An investigation by the Ombudsman into the level of unrefunded overpayments on borrowers' loan accounts
Published July 2000
A Report to the Dáil and Seanad in accordance with Section 6(7) of the Ombudsman Act, 1980.
My primary objective as Ombudsman is to examine and provide redress for justified complaints from individual citizens against certain public bodies. A secondary aim is to suggest or recommend improvements to administrative systems so that the same or similar mistakes are not repeated.
All organisations which provide services to the public have a responsibility to establish systems which ensure that their clients are given an adequate level of service. In one case which I dealt with in 1998 a complainant called into the offices of Meath County Council to establish how much it would cost to redeem his housing loan.
He was informed that his account had been paid in full since March 1996 and that, in the meantime, given that he had continued to pay the monthly loan instalments, a credit balance of £683.98 had accumulated on his account which had not been refunded to him. Had he not contacted the Council about the matter he might have continued paying his fully paid loan, indefinitely.
I was concerned that this might not have been an isolated incident so I asked the Council, and subsequently, the Department of the Environment and Local Government to examine the matter further. On receipt of the responses from the Department and the Council, I decided to exercise my power to initiate an investigation across all housing authorities.
In summary, my 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 made 46 consecutive monthly instalments on a fully paid up loan.
My 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.
Kevin Murphy June 2000
Housing Function of Local Authorities
The housing function of local authorities is, to a large extent, determined by statute. The principal pieces of legislation are the Housing Acts of 1966 and 1988. The housing activity of local authorities may be divided into two broad areas:
- the direct provision of housing for persons who are unable to provide their own accommodation and
- assistance to persons purchasing or improving their own dwellings.
Houses are sold by local authorities in accordance with the provisions of Section 90 of the Housing Act, 1966, as substituted by Section 26 of the Housing (Miscellaneous Provisions) Act 1992. Housing Authorities are responsible for the promotion and administration of the Tenant Purchase Scheme in their areas. All tenants who apply to purchase their houses are given assistance by housing authorities to enable them to decide on the purchase option suitable to their circumstances.
Existing tenant purchase arrangements make possible the purchase of dwellings by tenants at prices that are far below the current market value of the dwellings. The case for encouraging tenant purchase is two-fold. On the one hand, it is desirable on general social grounds that as many people as possible should own their dwellings and, on the other hand, the saving in public authority maintenance costs when a house is purchased by a tenant is a positive factor.
The majority of people acquire their homes by taking out a mortgage loan. This represents a major long term financial commitment and it is important, in terms of promoting home ownership, that appropriate safeguards exist. The Consumer Credit Act, 1995 consolidated and considerably expanded consumer legislation in relation to mortgages. Among the other safeguards, the following apply to all mortgage lending institutions:
- the borrower has the right to repay the mortgage early, without having to repay a redemption fee (except in the case of fixed interest rate mortgages)
- a mortgage lender has to provide the loan applicant with a copy of the valuation report on the house being purchased,
- the mortgage lender has to state the total cost of the mortgage credit.
In addition, Section 130 of the Consumer Credit Act, 1995, which came into operation for local authorities in September 1997, provides:
- A mortgage lender shall in respect of a housing loan, issue to the borrower:
(a) at the time the loan is made, or as soon as may be practicable thereafter a copy of the mortgage deed (including any contract relating thereto) which copy shall be additional to any copy of such mortgage deed issued to his legal representative, and
(b) a statement of the total amount outstanding on the loan on a specified date occurring not more than one year after the making of the loan and at intervals of not more than one year thereafter until the loan is fully repaid, such statement being issued as soon as practicable after the date specified.
The above provisions ensure that the borrower is fully informed about his/her mortgage details.
The Local Government Computer Services Board (LGCSB):
The function of the LGCSB is:
- to organise, administer and provide or arrange the provision of a service for the supply of computer facilities for local authorities,
- to co-ordinate and secure compatibility in the usage of computers by local authorities generally, with a view to securing the most effective use of available resources and in matters related to its function to:
- provide or arrange the provision of training and education,
- carry out, promote or assist in the carrying out of research , and
- furnish advice, information and assistance to the Minister for the Environment and Local Government and to local authorities.
The LGCSB identifies many ways in which information technology can improve the quality of local authority performance including:
- better record keeping and access to information, leading to better decision making,
- cost savings, better cash flow and management, reduced costs, better cost estimates and better cost control through timely reporting.
The LGCSB is not within the jurisdiction of the Ombudsman but it is necessary to refer to it in this report because of the computer services it provides to most (but not all) local authorities whose computerised financial reports are referred to in this investigation.
Ombudsman's Powers and Jurisdiction
My powers and jurisdiction, as Ombudsman, are set out in the Ombudsman Act, 1980 (as amended). In the normal course, I do not investigate a complaint unless certain specific criteria are met. Normally, there will be a complainant who claims to be adversely affected by an action of a public body listed in the Ombudsman Act, 1980 as being a body subject to investigation by the Ombudsman.
Following a preliminary examination of the case, it must appear to me that the action complained of has, or may have, adversely affected the complainant and that the action involved maladministration. In this regard, Section 4 of the Ombudsman Act, 1980 sets out a range of headings which help to determine whether or not there has been maladministration. I must decide whether the action complained of was, or may have been -
- "(i) taken without proper authority,
- (ii) taken on irrelevant grounds,
- (iii) the result of negligence or carelessness,
- (iv) based on erroneous or incomplete information,
- (v) improperly discriminatory,
- (vi) based on an undesirable administrative practice, or
- (vii) otherwise contrary to fair or sound administration."
In addition, I have the power under Section 4(3)(b) of the Act to investigate, on my own initiative, instances of maladministration, without the need to have received a specific complaint.
Background
The background to the current complaint is that, in 1981, the complainant (Mr X) took out a housing loan, with Meath County Council, in the sum of £2,500, at a fixed interest rate of 12.5% over a period of 15 years. The loan term expired in 1996.
The complainant called to the Council offices in January 1998 and was informed that his account had been paid in full since the 31st March 1996 and that, in the meantime, given he had continued to pay the monthly loan instalments, a credit balance of £683.98 had accumulated on the account.
According to the complainant, he was making repayments on his account by direct debit.
Once the complaint was presented to me, I asked the Council to forward a report on the matter. I asked the Council to include details of the following with its report:
- the loan payment history details,
- details of the annual end-of-year statements which issued to the complainant,
- details of the action the Council proposed to take in view of the alleged loan overpayment and
- whether the Council were now complying with the provisions of the Consumer Credit Act, 1995 in so far as it related to local authorities.
Council's Response
In its reply to my Office, the Council accepted that the monitoring and control systems which were in operation during this time would not stand up to an auditor's inspection. The Council informed me that, in the meantime, it had taken steps to ensure that the circumstances which gave rise to Mr X's complaint would not arise in the future.
The Council informed my Office that it was now complying with the provisions of the Consumer Credit Act, 1995 which came into effect for local authorities on 1 September 1997 and specifies that an annual end of year statement must be issued to all loan borrowers.
My Initial Conclusions
My initial impression of the Council's reply was that its internal Financial Management / Reporting procedures appeared to be somewhat lax.
I took the view that the absence (or at least non implementation) of any formalised internal reporting procedures between the Council's Housing Loan Department (the Section which issued the loan approval) and its Accounts Section (the Section which collected the due instalments) allowed a situation to develop which permitted the overpayment, over a prolonged period, of the loan by the complainant.
I noted that this breakdown of communications between the Accounts Section and the Housing Section, resulted in the Council:
- collecting an additional 22 monthly instalments,
- amounting to £683.98,
- on a fully paid up loan,
- from an Old Age Pensioner,
- for a period of almost two years.
I was conscious that £683.98 represented over 27% of the original loan amount of £2,500.
In the circumstances, I asked the Council to review the case and to consider the question of redress. I also asked the Council to consider liaising directly with the Local Government Computer Services Board with a view to enhancing its internal financial reporting procedures.
Council's Review of the Complaint
The Council agreed to my request.
It acknowledged my concerns about the absence of a formalised internal procedure between its Loan Department and its Accounts Department. The Council indicated, however, that this situation would shortly be addressed by issuing a statement to all borrowers in accordance with Section 130 of the Consumer Credit Act, 1995. This statement would indicate the capital and revenue balance on a loan at the end of each year. In addition the Council informed me that it consulted with the Local Government Computer Services Board with a view to improving and replacing its financial reporting systems which were introduced in the 1980's. Furthermore, the Council agreed to reimburse the complainant's bank charges in relation to the standing orders, on his current account for the 22 months period from 31 March 1996 to the date of the refund.
Having regard to the specific background to the complaint, particularly the fact that the complainant had been paying the Council by standing order rather than by direct debit - as he originally informed me - I accepted that the Council's offer was not unreasonable.
On this particular point, a standing order is an instruction from a customer to his bank to make a regular (often monthly) payment of a fixed amount from his / her account to another specified account. On the other hand a direct debit is an instruction to a bank from a customer to debit his / her account with the amount (fixed or variable) demanded by a named creditor. The broad distinction is that the customer has control of the standing order while the organisation has control over the direct debit transaction. Put simply, a bank will not take instructions from a Council to cancel a standing order which is authorised by a bank's customer. The onus is on the borrower to cancel any standing order.
Notwithstanding this, I asked the Council:
- to identify all other possible overpayments on mature housing loans and
- to indicate what procedures it proposed to adopt to ensure that no other cases emerge in the future.
In response the Council confirmed that it had identified an additional six (6) accounts where loan repayments had continued to be made after the loan Redemption Expiry Date. These sums ranged from £116 to £424 and the earliest redemption date was 1996, i.e. more than two years prior to the current case.
The Council confirmed that these borrowers had since been refunded in full and advised to cancel any standing orders through their banks. Subsequently, following my decision to investigate the problem across local authorities generally, it emerged that there was in fact a total of 217 cases.
Contact with the Department of the Environment and Local Government
Having regard to the fact that the majority of local authorities were using a similar Loan Repayment System, designed by the Local Government Computer Services Board (LGCSB), I took the view that all housing authorities should be notified of my findings by the Department of the Environment and Local Government which has overall responsibility for services provided by local authorities, and that they be instructed:
- to take the appropriate action, if not already being done, to ensure that all overpayments on paid up mature loans are refunded and
- to alert their borrowers to contact their paying bank with instructions to terminate their standing orders.
In response the Department issued a circular letter, dated 6 August 1998, to each housing authority issuing loans. This letter referred to the LGCSB's Housing Loan System which clearly identifies loans where the balance outstanding is paid off in the normal way or where the loan is redeemed early. The Department instructed the relevant local authorities to ensure that a similar facility is available in any other Housing Loan Systems in use. In addition, the Department requested local authorities to:
- identify any cases of overpayments on mature housing loans,
- take appropriate action to ensure that any overpayments on paid up mature loans are refunded,
- where appropriate alert borrowers to contact their paying bank with instructions to terminate their standing orders,
- adopt appropriate procedures to ensure that overpayments of paid up loans do not occur in the future.
Subsequently, on 21 August 1998, I asked the Department to notify my Office of the following:
- the number of identified cases, if any, where overpayments were made on mature housing loans,
- the range (maximum and minimum) of such overpayments,
- the total value of such overpayments, nationally, and
- the above to be identified by each housing authority.
Response from Department
The Department informed me, on 17 September 1998, that, in view of my further letter, copies of the Department's circular letter and my Office's letter were supplied to the Inspector of Audits in order that the Local Government Auditors might check the position at audit.
I considered the Department's response. I was, however, mindful that my role, as Ombudsman, is to act independently and to carry out an objective examination of complaints. I am conscious that it is this independence which gives my Office the public credibility to perform its functions. As Ombudsman, I am empowered to identify instances of maladministration, their causes and, where appropriate, to recommend redress.
In addition, my Office has a role in contributing to the elimination of what may be termed the root causes of many of the complaints encountered. Finally, my Office also has a responsibility to contribute to improving standards of public administration by identifying the underlying causes of maladministration and suggesting improvements. It was with this in mind that, while acknowledging the Department's response, I decided to investigate the matter further.
Investigation
Having regard to the outcome of the complaint against Meath County Council, I decided to use my power under Section 4 (3)(b) of the Ombudsman Act, 1980 to investigate whether there were similar incidents of overpayments in other local authorities. I am enabled to carry out such an investigation without the need for a specific complaint in respect of each local authority.
Accordingly, on 19 January 1999, I commenced my investigation of the complaint and asked each local authority with housing loan responsibilities to provide me with the following:
(a) the number of identified cases, if any, in their functional area where overpayment was made on mature housing loans and,in relation to each case identified,
1. the number of overpayments made by the borrower,
2. the amount (in £s) involved,
3. the action taken by the authority to rectify the matter,
4. the action taken by the authority to make good any loss, if appropriate, and
(b) the measures taken to ensure that, generally, overpayments would/could not arise in the future.
In addition, I asked Meath County Council to re-check the position to ensure that it had identified all borrowers who were due a refund. The Council then notified me that it had since discovered a total of 217 cases,
- involving total refunds of £27,289,
- ranging from £20 to £872.20,
- with one loan having been fully redeemed in 1982,
- during which time a credit balance remained on the account for a period of 16 years.
Acknowledgement
Many local authorities found it necessary to deploy staff on overtime because of the substantial effort involved in checking the accounts, making the refunds and preparing a response to my Office. It took some local authorities a year to compile their reports. I would like to acknowledge this effort and assure the bodies concerned that I do not underestimate the difficulties this investigation presented for many of them. I would like to thank them for this co-operation and, in particular Kildare, Kerry, Sligo and Dunlaoghaire Rathdown County Councils which provided me with very good quality reports that did not necessitate further enquiries from my Office. I would also like to acknowledge the effort of Donegal County Council which provided my Office with the information required on a phased but regular basis. While acknowledging the difficulties involved it was, nevertheless, necessary for my Office to issue a Section 7 Notice to South Dublin and Fingal County Councils. The purpose of these notices was to get the local authorities concerned to provide a response or relevant information in relation to the investigation.
A Section 7 notice requires the provision of a response or information by a specified date. Such notices are issued only as a last resort after both verbal and written reminders have failed to elicit a response.
One local authority, Dundalk Urban District Council, has provided me with estimated returns. While this is helpful it falls far short compared to the effort made by every other local authority in the country. I asked the UDC to explain the delay. In reply, it stated that it had identified approximately 500 loan accounts to be investigated but, due to pressure of work and staff shortages the exercise was taking longer than originally anticipated.
My Own Audit
One of my staff visited Sligo, Galway, Mayo County Councils and Dublin Corporation to examine a sample number of cases which were included in their completed returns in the context of:
- the techniques in place for monitoring and reviewing accounts,
- the custody of accounts and record keeping and
- the procedures followed for the processing of transactions.
My investigator also examined the procedures, both present and past, in the above housing authorities.
Summary of Returns
During the course of my investigation I received returns from the 42 local authorities which issue housing loans. I have summarised their responses by way of Summary Tables :
In summary, my examination has identified:
- 6,411 accounts,
- involving refunds of £546,597,
- ranging from £1 to £3,456 and
- seven local authorities which reported no overpayments.
Tables 1 to 6 summarise the results in league-table format by identifying those local authorities with:
- the largest total value of overpayments reported,
- the largest number of accounts on which overpayments were discovered,
- the longest time period a credit balance remained on an account,
- the largest number of consecutive payments accepted by a housing authority after a loan, had been redeemed or had matured,
- the largest amount refunded to an individual borrower and
- the number of cases where refunds exceeded £100.
Table 1: The Largest Total Value of Overpayments Reported
| Local Authority | Total Value | Number of Accounts |
| Donegal County Council | £122,823 | 1,002 |
| Kildare County Council | £67,408 | 379 |
| Limerick County Council | £33,166 | 234 |
| Westmeath County Council | £32,045 | 392 |
| Tipperary (South Riding) County Council | £28,769 | 245 |
| Meath County Council | £27,289 | 217 |
| South Dublin County Council | £25,353 | 1,134 |
| Cork Corporation | £21,859 | 453 |
| Dundalk Urban District Council | £20,000 (est.) | 500 (est.) |
| Waterford Corporation | £17,163 | 144 |
| Longford County Council | £16,113 | 139 |
Cavan County Council, Laois County Council, Monaghan County Council, Offaly County Council, Drogheda Corporation, Kilkenny Corporation and Galway Corporation were all found to have workable procedures in place which ensured that there were no overpayments which had not been refunded and therefore they had no cases of undiscovered overpayments to report to this investigation.
Table 2: The Largest Number of Accounts with Overpayments
| Local Authority | Number of Accounts | Total Value |
| South Dublin County Council | 1,134 | £25,353 |
| Donegal County Council | 1,002 | £122,823 |
| Dundalk Urban District Council | 500 (est.) | £20,000 (est.) |
| Cork Corporation | 453 | £21,859 |
| Westmeath County Council | 392 | £32,045 |
| Kildare County Council | 379 | £67,408 |
| Waterford County Council | 252 | £5,940 |
| Tipperary (South Riding) County Council | 245 | £28,769 |
| Limerick County Council | 234 | £33,166 |
| Meath County Council | 217 | £27,289 |
| Waterford Corporation | 144 | £17,162 |
Table 3: Longest Time Period
| Local Authority | Length of Time Credit Balance Remained on Account (years) | Amount |
| Donegal County Council | 18 | £43.67 |
| Cork Corporation | 17 | £429.69 |
| Louth County Council | 16 | £251.42 |
| Roscommon County Council | 16 | £162.72 |
| Meath County Council | 16 | £78.78 |
| Waterford Corporation | 15 | £34.22 |
| Dundalk Urban District Council | 14 | N/A* |
| Westmeath County Council | 11 | £280.00 |
| Kildare County Council | 11 | £214.00 |
| Clare County Council | 11 | £128.90 |
- The return from Dundalk was not finalised by the Council when this report was prepared.
Table 4: Largest Number of Consecutive Payments accepted after Loan Redemption or Maturity
| Local Authority | Number of Consecutive Payments accepted after Loan Expiry / Maturity | Cumulative Amount |
| Athlone Urban District Council | 46 | £1,432.78 |
| Limerick County Council | 22 | £3,456.77 |
| Donegal County Council | 19 | £1,144.44 |
| Longford County Council | 18 | £914.38 |
| Wicklow County Council | 16 | £2,396.48 |
| Waterford Corporation | 16 | £700.05 |
| South Dublin County Council | 16 | £147.25 |
| Kildare County Council | 14 | £622.72 |
| Meath County Council | 14 | £872.20 |
| Westmeath County Council | 12 | £1,505.04 |
| Kerry County Council | 12 | £623.70 |
| Cork County Council | 11 | £1,975.40 |
Table 5: Largest Amount Refunded to an Individual Borrower
| Local Authority | Amount | Amount of Monthly Instalment on Loan |
| Limerick County Council | £3,456.77 | £151.03 |
| Wicklow County Council | £2,396.48 | £149.78 |
| Cork County Council | £1,975.40 | £197.54 |
| Kildare County Council | £1,926.92 | £194.42 |
| Westmeath County Council | £1,505.04 | £125.42 |
| Athlone Urban District Council | £1,432.78 | £31.09 |
| Donegal County Council | £1,144.44 | £99.47 |
| Louth County Council | £1,045.84 | £141.74 |
| Kilkenny County Council | £993.10 | N/A |
| Tipperary (South Riding) County Council | £962.80 | £96.28 |
| Longford County Council | £914.38 | £49.00 |
Table 6: Number of Cases where Refund was in excess of £100.
| Local Authority | Number of cases where refund was in excess of £100. | Number of such refunds as a percentage of total number of refunds. | Highest Refund |
| Donegal County Council | 437 | 43% | £1,144.44 |
| Kildare County Council | 258 | 68% | £1,926.92 |
| Westmeath County Council | 139 | 35% | £1,505.04 |
| Tipperary (SR) County Council | 114 | 46% | £962.80 |
| Meath County Council | 111 | 51% | £872.00 |
| Limerick County Council | 107 | 45% | £3,456.77 |
| Longford County Council | 69 | 50% | £914.38 |
| South Dublin County Council | 69 | 6% | £536.18 |
| Cork Corporation | 61 | 13% | £429.69 |
| Waterford Corporation | 56 | 39% | £700.05 |
Explanations offered by Local Authorities
Local Authorities gave various explanations for the matters discovered in the course of the investigation. I should explain that in any individual case the overpayments arose in one of the following situations :-
(a) the loans had run out or matured having reached the expiry date of the loan or (b) the loan was redeemed early by the borrower.
Among the explanations offered for the overpayments were the following : -
- overpayments resulted from borrowers failing to instruct their bank to cancel their standing order. They are requested to do so when redeeming the loan but often fail to act accordingly,
- there are circumstances over which the local authority has no control such as a borrower's bank failing to comply with instructions to cancel the standing order or a borrower forgetting to issue an appropriate instruction to his / her bank,
- banks will not take instructions from local authorities to cancel standing orders and therefore, local authorities are dependant on the borrowers,
- there is no facility for direct debit but it is envisaged that this will become available in the future,
- refunds are made only after receipt of a written application from the borrowers for any credit due because it is an "audit" requirement,
- one local authority maintained that the total number of overpayments represented less than 15% of all accounts and the accounts where refunds were due involved payments by standing order which were not cancelled in time,
- one local authority reported that it did not have a proper tracking procedure in place to highlight matured loans,
- a particular local authority had a system in place for refunding overpayments on redeemed loans but not on matured loans,
- in the past, particularly in the 1980's, some local authorities had a number of refunds due to people but they were not in a position to make the refunds to these people as, in some instances, the families had emigrated and left no forwarding address.
- some local authorities had problems with their computer systems :
- - an authority claimed that information is lost from its Housing Loan Computer System once a loan is redeemed; therefore, in order to assess certain relevant information once a loan has been redeemed, the loan has to be checked manually using paper files and records.
- - one local authority claimed that its computer tapes are not compatible with current software and therefore it is not possible to say whether some of the credit balances showing had been refunded in the past.
- - another claimed that it was unable to be certain whether accounts showing credit balances had not already been refunded as the account in the Housing Loan System might not have been adjusted or the amount refunded might not have been coded to the correct code in the Expenditure System.
Returns from Local Authorities
In many instances where, following the issue of a refund to the borrower, the local authority had requested him or her to cancel a standing order instruction, the borrower failed to do so and a further payment was then made to the local authority. This necessitated the payment of a further refund and, in many instances, created additional work for the local authority. In some instances even the issue of a further notice did not result in the borrower cancelling the standing order with the result that a further payment was received by the housing authority. While local authorities cannot be blamed for the inertia of the borrowers in relation to standing orders, good administration requires that they have some follow-up procedures in place to: - highlight the need for the borrower to cancel the standing order or - seek assurance that the standing order has been cancelled or - return the overpayment direct to the bank.
The returns indicate that there are a number of accounts, in various local authorities, which still have a credit balance and despite the best efforts of the housing authority, these amounts have not yet been reclaimed or refunded. The number of such accounts is, however, relatively small in relation to the overall number of accounts.
In some local authorities it was a requirement of audit to issue a refund to a borrower only on the receipt of a written application from the borrower. However, no evidence was presented to me to suggest that the local authorities concerned actually notified the borrowers that they were due a refund. In these circumstances, for such a policy to be justified, it is important that the borrower be informed of the existence of such a credit and also be notified of the audit requirement.
Housing Loans
A fundamental element of local authority housing management involves the collection of housing loans. A major part of this function is also directed at preventing arrears from accruing and, if necessary, the recovery of arrears.
A recently published report (September 1999) by the Department of the Environment and Local Government indicated that total arrears on local authority housing loans were reduced from over £21 million in 1993 to approximately £19 million in 1995. In that report local authorities pointed out that their existing procedures were reasonably effective in collecting the arrears but were time consuming and required substantial staff resources.
Local authorities also manage a sizeable rented housing stock of approximately 100,000 units. A large element of their resources is devoted to the collection of weekly rents, the minimisation of arrears and the collection of arrears. Therefore, as part of their housing function, local authorities commit substantial financial and staff resources to the collection of rents and loans.
Having regard to the scarce resources at their disposal and the competing demands which are placed on them, local authorities must adopt a firm but fair approach to tackling the collection of loans and loan arrears. However, at the same time, they must also respect the rights of their borrowers.
From my investigation, it appears that the majority of local authorities consciously decided, directly or indirectly, to place a higher priority on the collection of loans and loan arrears than on the repayment of credit balances which were held on borrowers' accounts.
Extent of Maladministration
I referred in Chapter Two to the issue of a circular letter by the Department of the Environment and Local Government (DOELG) to all housing authorities. Any local authority that, prior to the issue of Circular Letter H8/98 of 8 August 1998 by the DOELG had a system in place for regularly checking loan revenue balances and for making refunds following such checks was, in my view, acting properly and exercising due care in relation to its own interests and those of its borrowers.
However, in relation to those local authorities where there were either no proper procedures or ineffectual procedures in place to check regularly revenue balances on mature and redeemed loans, they were, in my view, acting systematically in a manner which was negligent or careless and contrary to fair or sound administration.
Refunds
In some local authorities sums under £1 were not refunded; in others anything under £10 was not refunded while others still have delayed in making refunds under £20. It is clear that some have been scrupulous in making refunds while others have argued that the costs involved would not be justified in relation to sums less than £10.
I accept that it would be unreasonable to insist that sums less than £10 should be refunded but I would not agree that the threshold for refunds be set at £20. I am of the view that all overpayments of £10 or more should be refunded.
Compensation
The question arises as to whether compensation for loss of purchasing power should be paid on the monies owed and now refunded. In considering this question there are two matters of concern to local authorities: (a) on what amount should compensation be paid and (b) on what basis should it be paid?
In view of the total number of cases involved and taking into account the effort that has already been put in to making the refunds, I take the view that in relation to (a) compensation would not be warranted where the amount involved is less than £100.
While accepting that, at the outset, there was an onus on borrowers to cancel their standing orders, I found that the procedures for alerting borrowers to do so varied across local authorities - some advised borrowers to cancel standing orders, others did not.
I take the view that, after a certain period of time, the onus on the borrower was outweighed by the obligation on the local authority to ensure that, where a borrower failed to act to regularise the situation, its procedures acted as a fail safe device to ensure that credit sums on borrowers accounts did not remain undetected, indefinitely. Where such procedures were not invoked within a reasonable period, I take the view that the local authority became responsible by default. I also have to bear in mind that the local authority had the use of the unrefunded payments, in some cases for a considerable period of time. Therefore, in relation to (b) above, I consider that it would be reasonable to allow a fallow period of say two (2) years i.e. compensation would only be payable in cases where the refund was not made within two (2) years of the redemption or maturation of the loan.
I consider that, in calculating any compensation due to borrowers, the local authorities should use the Consumer Price Index (CPI) to update any refund due. This index, which is quite simple to apply, would ensure that the purchasing power of the borrowers' money is restored. I have attached, at Appendix 2, details of the relevant Consumer Price Index.
There may have been reasons which are unknown as to why so many borrowers failed to cancel their standing orders when their loans matured or were redeemed and perhaps this is something local authorities may wish to take into account in any review of existing arrangements.
Developments in Financial Systems
In the course of preparing this Report, I consulted with the Local Government Computer Services Board (LGCSB). I understand that, in the light of the problem highlighted in the case of Mr X and Meath County Council which resulted in the issue of Circular Letter H8/98 of 8 August 1998 by the Department of Environment and Local Government, a new transaction report has been provided by the LGCSB to all local authorities using its system. This report which is known as "Non Live Accounts Transaction List" has been available for the past year and should, if checked regularly, be of considerable assistance to local authorities in identifying cases where a credit is showing on redeemed or matured loans for the purposes of making appropriate refunds.
The LGCSB advised that its system was first introduced in the early 1980's, is somewhat cumbersome and needs heavy support. However, it advised me that a new financial management system is currently being tested by Meath County Council and that this new system may, in the future, replace existing financial systems in local authorities including those involving housing loans.
Findings
I find that:
1. Seven (7) 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,
2. In many local authorities there were either no proper procedures or ineffectual procedures in place to regularly check revenue balances on mature and redeemed loans. These local authorities were acting systematically in a manner which was negligent or careless and contrary to fair or sound administration.
3. The majority of local authorities consciously decided, directly or indirectly, to place a higher priority on the collection of loans and loan arrears than on the payment of credit balances which were held on borrower's accounts. However, I note that most have or are about to introduce revised procedures to redress this situation.
4. 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.
5. Some local authorities may have to consult with the Local Government Computer Services Board to ensure that the computer systems and procedures used by them are up to the standard of best practice for local authorities. In this regard I have included a procedures template in my recommendations.
6. The systems employed by those authorities named at 1 above who were in a position to make a "Nil" return in response to this investigation would provide a useful guide for those about to carry out, or in the process of carrying out, a review of their existing procedures.
My recommendation are based on my observations on best practice and on the helpful comments given by local authorities which had identified the problems in their systems some years ago and had then taken appropriate steps to deal with them.
I would advise those borrowers who had a loan with a local authority and who feel they may be due refunds to contact the relevant local authority and seek, in the first instance, a payment history report with a view to establishing whether they are due a refund.
I recommend that,
1. where it has not already been done, each local authority should review its current loan administration and accounting procedures to ensure that there is a basic and effective monthly financial control model in operation.
The following template could be used as a model for any revised procedure:
A monthly printout providing details of all accounts due to mature in the coming six months should be sourced from the Loans Computerised System.
The local authority should write to the individual borrowers approximately 1 - 2 months before the loan expiry date notifying them of:
- the month the final payment is due and
- advising them to make arrangements to ensure that no further payments are made on the loan after that date.
Immediately a loan matures a "stop" should be placed on the account. This would ensure that any further payments tendered in respect of the loan are receipted to a loans "overpayment" code.
A loan ledger reconciliation should be carried out each month and any discrepancies should be identified and appropriate corrective action taken.
The loan ledger should also be reconciled at the year end and any discrepancies identified and corrective action taken.
2. where it is not being done already, each local authority must ensure that it complies with the provisions, where relevant, of the Consumer Credit Act, 1995,
3. staff training schemes in account management techniques and instruction / procedure manuals be produced and provided to each account section staff member,
4. any outstanding credit balances on mature or redeemed loans should be examined to ensure that any credits on accounts are refunded, where due, to the borrower at the earliest possible date,
5. internal auditing processes in local authorities should be reviewed in order to
- prevent / minimise the possibility of fraud, including deliberate errors for personal gain,
- pursue outstanding accounts which are in credit and
- minimise the number and value of mature accounts in credit,
6. Local authorities which have not already done so should arrange to refund to all borrowers any outstanding credit balances on mature or redeemed loans which are equal to or in excess of £10,
7. in those instances where a credit balance remained on a revenue account for a period of more than two (2) years and where the amount is equal to or in excess of £100, the Local Authority pay the borrower compensation on the amount in question. In calculating the compensation, local authorities should apply the Consumer Price Index (CPI) and to this end, I have attached a table, at Appendix 2, showing the relevant Consumer Price Index, from 1982 (base year 100) to 2000.
8. local authorities should develop greater use of available Information Technology facilities, such as electronic banking systems, on-line banking and household budget / bill pay services.
APPENDIX 1 - Summary Table
| LOCAL AUTHORITY | Number of cases | Total refunds | Ave. refund | Highest no. of instalments (mths) | Highest refund | Lowest refund | Longest elapsed time (years) |
| Athlone UDC | 74 | £5,872.68 | £79.36 | 46 | £1,432.78 | £1.03 | 8 |
| Bray UDC | 1 | £745.30 | £745.30 | 10 | £745.30 | n/a | 1 |
| Carlow Co cl | 2 | £385.84 | £192.92 | n/a | £252.09 | £133.75 | 0 |
| Cavan Co Cl | 0 | £0.00 | £0.00 | 0 | £0.00 | £0.00 | 0 |
| Clare Co Cl | 110 | £8,847.40 | £80.43 | 6 | £301.02 | £10.12 | 11 |
| Clonmel Corp. | 48 | £4,491.04 | £93.56 | 9 | £250.57 | £20.72 | 9 |
| Cork Co Cl | 72 | £13,551.54 | £188.22 | 11 | £1,975.40 | £22.22 | 5 |
| Cork Corp. | 453 | £21,859.51 | £48.25 | 5 | £429.69 | £1.00 | 17 |
| Donegal Co Cl | 1002 | £122,823.58 | £122.58 | 19 | £1,144.44 | £1.21 | 18 |
| Drogheda Corp. | 0 | £0.00 | £0.00 | 0 | £0.00 | £0.00 | 0 |
| Dublin Corp. | 90 | £3,358.39 | £37.32 | 7 | £249.54 | £1 | 11 |
| Dundalk UDC | 500 | £20,000.00 | £40.00 | n/a | £426.54 | £10.00 | 14 |
| Dunlaoghaire/ Rathdown | 53 | £2,236.98 | £42.21 | 1 | £359.00 | £1.00 | 5 |
| Fingal Co Cl | 145 | £6,662.89 | £45.95 | 1 | £289.29 | £1.00 | 5 |
| Galway Co Cl | 6 | £618.26 | £103.04 | 0 | £154.25 | £65.14 | 0 |
| Galway Corp. | 0 | £0.00 | £0.00 | 0 | £0.00 | £0.00 | 0 |
| Kerry Co cl | 97 | £8,516.64 | £87.80 | 12 | £623.70 | £2.00 | 10 |
| Kildare Co cl | 379 | £67,408.19 | £177.86 | 14 | £1,926.92 | £6.08 | 11 |
| Kilkenny Co Cl | 15 | £2,812.15 | £187.48 | 4 | £993.10 | £17.00 | 2 |
| Kilkenny Corp. | 0 | £0.00 | £0.00 | 0 | £0.00 | £0.00 | 0 |
| Laois Co Cl | 0 | £0.00 | £0.00 | 0 | £0.00 | £0.00 | 0 |
| Leitrim Co Cl | 27 | £3,576.80 | £132.47 | 3 | £554.72 | £5.53 | 5 |
| Limerick Co cl | 234 | £33,166.32 | £141.74 | 22 | £3,456.77 | £1.00 | 7 |
| Limerick Corp. | 106 | £5,205.32 | £49.11 | n/a | £200.00 | £1 | n/a |
| Longford Co Cl | 139 | £16,113.84 | £115.93 | 18 | £914.38 | £5.03 | n/a |
| Louth Co Cl | 75 | £13,247.23 | £176.63 | 6 | £1,045.84 | £23.14 | 16 |
| Mayo Co Cl | 57 | £9,509.85 | £166.84 | 11 | £440.91 | £5.67 | 10 |
| Meath Co Cl | 217 | £27,289.00 | £125.76 | 14 | £872.20 | £20.01 | 16 |
| Monaghan Co cl | 0 | £0.00 | £0.00 | 0 | £0.00 | £0.00 | |
| Offaly Co Cl | 0 | £0.00 | £0.00 | 0 | £0.00 | £0.00 | 0 |
| Roscommon Co Cl | 42 | £4,937.28 | £117.55 | 4 | £397.72 | £1.09 | 16 |
| Sligo Co Cl | 102 | £10,732.00 | £105.22 | 3 | £448.98 | £10.96 | 8 |
| Sligo Corp. | 9 | £560.69 | £62.30 | 1 | £373.06 | £9.16 | 7 |
| South Dublin Co Cl | 1134 | £25,353.96 | £22.36 | 16 | £536.18 | £0.01 | 6 |
| Tipp (NR) Co Cl | 16 | £2,389.69 | £149.36 | 2 | £445.30 | £40.00 | 2 |
| Tipp (SR) Co Cl | 245 | £28,769.54 | £117.43 | 10 | £962.80 | £6.00 | 7 |
| Waterford Co Cl | 252 | £5,940.98 | £23.58 | 3 | £299.88 | £1.00 | 8 |
| Waterford Corp. | 144 | £17,162.85 | £119.19 | 16 | £700.05 | £12.70 | 15 |
| Westmeath Co Cl | 392 | £32,045.48 | £81.75 | 12 | £1,505.04 | £10.00 | 11 |
| Wexford Co Cl | 80 | £8,717.99 | £108.97 | 7 | £910.00 | £20.00 | 4 |
| Wexford Corp. | 52 | £4,782.67 | £91.97 | 12 | £465.01 | £2.00 | 11 |
| Wicklow Co Cl | 41 | £6,905.37 | £168.42 | 16 | £2,396.48 | £0.08 | 2 |
| TOTALS | 6411 | £546,597.25 | £85.26 |
APPENDIX 2 - Summary Tables and Responses.
Response from each Local Authority
Athlone Urban District Council confirmed that, since April 1999, the following revised procedures are in place to ensure that there is no recurrence of ongoing credit balances:
Following redemption of a loan the borrower is requested to cease any standing order payments.
After a period of two (2) months all accounts are checked to ensure that payment has ceased and any credit balance is then refunded to the borrower. A regular check is carried out to ensure that any expired / run-out loans are not carrying credit balances.
Of the 75 cases identified below, 21 related to refunds of £100 or over.
| Council | Number of cases | Total refunds | Ave. refund | Highest number of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Athlone UDC | 75 | £5,872.68 | £79.36 | 46 | £1,432.78 | £1.03 | 8 years |
Bray Urban District Council has a system to ensure that overpayments on mature housing loans are prevented and that, if any overpayments occur, they are identified, promptly notified to the borrower and remedial action is taken. The system involves regular checking of the monthly ledger report in order to identify any overpayments which may have occurred. Borrowers are promptly notified once a loan has expired.
At the time of the commencement of this investigation there was a satisfactory system in place which ensured that as far as possible instalments overpaid were refunded within a relatively short period of time.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Bray UDC | 1 | £745.30 | £745.30 | 10 | £745.30 | n/a | <1 year |
Carlow County Council confirmed that a printout is produced on a monthly basis which identifies payments received in respect of run-out or redeemed loans. The overpayments result from borrowers failing to instruct their bank to cancel standing orders. Borrowers are requested to cancel standing orders when they redeem their housing loans but, on occasions they appear to neglect to do so.
At the time of the commencement of this investigation there was a satisfactory system in place which ensured that as far as possible any instalments overpaid were refunded within a relatively short period of time.
Both of the cases identified below involved refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) | |
| Carlow Co Cl | 2 | £385.84 | £192.92 | 0 | £252.09 | £133.75 | 0 |
Cavan County Council reported that refunds are issued to all account holders as expeditiously as possible. The general procedure that operates is as follows:
Statements of standing orders are received from the bank and are batched on a daily basis in the Finance Section, then forwarded immediately to the Council's Information Technology Section for input to its computer system. Checks are in place to guarantee that totals or ordinary, part and full redemptions on each batch header agree with corresponding totals on the computerised printout.
The Council's computerised printout flags all repayments made subsequent to redemption of loans with the message "Account not Active / Unusual amount". These amounts are recorded and held in abeyance for three days pending cancellation of the standing order by the customer's bank. When this period elapses without cancellation, the refund is processed within the following month. The house loan system therefore provides an expedient fail safe mechanism whereby all overpayments are identified and refunded in the shortest possible time frame.
In cases where refunds on redeemed accounts apply, the Council notify the customer to cancel associated standing orders in their paying banks immediately. In order to further strengthen controls the Council adopted a procedure of notifying loan holders in writing of the requirement to cancel standing orders at the date of redemption of their loans. Those who fail to do so are again informed of the necessity to do so when the refund is being processed.
There are circumstances over which the Council has no control, such as, a customer's bank omitting to comply with all instructions to cancel a standing order, or, a customer forgetting to issue the appropriate instruction to his/her bank.
At the time of the commencement of this investigation there was a satisfactory system in place which ensured that, as far as possible, any instalments overpaid were refunded within a relatively short period.
For the purpose of my investigation I am satisfied that the Council has a nil return.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Cavan Co Cl | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Clare County Council reported that refunds are made to borrowers periodically. When borrowers request redemption figures, they are advised to stop direct debits / standing orders on redemption of the loan. Borrowers are also advised to stop direct debits / standing orders when the final payment is received by the Council. Some information is lost from the Council's Housing Loan Computer System once a loan is redeemed. Therefore, in order to access certain relevant information once a loan has been redeemed, the loan has to be manually checked using the original paper files and records.
Following its initial report to my Office the Council confirmed that an additional "run-out" loan with a revenue balance was discovered. It appears that the borrower in this case had continued to make payments by standing order. This loan was undetected due to a peculiarity with the Council's House Loans Computerised System. The Council informed me that this loan had "run -out" and did not appear on the Computerised Redeemed or Suspended Loan printouts. In order to avoid the recurrence of this issue, the Council has since included further fields in all loan printouts and will carry out periodic checks.
Of the 110 cases identified below, 36 involved refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Clare Co Cl | 110 | £8,847.40 | £80.43 | 6 | £301.02 | £10.12 | 11 years |
Clonmel Corporation confirmed that some credits on mature housing loans arose because its borrowers neglected to cancel standing orders after redeeming their housing loan. The Corporation has refunded all outstanding credits. With effect from 1 January 1999, it issues written instructions to all persons who redeem their housing loans to cancel their standing orders immediately.
Of the 48 refunds identified below, 18 relate to refunds of £100 or more
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Clonmel Corp. | 48 | £4,491.04 | £93.56 | 9 | £250.57 | £20.72 | 9 years |
Cork County Council confirmed that the making of refunds of overpayments in respect of fully redeemed house loans is an ongoing process in the Council. The Council made refunds in the normal course of events of between £44,000 and £67,000 to borrowers each year in the period 1996 to 1998. The majority of overpayments arise when borrowers pay off loans in full but fail to cancel bank standing orders in time, with the result that the instalment due for the month of redemption is paid by the borrower through their bank, while that monthly instalment is also paid at the date of redemption.
The Council's standard letter notifying redemption figures on loans advises borrowers to cancel standing orders as soon as the loan is redeemed. Similar advice is given to telephone callers. Despite this, a large number of people end up paying one or more monthly instalments after the loan has been fully redeemed. The banks will not take instructions from the Council to cancel a standing order which is authorised by a bank's customer. The Council must depend on borrowers to give correct instructions to their respective banks.
The Council deals with a large number of refunds throughout the year, but requests borrowers to make a brief informal written request in letter or note form, before issuing a refund.
Of the 72 cases identified below 42 were to the value of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Cork Co Cl | 72 | £13,551.54 | £188.22 | 11 | £1,975.40 | £22.22 | 5 years |
Cork Corporation advised that it has procedures in place to avoid overpayments on mature housing loans by way of monitoring at month end. The situation is monitored on a monthly basis and refunds are made as soon as possible thereafter.
Of the 453 cases identified below 61 involved refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Cork Corp. | 453 | £21,859 | £48.25 | 5 | £429.69 | <£1.00 | 17 years |
Donegal County Council informed me that, in the past, it was a requirement of audit in the Council, to only issue refunds upon receipt of the written application from the borrowers for any credits due. In view of recent developments, arising from my investigation, the Council will dispense with that requirement. Credits accruing on any account as a result of loans maturing or being redeemed will be refunded immediately and borrowers will be advised to terminate their standing orders with their banks.
Of the 1,002 cases identified below 437 cases were to the value of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Donegal Co Cl | 1,002 | £122,823 | £122.58 | 19 | £1,144.44 | £1.21 | 18 years |
Drogheda Corporation indicated that in 1996 it was discovered that standing orders were still being paid even though the loan had run-out. Refunds were made and the borrowers involved were advised to cancel the standing order. Since then the Corporation generate a housing loan "credit report" each month so that if an overpayment is made when a loan is redeemed it is refunded the following month.
For the purpose of my investigation I am satisfied that the Corporation has a nil return.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Drogheda Corp. | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Dublin Corporation advised that it has a policy, when issuing a borrower with their housing loan redemption figure to advise them to cancel their standing order with the bank before discharging the loan. When loans are discharged a code is immediately placed on the borrower's account. This prohibits any further payments being updated to the account. The Corporation's computer system generates a report outlining all rejected payments and should a payment be received after a loan has been discharged the amount in question is refunded directly to the borrower.
Of the 90 cases identified below 7 were to the value of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Dublin Corp. | 90 | £3,358.39 | £37.32 | 7 | £249.954 | <£1 | 11 years |
Dundalk Urban District Council indicated that it has identified approximately 500 loan accounts to be investigated but, due to resource issues its investigation is taking longer than anticipated.
In the light of the current investigation the Council has reviewed its procedures for dealing with loan balances. The Council has confirmed that every loan that is redeemed / expired is checked and refunds are made as quickly as possible.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Dundalk UDC | 500 | £20,000 est. | £40 | n/a | £426.54 | <£10 | 14 years |
Dunlaoghaire Rathdown County Council confirmed that a printout providing details of all accounts due to mature in the following six months is provided by the Council's Loans Computer System in each month. Borrowers are notified approximately 1 to 2 months before the expiry date of the month the final payment is due and advised to make arrangements to ensure that no further payments are made on the loan.
Immediately a loan matures, whether by payment of the final instalment at the expiry of the term of the loan or when a loan is redeemed early, a "stop" is, as a matter of course, placed on the account. This ensures that any further payments tendered in respect of the loan are receipted to the loans "overpayment" code.
When a "stop" is not placed on a redeemed account, due to an operative error by Council staff and overpayments are made between the date of redemption and the end of the calendar month when the redemption was made , such payments are credited to the account and give rise to a credit balance on the redeemed account. This is identified during the monthly loan ledger reconciliation and dealt with as a refund in the normal way.
Subsequent payments would be rejected by the receipting system and credited to the overpayment code.
Payments to the overpayments code are examined on a monthly basis and the borrower is notified in writing of the fact of the overpayment, requested to take action to prevent any further payments and invited to submit a written request for a refund. On receipt of such a request arrangements are made to have the refund issued without delay. It is standard procedure to make a payment only on foot of an invoice or other demand for payment in order to safeguard public funds.
Of the 53 cases identified 7 were for amounts greater than £ 100.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Dunlaoghaire / Rathdown Co Cl | 53 | £2,236.98 | £42.21 | 1 | £359 | £1 | 5 years |
Fingal County Council informed me that it has a system in place to anticipate the expiry of accounts. The Council say that the expiry may arise through accounts running the full term of their repayment period or it may arise earlier following special payments of capital by the borrower or through the borrower making excess payments over the monthly instalment on an ongoing basis.
The Council say that prior to the expiry date, borrowers are notified of the imminent expiry of their account, the capital sum required to redeem the account early and invited, if they desire, to pay this capital amount. If this offer is not availed of, the account will run to its logical expiry date. If, on this date, payment of the monthly instalment is up to date or in credit, the account is ceased.
The Council say that when an account is ceased it is literally taken out of the system so that any payments offered against that account will not find a matching account number and therefore it cannot be posted to an account. The Council confirm that such payments are returned to the borrower or, more commonly, the borrower's bank is asked to take back a credit for the overpayment. When the account is ceased, the borrower is written to and advised to apply to the Council's Law Agent for release of Title. Any overpayment existing on the account is, on the application of the borrower, refunded. An account may be terminated through the proactive action of the borrower in paying off capital outstanding at any stage. Any overpayment made on the account during these transactions are specifically notified to the borrower.
Of the 145 cases identified below 22 were for amounts greater than £100.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Fingal Co Cl | 145 | £6,662.89 | £45.95 | 1 | £289.29 | <£1 | 5 years |
Galway County Council explained that a weekly printout of "receipts" is produced by the Housing Loan Computer System. If a receipt is recorded against a redeemed loan, an "error" message appears on this printout. This error message is checked to see whether a refund is due. If it is due, a list is prepared and the Customer Account number is sourced from Accounts Section.
A printout of all loans which have been paid off are checked on a weekly basis. Any credit balances on "paid off" loans are queried . If it is established that a refund is due, a voucher is prepared with an accompanying letter informing the borrower of the necessity to cancel a standing order.
Of the 6 cases identified below 3 are for amounts greater than £100.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Galway Co Cl | 6 | £618.26 | £103.04 | 0 | £154.25 | £65.14 | 0 |
Galway Corporation. The Corporation advises that it has arrangements in place to ensure that overpayments do not arise on mature / expired housing loans. Any loans which are due to expire are highlighted on a report produced from the Housing Loans Computer System on a monthly basis. A notification is then sent to each borrower informing them that the loan is about to expire, the balance on the loan and that the standing order should be stopped.
In the case of redemptions, the borrowers and / or their solicitors are reminded to cancel their standing orders. Should an overpayment occur, an error message is produced on their housing loans report at the end of the month. Arrangements are then made to refund the amount overpaid and a revenue adjustment is made to clear the account balance. Arrangements have been put in place recently to ensure that accounts are adjusted immediately when borrowers are refunded any outstanding credits on their accounts.
For the purpose of my investigation I am satisfied that the Corporation has a nil return.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Galway Corp. | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Kerry County Council provided me with one of the most comprehensive and helpful reports of this investigation. The Council pointed out that the total number of credits identified represents less than 5% of the overall number of accounts held and the particular accounts where refunds were due involved payments by standing order which were not cancelled by the borrowers in time.
The Council have told me that as a result of this investigation it proposes to take the following action:
- Loans which naturally mature and those which are redeemed early will be identified on a monthly basis. These loans will be tracked on a regular basis to ensure that any overpayments made are highlighted and refunded to the borrower immediately.
- It also proposes to take the matter up with the Local Government Computer Services Board, who designed the Computer Housing Loans System in operation in many local authorities, to ensure that the Council's system highlights loan accounts where payments are made and where such payments should be refunded due to the expiry or redemption of a loan.
In 32 cases the refund due was £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Kerry Co Cl | 97 | £8,516.64 | £87.80 | 12 | £623.70 | £2 | 10 years |
Kildare County Council, which also produced a very good quality report to this investigation, said that of the 379 accounts identified refunds were issued in 262 cases. One hundred and four borrowers (104) were contacted by the Council but the notices were returned by the post office indicating that the borrowers were no longer at the address. A further 13 borrowers have yet to contact the Council.
Borrowers are advised, on redemption, to cancel any standing order immediately. In future the Council propose to examine all loans on a monthly basis and to issue refunds, if due, immediately.
Of the 379 accounts identified, 258 involved refunds of £100 or greater.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Kildare Co Cl | 379 | £67,408 | £177.86 | 14 | £1,926.92 | £6.08 | 11 years |
Kilkenny County Council reported that its Housing Loan System is updated on a monthly basis. It said that standing order payments are credited to the accounts within 10 days of the month following that to which they refer. Any credit balance on an account is checked on a monthly basis and if a refund is due, it is dealt with at that stage and the customer is notified to cancel the standing order.
Of the 15 refunds identified, 9 relate to refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Kilkenny Co Cl | 15 | £2,812.15 | £187.48 | 4 | £993.10 | £17 | 2 years |
Kilkenny Corporation reported that its Housing Loan System is updated on a monthly basis with payments by standing order being credited to the individual account within two weeks of the month to which they refer.
If a loan is redeemed in the middle of a month the standing order payment is not updated at the date of redemption but any balance is shown on the account the following month and, if a refund is due, it is dealt with at that stage. In order to eliminate the need for refunds the Corporation tries to ensure that the redemption figure given to an account holder at the time of redemption is totally accurate. The Corporation say that the account holder is notified to cancel any standing order with their paying bank.
For the purpose of my investigation I am satisfied that the Corporation has a nil return.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Kilkenny Corp. | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Laois County Council indicted that, in February 1998, it had reviewed all loans which had expired or were redeemed. This was almost one year before I brought the matter to its attention. A total of 55 accounts were overpaid and refunds of £9,149.50 were made. The Council currently carries out a quarterly review of all loans redeemed/expired and refunds are made as they arise.
For the purpose of my investigation I am satisfied that the Council has a nil return.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Laois Co Cl | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
Leitrim County Council informed me that, in future, subsequent to the redemption of a loan, the borrower or his/her solicitor will be advised that no further payments should be made on the loan. The Council say that each account will be reviewed on a regular basis and should any overpayments arise, refunds will be processed as soon as possible.
Of the 27 cases referred to, 17 are for amounts of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Leitrim Co Cl | 27 | £3,576.80 | £132.47 | 3 | £554.72 | £5.53 | 5 years |
Limerick County Council stated that it produces a report each month which gives details of the accounts which have been paid off / expired the previous month but in respect of which monies continue to be received. The borrower is advised to cease payments immediately and, in the case of a standing order, confirmation is sought from the borrower's bank that the standing order has been cancelled. When the Council is satisfied that all the necessary steps have been taken to prevent further credits occurring, a refund is made to the borrower.
Of the 234 cases referred to below, 107 relate to amounts of £100 or over.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Limerick Co Cl | 234 | £33,166.32 | £141.74 | 22 | £3,456.77 | <£1 | 7 years |
Limerick Corporation advised that some of the accounts identified may have been the subject of refunds in the past but it is almost impossible to be absolutely sure as the computer tapes on which the old data is held have conflicting densities with the current software. The Corporation say that the above credits arose because borrowers did not cancel their standing orders and no proper tracking procedure was in place to highlight run-out loans. The Corporation have since introduced revised procedures to highlight any overpayments and to make any refunds, where appropriate.
Of the 106 cases identified 12 involved refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Limerick Corp. | 106 | £5,205 | £49.11 | n/a | £200 | <£1 | n/a |
Longford County Council said it has introduced measures to ensure that overpayments do not arise in the future. Borrowers are notified to cancel any standing orders or wage deductions as appropriate following redemption of their loans. A periodic check is kept on accounts which may be in credit and the necessary arrangements are made to refund any amount as soon as possible but in any event before the end of the relevant financial year.
Of the 139 cases identified, 69 involved refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Longford Co Cl | 139 | £16,113.84 | £115.93 | 18 | £914.38 | £ 5.03 | n/a |
Louth County Council said that it is part of its procedures to advise borrowers to cancel a standing order when a loan is being redeemed. A follow-up check is carried out the following month to ensure that the standing order has been cancelled and it is now part of the Council's internal audit function to carry out periodic checks on all loan accounts.
Of the 75 cases identified, 51 involve refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Louth Co Cl | 75 | £13,247 | £176.63 | 6 | £1,045.84 | £23.14 | 16 years |
Mayo County Council confirmed that it has revised its procedures, as follows:
When a loan is redeemed, the details are inputted to the Housing Loan Computer System and also recorded in the manual register. A computer printout is checked each month and in the case of clients who do not cancel standing orders, refunds are made. A computer printout is also checked each month in the case of mature loans and refunds made, as appropriate.
Of the 57 accounts identified, 48 involved refunds of £100 or more.
| Council | Number of cases | Total refunds | Ave. refund | Highest no. of instalments overpaid (mths) | Highest refund | Lowest refund | Longest elapsed time before refund was made (years) |
| Mayo Co Cl | 57 | £9,509.85 | £166.84 | 11 | £440.91 | £5.67 | 10 years |
Meath County Council reported that it now has a procedure in place to check, on a monthly basis, any credit balances on redeemed and mature housing loans. The Council has confirmed that its computer system now produces, when requested, a Credit Listing which identifies all accounts which show a credit balance. This listing is now regularly checked for accounts where instalments are paid after the loan expiry date. The Council has engaged the services of a software printing company to produce the necessary statements which comply with Section 130 of the Consumer Credit Act, 1995.