and another 79
investment properties were incorrectly repossessed.
Varadkar said the overcharging - which left some customers
paying hundreds of euros extra a month at the height of
Ireland's financial crisis almost a decade ago - had also
affected many people's mental health and well being.
The central bank expects all lenders to start providing
redress and compensation by the end of the year, but it does not
have the statutory power to compel lenders to do so for failures
that occurred prior to the introduction of new powers in 2013.
So far, permanent tsb, the first lender to start a
compensation programme for customers, has been fined 4.5 million
euros and the central bank is further probing it and RBS'
Irish unit Ulster Bank.
It has said two further enforcement investigations into
other lenders are in train, with more anticipated.
Irish bank shares were little changed on Varadkar's warning,
with most lenders up on the day at 1230 GMT.
(Reporting by Padraic Halpin; Editing by Adrian Croft and Mark
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