Should existing KBC customers avail of the reduced mortgage rates?

[Brendan Burgess]

I had assumed that this was a clear cut decision, but thinking a bit more about it, I have some concerns. This is the declaration you sign:

DEClARATION AND AUTHORISATION
By signing hereunder I/we hereby acknowledge and confirm that I/we have read and understood the terms and conditions applicable to the changing of my/our interest rate as set out overleaf and that they amend the terms and conditions applicable to my mortgage account.

I/we have been afforded the opportunity to seek independent legal and financial advice in relation to them. ..

If you determine me/us to be eligible, I/we hereby irrevocably instruct and authorise KBC Bank Ireland plc to amend the interest rate applicable to my/our mortgage account in accordance with the terms and conditions overleaf on this basis.

I/We hereby agree that once a letter is issued by KBC Bank Ireland plc to me/us confirming the interest rate on my/our mortgage account has been amended as requested above at the interest rate specified in the confirmation letter the terms and conditions set out overleaf shall be binding on me/us and shall amend the existing interest terms and conditions of my/our mortgage.

On three occasions,they refer people to the conditions overleaf.

9. We reserve the right at any time in the future to amend, modify, withdraw or change the Option or the terms and conditions applicable thereto without notice. If we withdraw the Option this will not affect those customers who have availed of it prior to the date on which we withdraw it. For the avoidance of doubt however if we withdraw the Option customers who have availed of it prior to that date will not be able to re-apply for the Option in the future.

21. The interest rate on a variable rate loan including your mortgage account can be varied (whether upwards or downwards) at any time, at our absolute discretion by reference to a variety of factors including, without limitation, changes in the ECB base rate, the Lender’s cost of funding, credit risk, operational costs,
regulatory requirements, profitability, business strategy, competitive environment and other market forces. Proposed interest rate changes go through a number of processes before they are approved by us. We will take such steps as we consider
reasonable and appropriate to bring any such variation and the date from which the variation is effective to your attention.

33. You are only entitled to the New Business PDH LTV Rates available at the date on which the new interest rate is applied to your mortgage account. Once this interest rate has been applied to your mortgage account no variations in the New Business PDH LTV Rates that we may introduce thereafter will be applicable to your mortgage account. You may however re-apply for the Option at any time.

36. The relevant category of loan for interest rate purposes is determined by us inter alia by reference to one or more of the following:
(a) the type of customer the Borrower is, namely whether the Borrower has drawn down the Loan whereby he is an existing customer of the Lender (an ‘existing customer’) or has not yet drawn down the Loan whereby he is a new customer of the Lender (a ‘new customer’);

(b) the use of the Property by the Borrower

(c) for loan to value rates, the Loan to Value percentage calculated at the draw down of the Loan or on (re)calculation as part of the Option ;

(d) if a Borrower requests a variable rate loan or requests that the rate of interest on all or part of a variable rate loan is to be fixed for any period;

(e) the date of drawdown of the loan and/or the date(s) on which the interest rate is switched under the Option; and

(f) any such other factors that we may at our discretion so determine from time to time.

We will advise you from time to time as to the relevant category of loan that is applicable to your mortgage account and save for manifest error a statement from us as to the relevant category of loan that is applicable to your mortgage account shall be conclusive
evidence in this regard.

38. Where there is any inconsistency between these terms and conditions and the General Homeloans Terms and Conditions applicable to your mortgage account these terms and conditions shall take precedence.

39. (a) We reserve the right to amend these terms and conditions and the General Homeloans Terms and Conditions applicable to your mortgage account from time to time for such reasons as we deem reasonable and necessary. In particular we may amend them due to changes in legislation or regulation applicable to us or the operation of your mortgage account, and/or a change in technology, our IT Systems and/or banking practice generally or as otherwise considered by us as reasonable and/or necessary

 

[Brendan Burgess]

These are very significant changes. And people should hold off applying for them until their implications are worked out.

At the moment, KBC has different rates for new and for existing customers. It seems to me that this is a clear breach of the Consumer Protection Code

• It breaches to fundamental principle of fairness
  
• They did not notify people at the time that they would be doing this

I think that KBC, and other banks such as ptsb which behaves in this way, face the prospect of a Central Bank review of this practice and may have to give refunds of the overcharged interest.

If you sign this agreement, you are effectively agreeing that it's ok for KBC to charge new customers lower rates than existing customers.

I have argued before if KBC tells you when you take out your mortgage that they are not going to pass on rate cuts to you, then you have no right to complain when they don't do so. But if they don't tell you, then you have a right to be treated fairly.

Brendan

 

[Brendan Burgess]

39. (a) We reserve the right to amend these terms and conditions and the General Homeloans Terms and Conditions applicable to your mortgage account from time to time for such reasons as we deem reasonable and necessary. In particular we may amend them due to changes in legislation or regulation
applicable to us or the operation of your mortgage account, and/or a change in technology, our IT Systems and/or banking practice generally or as otherwise considered by us as reasonable and/or necessary

Is this a normal term in a contract? We can vary the terms of your contract at will.

 

[Sarenco]

Hi Brendan

Should existing KBC borrowers avail of the new lower rates?

As a poster put it on another thread - "would they be any worse off than they are now?"

I wouldn't have thought so.

However, some borrowers might actually be better off taking a short term fix, depending on the outstanding amount of their loan and (to a lesser extent) their LTV.

And some borrowers may well be better off switching to another lender altogether.

 

[gnf_ireland]

I think that KBC, and other banks such as ptsb which behaves in this way, face the prospect of a Central Bank review of this practice and may have to give refunds of the overcharged interest.

"would they be any worse off than they are now?"

The two above lines are key. If the central bank were to decide KBC was behaving unfairly and in contradiction to the code of conduct, they could force KBC to refund customers the overpaid interest.
However, for this to be relevant the Central Bank would need to do this. This may or may not happen, so there is a bit of uncertainty around it.

In the event the customers signs the new terms and conditions, they are accepting this rate differentiation policy, and in effect lose their 'entitlement' to complain about it.

So its back to " is a bird in the hand worth two in the bush" ? For some it will probably be, especially if they are on the higher SVR rates. For others, it might not be.

 

[Brendan Burgess]

As Sarenco says, the first thing existing KBC customers should do is to switch to another lender which is likely to treat them fairly. The best options are EBS or AIB at the moment.

If they sign this form today, they are acknowledging KBC's right to treat them unfairly from now on and so they would lose the right to complain about unfair treatment from now on.

However, if they sign this form today, I don't think that they would lose the right to complain about unfair treatment up to now.

If someone was publicly spirited enough, they should refuse to sign the form and take a case to the FSO or the High Court to have KBC's treatment of existing customers deemed unfair.

Brendan

 

[Bronte]

.

If someone was publicly spirited enough, they should refuse to sign the form and take a case to the FSO or the High Court to have KBC's treatment of existing customers deemed unfair.

Shouldn't the FSO be already looking into this?

And nobody can afford the High Court.

 

[Brendan Burgess]

The FSO doesn't look into things. They can only adjudicate on complaints from individuals and each one is assessed on its own merits. But if they uphold a complaint, they could order KBC to rectify it for everyone affected by the same issue or they could refer it to the Central Bank.

The Central Bank should be looking into this and directing all lenders to comply with the Consumer Protection Code.

Brendan

 

[Bronte]

So are you saying this does not comply with the Consumer Protection Code?

 

[Brendan Burgess]

The existing mortgage contract is a standard contract. Neither it nor any of the advertising says to new customers that they will not be passing on rate cuts when they become existing customers.

I believe that is a clear breach of the CPC and can't understand why the Central Bank has not intervened.

This new contract says, admittedly in the small print, "You will not be entitled to the interest rate cuts we pass on to new customers".

That might be enough to comply with the CPC but I think it should be far more prominent.

Brendan