High Court upholds PTSB's challenge to Ombudsman's decision on tracker mortgages

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The court heard the couple took out a mortgage for €395,000 with the lender in 2007 with the interest rate fixed for the first three years, after which the rate would revert to a tracker rate following ECB rates.
In January 2009, they contacted Permanent TSB’s Lucan branch concerning whether there was an exit fee for the fixed-rate mortgage. They said they were told there was “no penalty” and the couple then switched rates.



The ombudsman upheld their complaint in February last and the lender has challenged that decision in proceedings which opened yesterday before Mr Justice Michael White. Permanent TSB claims there were “significant errors” in the ombudsman’s findings, including his finding that the bank had a “fiduciary relationship” with the couple.

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Thats gas. I did the exact same around the same time. Rang them for the no penalty change from my fixed to the variable. Always wondered why they let us off with the penalty for breaking fixed rate. We had fixed at 5.10% in 2007 and then changed to variable rate of 3.45% in Feb 2009.

Thought I was the one screwing them out of money at the time. What a Fool!

Turned the house over there to find an offer letter but can't find it.

Oh thanks for that I will be logging in on the 16th November then to hear the results. We have a very very similar issue with PTSB - except in my case I went to them in Jan 2009 worried about whether I would get my tracker rate back at end of my fixed period (because they had stopped offering trackers). I was told by them no I would not get my tracker back! So went with what I thought was the second best option from them & moved from fixed to variable with no penalties - thinking a small saving was better than none at all!

Turns out my terms and conditions state I should have been offered tracker back at end of fixed period (which I did not realise at the time) but because I broke out of my fixed period it was null & void.

PTSB are now saying they would never have told me "No Tracker" at end of fixed period and I would have being informed of the fact that moving from fixed would have meant loss of my tracker! I spoke to someone in branch and over the phone but they cannot find the phone records even though I have the persons name and date of phone call.

I have contacted the Ombudsman - just waiting on final response letter from PTSB to move forward with it. So really interested to see whether this case will be over turned or not - for our sake I really really hope it isn't. It means alot of money to us and I really feel PTSB "offered" this no penalty break out of fixed in Jan 2009 so as people like me would break out and hence break our tracker terms and conditions. What annoys me the most is I pushed them for my tracker back and was told I would not get it back - but they are now saying they would never have said this to me!

Hi Kaza

There is another case above where ptsb did not forward the phone records to the ombudsman, the ombudsman ruled against the couple, then the couple brought it to the High Court and ptsb had to give the ombudsman the phone records. It is back with the ombudsman now for review. I have not seen anything on this case since.

Judge put this back to the ombudsman to review again, he ruled it was not a "fiduciary relationship"- Wait another 6 months so!

I cannot find any reference in the media to this judgment at the moment. My thoughts would be that if a fiduciary relationship does not exist it is going to be difficult for the Ombudsman to find in favour of the couple second time around. I do hope I am wrong.....

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The ombudsman has been directed to reconsider the matter in accordance with the court’s findings.

In his decision, Mr Justice White found the ombudsman made serious and significant errors in his finding upholding the couple’s complaint.


The ombudsman, in considering the complaint, should have applied the provisions of the 2006 Consumer Protection Code, the lender’s obligations under its own rules, regulations and code of conduct, and general consumer law.


The ombudsman had failed to address a conflict of evidence between the couple and the lender as to what was said by it to them concerning switching from the tracker rate, he found.


The ombudsman had also incorrectly ruled there was a fiduciary relationship between the lender and the couple, he said. The parties were not in a fiduciary relationship with each other as, in law, the lender was entitled to have regard to its own financial interest. Any change in the interest rate had consequences for the couple and the lender, he noted.


The responsibilities placed on the lender were in accordance with the Consumer Protection Code, rather than any duty as a fiduciary, he said, insofar as there was any finding by the ombudsman the bank had misrepresented matters by silence because of a fiduciary relationship that was not correct in law.

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The full judgement can be read [broken link removed]

Hi Brendan

Yes I hope he does. We have the exact same issue with the FSO but we did not go to the branch. We called on the phone(recorded) and sent letters. PTSB argued in this case the couple were told in the branch that they would lose the price promise on tracker. They cannot do that in our case.

The bank knew exactly what they were doing at the time and came out with a story where they had a problem with the system and this is why there was no breakage fee.


Anyway, as I said, long road!

Cheers

Taldar

The most interesting statement was the Court found they were not in a fiduciary relationship. Sounds like people are going to have rely on consumer protection legislation if they wish to make a complaint.

On reflection, I am a bit confused by this.

If one was on a fixed rate of 5% and entitled to a tracker on expiry of the fixed rate, what rate were you put on through switching early on?

Petal sets out the issue in this post from Jan 2009

http://www.askaboutmoney.com/showpost.php?p=775706&postcount=16

I've been onto PTSB regarding breaking the fixed rate (1 year left). I'm fixed at 4.85, they offered me 4.65 varibale rate and no penalties. So I asked them if I wait till fixed rate expires will I go back onto my original tracker and they said yes i will fall onto the tracker available at the time my fixed rate expires. I have to do some calculating, but I'm pretty certain I'll be better off sitting out the year and falling back onto a tracker rather than going on a variable now.

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Whatever variable rate was in place at that date. Before August 2009 the variable rates were very attractive in comparison with existing fixed ones. I am disappointed with yesterday's result, a very legalistic approach. Why couldnt he make the final decision without referring it back to the ombudsman?

All is not lost George, It is better to go back to FSO than get a final ruling against it. I went through the 2006 Consumer act last night and picked 6 conditions in it where the bank were at fault. I will be pointing these out the to FSO in our case.

PS: We were on fixed rate 5.35%, switched to 4.9% as wife was going on maternity leave. 6 months of fixed left at the time!

taldar said:

PS: We were on fixed rate 5.35%, switched to 4.9% as wife was going on maternity leave. 6 months of fixed left at the time!

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The crux of the current case is this:

The ombudsman had failed to address a conflict of evidence between the couple and the lender as to what was said by it to them concerning switching from the tracker rate, he found.

The bank argued that an assistant manager had said he would clearly have told the couple, once they switched, any “price promise” regarding a tracker would be null and void.

Was this was happened?

• Couple were stressed out due to financial difficulties stemming from the fact one of them had lost their job.
• The variable rate would have meant lower repayments and as they were under pressure they were happy to go onto the variable rate.
• The loss of the "price promise" was mentioned to them but due to the pressure they were under, they heard it but didn't understand it. They signed up for the variable rate anyway.
• On reflection after reports in the media, they realised that they had made a mistake in coming off the fixed rate as they lost their right to a tracker.

As the court ruled, there is only a duty of care between the lender and the client, when the bank official had mentioned the price promise, the lender had fulfilled their duty of reasonable care.

The new CPC 2012 will force the lenders to give written information and warnings about long-term effects of changing from a tracker interest rate and allow consumers a cooling-off period.

This did not apply to the 2006 Code, there was only a duty of care.

It looks like all cases in the pipeline will be decided on whether the loss of the price promise was mentioned to the client.

taldar, did PTSB ever tell you that you would lose your right to a tracker?

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Yes I agree, we did not go to a branch like that couple, just calls which are recorded and letters, there was no mention of anything about price promise or tracker not being available to us and in fact the words used by the bank were "no penalty". We have this in our letter requesting the change. The real penalty was the tracker was not available.

I'm interested that the Ombudsman found for this couple in the first place.

We had the exact same situation with PTSB and the Ombudsman ruled against us on the basis that PTSB had no obligation to tell us that we would not be entitled to our tracker and that there was no guarantee that if we had been told that we would have acted any differently.

In our case I went into a branch in Jan 2009 as I was worried about getting our tracker back at the end of our fixed rate in Aug 2009 (5.15%). I was unaware of my terms and conditions at the time but they clearly told me that I would not get my tracker back in August 2009. I was told I could move to variable of 4.65% with no penalties, and that I would then get a further .5% reduction in line with ECB reduction in Feb 2009. I was told that only existing variable rate customers would get the .5% reduction in Feb and this rate would not apply to new variable rate customers after Feb 2009 - so if I moved in Jan 2009 to variable I would be on 4.15% in Feb, where as if I waited until my fixed rate ended in August 2009 I would go onto the variable rate for new customers of 4.65% (if it was still that in the August but basically I would loose out on the .5% Feb reduction).

I went away and thought about it - my friend took the offer up and I thought I might as well get some reduction rather than nothing! So I rang them to say yes I would take the break out. I cannot remember the exact wording of the phone call as it was Jan 2009 but I am certain I reiterated what I had being told and that I was not entitled to my tracker back.

PTSB up until August this year (2011) had continued to tell me that no I would not have gotten my tracker back in August 2009. When I produced my terms and conditions then they changed their story and started to say that yes I would have gotten my tracker back and they would have not told me that I was not going to get it back - this is nearly what is annoying me the most - they now changed their story and I have no proof as such to say they are lying!

PTSB have said they checked their phone records but have no record of my phone call even though I have given them the date and name of the person I spoke to.

I might just be a bitter customer - but I really feel like PTSB knew what they where doing back in Jan 2009 and it is now being dubbed as a computer glitch!!!

I think that you guys need to get together and form some type of campaign.

PTSB is charging a 6% standard variable rate, so if you lose your Ombudsmans cases, this will be very expensive for you.

Given that most of the complaints here seem to be about the "PTSB fixed to variable rate and lose tracker " issue, I think you should be calling on the Financial Regulator to do a systemic enquiry of this practice.

There may be hundreds of people who have lost their trackers who are not informed enough or empowered enough to complain.

I keep reminding people - Michael Noonan is the 99% shareholder in PTSB. This should be relatively simple to sort out if you put the pressure on the right place.

The pressure has been taken off by the political focus on "Bad boys AIB did not pass on 0.25% cut in the SVR". You guys need to organise yourselves to get the focus on the much bigger problem.

Brendan

Brendan Burgess said:

I think that you guys need to get together and form some type of campaign.

PTSB is charging a 6% standard variable rate, so if you lose your Ombudsmans cases, this will be very expensive for you.

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I will keep you all updated with my case as it progresses - at the moment I am waiting on a final letter from PTSB before passing it back to the Ombudsman. But if my case if refused (which it probably will be) I definitely am not happy to just accept it - I will be trying to push forward with it as far as I can.

And yes it will cost us a fortune in interest if the rates stay around 6% - in my case approx €160,000 over the rest of the term of my mortgage (taking tracker as 3% and variable as 6%) will be paid extra in interest.

I agree with Brendan too, we need to click together and fight them as a class rather than as individuals. A handful of people have posted about their plight here but there must be many many more who are not even aware that the issue applies to them. I question when PTSB adds to its' press release when it is raising varaible rates that only a handful of people are on variable rates and most have very old mortgages that are charged little interest anyway, can this be true? When I read such things I think I am the only fool out there who ended up with a variable mortgage in recent times.

i have especially registered here to share my story.in january 2009 we broke out of our fixed rate and into a standard variable during a meeting with a bank member that wasnt even set up to discuss interest rates. originally we had a tracker in 2004 when we first drew down our morgage and then fixed it in 2007 to a 3 year fixed rate. during this meeting we were specifically advised to come out of our fixed rate early and into a variable rate which was lower then the fixed rate at the time. we were informed that tracker morgages no longer existed and that we could not ever get a tracker back. we also came out of our fixed rate penelty free. little did we know at the time we were paying the biggest penelty of all by loosing our tracker. since then we have got a copy of our terms and conditions and oh yes we could have reverted back to a tracker if we completed the fixed term. currently our case is under investigation by financial ombudsman. just going through the motions. i think permanent tsb are an absolute disgrace. i no longer feel any loyalty towards them. maybe when the ombudsman sees that there is a lot more then 1 case going for investigation more questions will be asked re ptsb.