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Ireland's political and cultural magazine
1 4 July
NEWS
JUNE
The day before Brexit, Permanent TSB shares soared
amid speculation that the 75%-state-owned bank may
eventually merge with another lender. Shares surged
by 10 per cent though they had fallen by more than half
since the government sold shares last year. Michael
Noonan said: "The share price has been under pressure
for a myriad of reasons". He listed some of them but
failed to include the important legacy issue of under-
paid depositors.
After the vote for Brexit, Davy Stock-
brokers reported: "Brexit has clearly
heightened the uncertainty around the
timing and price of the sale of PTSB's
residual UK assets, delaying the bank's
normalisation". The shares had sunk by
around another quarter.
If the bank ever merges, its partner
may have to address legacy issues that
just might create significant liabilities.
RECENT OVERCHARGING
Meanwhile in June the bank consented
to Joseph Wallace, a mortgage holder
from Mahon, Co Cork, being discharged
from his bankruptcy after it overcharged
him interest. Wallace claimed he would
not have had to go bankrupt, after being
unable to meet repayments on him home, if he had not
been overcharged. He told the High Court he only
learned of the overcharging after becoming bankrupt.
The outstanding mortgage at the time of Wallace’s
bankruptcy was around €326,000 with €75,000
arrears, his barrister told the court.
However, the actual amount, without the overcharge,
was around €284,000 with €52,000 arrears. Wallace
was charged interest at a rate of 4.5 per cent when he
was entitled to 1.5 per cent. David Hall of the Irish Mort
-
gage Holders Association welcomed the judge’s
decision and said his organisation was in discussions
on behalf of a number of other people in similar situa-
tions who had cases pending.
In 2014 the TSB shareholders challenged the consti-
tutionality of laws permitting the bank's €4bn
recapitalisation by the State. The matter was referred
to the European Court of Justice. Another headache.
THE ENORMOUS PRECEDENT
From 1958 to 20 February 1993 TSB Bank, a forerunner
of Permanent TSB, did not disclose the basis of calcu-
lating interest in its application form for new accounts,
in the notice of interest rates in its branches and in the
daily newspapers - with a view to 'defrauding' most
depositors. The bank was convicted and fined £1000
for breaching the Consumer Information Act 1978, as a
result of a private prosecution by me, after the aptly
named William Fagan refused to prosecute. Mere days
after the convictions and fines, the bank started paying
everyone the full advertised rate.
DISCOVERY OF 'FRAUD'
In April 1990, I had opened an Investment account with
TSB Dublin, lured by its offer of significantly higher
interest than other banks. Ten months later, I lodged a
bank draft and enquired as to when the draft would
attract interest. I was shocked to find that interest was
paid from the 21st of any month on the lowest monthly
balance.
I closed the account in January 1991. Two months
later, I wrote to the bank requesting a copy of the rules
Swindle at TSB
2016, and 1958 to 1993
Victims of Windle-stopped-Swindle never
reimbursed £339m leaving PTSB open to
possible claims
by Srinivasan Devrajan
Depositors or their
successors who held a
deposit or investment
account with TSB Dublin
or in Cork and Limerick
Savings Bank between
1958 and 20 February
1993 are invited to
contact the author
July 1 5
of the bank and whether interest was calculated
on a daily basis. The bank sent me a cheque for
about £62 on an ex-gratia basis, without preju-
dice. Smelling a rat, I sued the bank in the High
Court.
On 2 September 1992 TSB settled with me,
out-of-court, for £30,000 and a commitment
that I did not inform other depositors that they
had been 'defrauded'. As part of answers to
interrogatories raised by me, the bank con
-
ceded that the accounts were “not strictly
investment accounts” though that is precisely
what they were called. Six months later I
launched a private, criminal action against TSB.
ORDINARY AND CUSTOMARY
PRACTICE OF BANKING
The ordinary and customary practice of banks
and building societies in the State is to pay daily
interest on deposits.
ModuS operandi OF THE 'FRAUD' ON MOST
DEPOSITORS FROM TO
TSB Dublin and Cork and Limerick Savings Bank
'defrauded' most depositors from 1958 to 1993
by not paying the clearly and categorically
advertised interest on savings and investment
accounts.
The banks tricked depositors by not disclos-
ing, in the application forms for accounts and
in newspaper advertisements of interest rates,
the following material information:
1.
Interest was calculated on the lowest monthly
balance (Rule 18 certified under the Act of
1863)
2. Monies could be held for up to 60 days (from
the 21st of any month to the 20th of the
second following month) without earning any
interest, regardless of the sum of money
lodged or withdrawn.
3.
Money earned only 11/12ths of the clearly
advertised rate, except for deposits lodged
or withdrawn on the 21st day of any month.
CENTRAL BANK OF IRELAND
AWARE OF THE 'FRAUD'
Dr Michael Casey, Senior Adviser to the Central
Bank, advised by letter dated 6 March 1990 to
TSB Dublin and Cork and Limerick Savings Bank
that they should publish the gross and com-
pound annual rate of deposits so that depositors
could make an informed choice between the
rates offered by different banks.
The Central Bank knew that TSB was adver-
tising Compound Annual Rate 1/12th higher
than in fact paid, in breach of the Trustee Sav-
ings Banks Act 1989 section 27 (1), as is evident
from the letter of Dr Casey which stated:
"While we understand that the TSB’s tradi-
tional method of crediting interest to deposits
might lead to some difficulties with expressing
annual interest rates, we feel that these should
not be insurmountable”.
This is a subtle acknowledgement of the fact
that the advertised annual interest rates were
what most people would call fraudulent. The
question arises on whose behalf Casey felt sur-
mounting was needed. It was certainly not that
of the consumer or the public interest.
COMPLAINT TO DIRECTOR
OF CONSUMER AFFAIRS
I complained about the 'fraudulent' advertising
to the Consumers Association of Ireland (CAI)
and copied the letter to the then Director of Con-
sumer Affairs, William Fagan, TSB Bank, the
Central Bank of Ireland and the Advertising
Standards Authority for Ireland (ASAI)
‘INVESTIGATION' BY WILLIAM FAGAN
In 1991, Fagan refused to prosecute the bank for
not disclosing, in the application forms for
accounts and in newspaper advertisements of
interest rates, that interest was calculated on
the lowest monthly balance.
Moreover, TSB has not redressed the 'fraud'
perpetrated on most depositors after the 'inves-
tigation' in 1991, such as it was, by Fagan.
WARNING BY CONSUMERS ASSOCIATION OF
IRELAND IN ConSuMer ChoiCe MAGAZINE
The CAI published two letters from me warning
about the misleading advertising of TSB, in the
magazine Consumer Choice in 1991, but did not
see it fit to approach the High Court for an
injunction restraining the bank from continuing
to perpetrate the 'fraud'.
ADVERTISING STANDARDS AUTHORITY
OF IRELAND (ASAI)
ASAI did nothing all to stop the bank the bank
from misleading its depositors, despite the
warnings in Consumer Choice magazine and my
complaint.
The bank was convicted and fined
£1000 for breaching the Consumer
Information Act 1978, as a result of
my private prosecution
1 6 July
TSB MISLEADS FAGAN
TSB wrote to Fagan admitting that all depositors
were, and would continue to be, paid on their
lowest monthly balance. However, TSB did not
disclose to Fagan that some depositors includ-
ing trustees and employees of the bank were
being, and would continue to be, paid interest
on the basis of their daily balances. In fact, the
bank distributed passbooks in 1985 with a note
advising, “Investment accounts - a daily rate
may be paid in certain cases”.
TRUSTEES AND EMPLOYEES OF TSB
BENEFITED FROM MORE FAVOURABLE REGIME
So, the bank’s trustees and employees were
helped to the daily interest, despite the bank’s
own Rule 18 which prohibited interest for any
period less than one full calendar month.
WINDLE STOPS £ MILLION SWINDLE
ON MOST TSB DEPOSITORS
I, a lowly colonial alien, took and won a private
prosecution of the TSB for advertising an inter-
est rate of 8% pa on its Investment Account and
3.5% on its Deposit Account in the Irish Times
of 5 June 1992, when the true rates were 7.333%
and 3.208%. The bank pleaded not guilty, and
elected for summary trial in the District Court.
On 17 February 1993, District Judge Desmond
Windle convicted TSB Bank, fining it a total of
£1000 on two counts for breaches of s8 of the
Consumer Credit Act 1978 which states:
A person shall not publish, or cause to be
published, an advertisement in relation to the
supply or provision in the course or for the pur-
poses of a trade, business or profession, of
goods, services or facilities if it is likely to mis-
lead, and thereby cause loss, damage or injury
to members of the public to a material degree.
The judge declared that the fine would have
to be the maximum of £500 on each count, high-
lighting the Court's displeasure at the severity
of the offences.
Though the bank appealed the convictions
and fines, it started paying the full advertised
interest - interest on the aggregated daily bal-
ance - on the two accounts to all depositors
from 21 February 1993. Significantly, the bank
elected to pay the full advertised interest rate
to all depositors from 21 February 1993 rather
than to disclose its extraordinary method of cal-
culating interest in the application forms for the
accounts and in newspaper advertisements.
The convictions had no impact the minority
of depositors who received daily interest.
HARRY LORTON, TRUSTEE CHIEF
EXECUTIVE OF TSB ASHEN-FACED
On 21 October 1993, the convictions and fines
were affirmed by Dublin Circuit Court, after TSB
withdrew its appeal on the day of the hearing. I
remember clearly that Harry Lorton, Chief Exec-
utive of TSB, was ashen-faced outside the Court
almost as though he was staring at death.
KPMG AND PRICE WATERHOUSE COOPERS
KPMG and Price Waterhouse Coopers certified
the accounts of the TSB Bank for the year ending
October 1991, despite the convictions being
reported in the daily newspapers and on RTÉ.
They must have tried very hard not to detect the
'fraud', as interest on deposits would have shot
up after 21 February 1993, when the bank
started paying everyone interest on a daily rate.
CARMEL FOLEY REFUSES TO
REOPEN INVESTIGATION
In 2003 I presented Carmel Foley, the then
Director of Consumer Affairs, with documentary
evidence that TSB hoodwinked Fagan in 1991 by
claiming that all depositors were, are and would
be, paid interest on the lowest monthly bal-
ance. Foley asked only,”What do you want me
to do?”.
EUROPEAN COMMISSION
Silvia Scatizzi of the Commission was of the
expert and considered opinion that Ireland had
not failed to uphold the Misleading Advertising
Directive, despite the convictions and fines.
SOME SETBACKS IN THE COURTS
In 2006, the learned Justice Hanna considered
that the convictions and fines were for mislead-
ing advertising, not fraud. I would be of the view
that not paying the clearly advertised interest
for 35 years is 'fraud' in anybody's language.
Though he was technically and legally correct.
The issue arises because there is no statute of
limitation for a possible civil action for fraud.
An application by me to the District Court in
a further private prosecution, this time for
breaches of the Larceny Act, Section 8 of the
Consumer Information Act 1998 and Section
27(1) of the Trustee Savings Banks Act was dis-
missed by Judge James Paul McDonnell on the
grounds of abuse of process.
In 2011 Judge Mella Carroll refused me an
injunction against TSB's misleading advertising
on grounds that damages would be an ade-
quate remedy.
In 2000 Judge Paul Butler dismissed a civil
action taken by Alfie Smyth against TSB on the
ground that the sum sought, £8.80 was too
small to be heard in the High Court.
iriSh independent, iriSh exaMiner, iriSh
tiMeS AND RTÉ
I tipped off the Indo, Examiner, Times and
RTÉ about the consequences of the 'fraud' by
TSB. They studiously ignored me.
RIGHTS OF DEPOSITORS
TSB Bank has its origins in the penny savings
banks established to help the poor. It behoved
TSB not to 'defraud' its depositors. It should
have paid the outstanding interest, com
-
pounded annually at the then prevailing interest
rates.
Ironically, TSB now pays interest rates that
are in general above market rates. According to
Davy stockbrokers: “PTSB continues to pay
75bps [basis points. One basis point is equal to
1/100th of 1%] for one-year money compared
with 25-45bps at Bank of Ireland and 30-40bps
at AIB (EBS 55bps)”.
LEGAL ACTION
Depositors or their successors who held a
deposit or investment account with TSB Dublin
or in Cork and Limerick Savings Bank between
1958 and 20 February 1993 are invited to con-
tact the author by email for a draft copy of a
‘Statement of Claim’ for an action to right this
wrong. Based on a claim of fraud, which would
not be statute-barred.
Srinivasan.Devrajan@gmail.com is a Tamilian
who failed maths at school and lives in Meath.
www.windlestopsswindle.com
NEWS
The Central Bank said
“the difficulties with
expressing annual
interest rates… that
these should not be
insurmountable
Conviction for breach of Consumer Information Act 1978
