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Ombudsman Publishes Report on Local Authority Housing Loans

Ombudsman Publishes Report on Local Authority Housing Loans

The Ombudsman, Kevin Murphy, has today (5 July 2000) published a report entitled "Local Authority Housing Loans - Overpayments". The report, which he has presented to the Dáil and Seanad, highlights:

• the extent to which many local authorities had continued to accept payments from borrowers on loans that had been paid in full,
• the failure of many local authorities to take any steps to refund the overpayments made on fully paid up loans.

His investigation arose from a complaint made in 1998 when the Ombudsman discovered that Meath County Council had continued to accept payments from an elderly borrower in respect of a housing loan which had been fully paid up for almost two years.

Having examined that complaint the Ombudsman was concerned that this might not have been an isolated incident so he decided to exercise his powers to initiate an investigation across all housing authorities.

In summary, his investigation has revealed

• 6,411 accounts,
• involving refunds of approx. �547,000,
• ranging from �1 to approx. �3,500 in individual cases,
• one local authority made refunds totalling �122,823,
• seven local authorities reported no overpayments,
• one local authority had a credit balance remaining on an account for almost 19 years and
• one borrower paid 46 consecutive monthly instalments on a fully paid up loan.

His Report includes a breakdown of the above details for each local authority together with findings and recommendations to ensure that this type of complaint does not recur.

Main Findings The Ombudsman found that - Seven of the 42 local authorities investigated had proper control procedures in place which ensured that there were no overpayments on mature / redeemed housing loans. These local authorities are:

• Cavan County Council,
• Laois County Council,
• Monaghan County Council,
• Offaly County Council,
• Drogheda Corporation,
• Galway Corporation and
• Kilkenny Corporation.

- Other local authorities had either no proper procedures or ineffectual procedures in place to regularly check revenue balances on mature and redeemed loans.

- The majority of local authorities placed a higher priority on the collection of loans and loan arrears than on refunding credit balances which were held on borrowers' accounts. - While many borrowers may have been remiss in not cancelling their standing orders, this did not diminish the obligation on local authorities to have proper and secure financial management systems in place to protect both their own interests and those of their borrowers.

- Some local authorities will have to improve their computer systems and procedures. In this regard the Ombudsman has included a best practice procedures template in his recommendations.

Recommendations The Ombudsman has recommended improved:

• administrative procedures,
• staff training,
• internal auditing and
• information technology usage,

and he has also recommended the payment of compensation.

On the issue of compensation, the Ombudsman recommends that in those instances where

• a credit balance remained on a revenue account for a period of more than two years and
• where the amount is equal to or in excess of �100,

the Local Authority, in addition to refunding the overpayment, should also pay the borrower compensation for the loss of purchasing power of the amount in question. In calculating compensation, the Ombudsman has recommended that local authorities apply the Consumer Price Index (CPI).

Most local authorities made immediate arrangements to refund overpayments as soon as they came to light during the course of the Ombudsman's investigation. They also took steps to review their administrative procedures.

The report is attached. The full text of the report is also available at http://www.irlgov.ie/ombudsman/ on the Ombudsman's website.

For further information please contact Maureen Behan or William O'Doherty at 01- 6785222 or 01- 6395650 / 5652 (direct).