# permanent tsb challenging Ombudsman tracker decision in the High Court



## Brendan Burgess (19 Nov 2021)

PTSB takes legal challenge over ombudsman tracker decision
					

Industry observers speculate outcome may set precedent for wider group of borrowers




					www.irishtimes.com
				




This is very interesting.

It does not appear to be the discounted tracker issue as there are two reports of the Ombudsman rejecting complaints on this issue.

I can't think of any systemic issue which is outstanding?

It's unlikely that ptsb would challenge a one-off case without implications for others?

ptsb had determined that the borrower was not impacted, but the Ombudsman has held that they were. 

Brendan


----------



## Brendan Burgess (19 Nov 2021)

The Ombudsman judges each case on its merits.

Is it possible that the Ombudsman rejected complaints on the discounted tracker issue based on the arguments put forward in those complaints and found in favour of a complainant who argued their case differently?

I doubt that in that the Ombudsman probably allows for the fact that some consumers don't argue their case well. If someone else argued their case well enough to uphold a complaint, I would imagine that the Ombudsman would apply those arguments to the other case. 

Brendan


----------



## Gregmill (22 Nov 2021)

Hi Brendan

Just noticed your thread re any systemic issue with regards to PTSB .

There's does appear to an issue with this case 2020-0214 where the FSPO disagreed with the provider which I know is almost certainly the above mentioned bank.

I don’t think it  refers to the particular case in your heading but there could be a systemic issue here. It’s gets interesting from page 13/14 onwards. See what you think.


----------



## Brendan Burgess (22 Nov 2021)

Hi Greg

I would say that is probably it. Well spotted.

In summary.
This borrower fixed for two years and the contract said that they would be offered a choice of rates at the end of "the fixed rate period."
They were offered a tracker rate at the end of the two years but chose a variable rate instead. 

They complained that the "repercussions" of picking a variable rate were not explained to them.
The Ombudsman, correctly in my opinion, found that the implications were clear and rejected the complaint


*But...*

In  a general discussion of the issues, 
The Ombudsman said that "the end of the fixed rate period" means _any _fixed rate period.
So if the borrower had fixed again for a year, they would have been entitled to a tracker at the end of that second period.
ptsb disagreed saying that the "the fixed rate period" clearly meant the initial fixed rate period and not any subsequent period.
But the Ombudsman said that if that was what they meant they should have said "at the end of the initial fixed rate period"

Brendan


----------



## Brendan Burgess (22 Nov 2021)

For someone who had the older tracker mortgage contract which had a tracker rate specified in the contract, they will have lost out a lot by not being offered the tracker. [ Update: Padraic Kissane has informed me that anyone who had a rate specified in their contract did get redressed] 

Brendan


----------



## Brendan Burgess (22 Nov 2021)

For someone who had not got a tracker margin specified in their contract...

At the end of the second fixed rate period, they should have been offered a tracker rate at the then current rate which was a margin of 3.25%.

You might say, so what? A margin of 3.25% would make the tracker very unattractive, but...

permanent tsb had very high SVRs which were more than 3.25% above the ECB Rate 








Brendan


----------



## Brendan Burgess (22 Nov 2021)

OK, for a period of time, they did not even quote fixed rates for existing customers while offering them to new customers.






						ptsb has dropped their fixed rates
					

PTSB seem to have dropped some of their fixed rates:



					www.askaboutmoney.com
				




They clearly anticipated that by allowing customers to fix, they could argue that they should get a tracker when the fixed rate ended.

A very insightful post here from 5 years ago.

_They are not offering fixed rates to existing customers, because of the wording of their tracker contracts which say something like "on expiry of the fixed rate you will get your tracker back". So someone who properly lost their tracker could fix for one year and then reclaim their tracker._


----------



## Gregmill (22 Nov 2021)

Brendan

Your post is very interesting where you listed out the rates and the differences. There does look like there was a systemic breach here.

The question i would now ask is that on page 20 of this report the Fspo indicated that the bank failed to comply with one area of the CPC code.

Who is responsible for reporting this breach. Is it the bank the FSPO or both of them to report this to the central bank?

It would be interesting to know was this reported?


----------



## Brendan Burgess (22 Nov 2021)

Hi Greg

I had skipped over that, as I was focussed on other issues.

_The Provider has outlined in its post Preliminary Decision submissions dated 14 February
2020 as follows;


“It is a misapplication of rule 12 of the Consumer Protection Code 2006 to use it as
an aid to the Interpretation of a contract. Contracts must be interpreted according
to the ordinary rules for their construction. Those rules do not vary according to
whether a regulated entity that is a party to that contract has or has not complied
with a provision of the 2006 Code.”

While I accept that Rule 12 of the Consumer Protection Code 2006 cannot be utilised as a
method of interpretation of a contract, I find the proposition put forward by the Provider
that the Consumer Protection Code somehow does not apply to a mortgage contract to be very worrying. I believe, the contract, like all communications by a regulated financial
service provider, must meet the requirements and standards set out in the Code which the Provider has failed to do._

 I would be fairly sure that the Ombudsman would have brought this to the attention of the Central Bank. If not, I am sure that the Central Bank has studied the published decisions of the  Ombudsman. 

But just to be triple sure, I will bring it to the attention of the Central Bank, anyway.

_Brendan_


----------



## Gregmill (22 Nov 2021)

> For someone who had the older tracker mortgage contract which had a tracker rate specified in the contract, they will have lost out a lot by not being offered the tracker. [ Update: Padraic Kissane has informed me that anyone who had a rate specified in their contract did get redressed]



Hi Brendan

Regarding your post today at 1.43 you quoted the above.

There maybe other implications here regarding all of these contracts. What about the contracts which had no specified rate, but there was a tracker entitlement at the end of every  fixed rate period.

Lets say, a person went on a tracker rate at the end of a first fixed rate period and then  a few months later decided to opt for a second fixed rate period. PTSB claim that you go on their current tracker rate at the end of the fixed rate period. What happens if the first tracker rate the consumer was on previously was lower than the rate now being offered at end of 2nd fixed rate period? (assuming that a tracker rate was offered, which more than likely was not offered)  

For example in the case quoted the customer was offered a bank margin of 2.25% over ECB in May 2009. Suppose a different customer with the exact same contract as in the case mentioned in this thread opted for the tracker for two months at 2.25% in May 2009. If however in July 2009 they decided to go on another fixed rate for another two years. Then in July 2011 the 2nd fixed rate ceased. Even if PTSB offered them a tracker, based on their rules they would have offered them the tracker rate with a margin of 3.25% over ECB as that was the then current tracker rate at July 2011 if offered by the bank.   How does this reconcile to PTSB rules as outlined by them for TRACKER MORTGAGE LOANS within the meaning of the Consumer Credit Act 1995 which they showed on the reverse of each letter of approval page. I quote

" The interest rate applicable to Tracker Mortgage loans is made up of the ECB Rate plus a percentage over the ECB rate. The amount of the percentage over the ECB rate will depend on the amount of the loan and that percentage will not be exceeded over the term of the loan"

This text was also outlined on page 9 of the FSPO decision 2020-0214

I wonder how many customers might fit into this category?


----------



## Brendan Burgess (22 Nov 2021)

Hi Greg

An interesting angle.

The contract is clear:

"On expiry of the fixed rate period, and where the applicant chooses the option of a tracker mortgage interest rate, the interest rate applicable to the loan will be the tracker mortgage rate appropriate to the balance  outstanding on the loan at the date of expiry of the fixed rate period."

2007 fix for two years - on expiry offered tracker of ECB + 1% , but fix for another two years.
2009 expiry of 2nd fix rate period - not offered a tracker, but Ombudsman says should have been offered one.

Let's say that ptsb loses/concedes the case, they will offer the rate on the date of expiry of the fixed rate period, which would be, say the margin of 3.25%.

Are you arguing that the margin should be the margin of 1% at the end of the first fixed rate period?


" The interest rate applicable to Tracker Mortgage loans is made up of the ECB Rate plus a percentage over the ECB rate. The amount of the percentage over the ECB rate will depend on the amount of the loan and that percentage will not be exceeded over the term of the loan"

So the margin for the full term of the mortgage should be the margin offered at the end of the first fixed rate period?

Worth arguing ok.  It certainly would be in line with the principle and understanding of what a tracker mortgage is. Once a margin is set, it's set for the remaining term.   But ptsb would argue that the contract is clear that it's the rate appropriate when the fixed rate period ends.

It would be in keeping with all the other cases where a rate was specified in the contract.  ptsb initially argued that they gave up that rate and were entitled only to the "then current rate" on expiry of the fixed rate, but subsequently put everyone who had such a rate back on that rate.

Brendan


----------



## Gregmill (22 Nov 2021)

Hi Brendan,

I think there is some confusion here.

I am not arguing what was offered at the end of the first fix rate period and this was immediately followed by a second fixed rate period. What i am saying is that if a customer was offered a 1% margin at end of first fixed rate period and then actually took this tracker margin for a few months. Then subsequently decided to fix again. *The question then is, what tracker margin should apply after the expiry of the 2nd fixed rate period? *Should it be 1% or 3.25%?

So the position is as follows:   Tracker Entitlement per the mortgage loan after each fixed rate period per FSPO and then you have the sequence as follows;

Fixed rate period     +   Tracker rate for short period  + 2nd Fixed rate period + finally another tracker rate period


If you apply the 3.25% after end of 2nd fixed rate period ( it matches PTSB interpretation with the then current tracker rate but is inconsistent with the Tracker Loans Conditions)

If you apply the 1% margin after end of 2nd fixed rate period ( it agrees with the Tracker Loan conditions but then is inconsistent with the then Current tracker rate)

No matter, which rate is used, there appears to be a flaw in the contract conditions.

If they were already on a tracker margin of 1% then based on the CCA rules this margin should not be exceeded during the term of the loan. There is then an inconsistency in the PTSB terms and conditions. If you apply the margin of 3.25% this doesnt agree with their TRACKER Loan conditions.

Hope this makes it clearer, but there does appear to be a flaw in their contract.


----------



## Brendan Burgess (22 Nov 2021)

Hi Greg

That is not a scenario I had considered. 

Agree with you that if someone went on a tracker of 1% at the end of the first fixed rate and subsequently fixed, then they should be offered the 1% at the end of the second rate.   

Brendan


----------



## Gregmill (23 Nov 2021)

Brendan 

I would agree with you, i think the 1% should also apply but i doubt if the bank would agree with us.

What about all of these customers who were not even offered a tracker after a second fixed rate period or were indeed offered an incorrect rate ?

As The FSPO mentioned in his final report regarding the case we are discussing, which you quoted yesterday

_"While I accept that Rule 12 of the Consumer Protection Code 2006 cannot be utilised as a
method of interpretation of a contract, I find the proposition put forward by the Provider
that the Consumer Protection Code somehow does not apply to a mortgage contract to be very worrying."_

What I do find very strange indeed is that a bank which got a record fine at that time in 2019 for breaches of the CPC code , for the FSPO to state in the year 2020 the above sentence is indeed a strange state of affairs.


----------



## Gregmill (25 Nov 2021)

Does anyone have any thoughts where this cohort of customers should go from here. There appears to be possible multiple systemic breaches here and it’s strange that nobody else has made any comments because this may have impacted on a lot of customers.

There are probably many customers out there who don’t even know  that this case may have had implications for them but are still totally unaware of the issues.

Should Padraic Kissane mentioned above by Brendan be contacted on this.

Have the central bank reviewed these cases?

What do others think. You will have to read the decision by the FSPO first to get an understanding of all the implications re this case as there are many.


----------



## Brendan Burgess (25 Nov 2021)

Hi Greg

What can someone affected by this do? 

They can make a complaint to permanent tsb which would take a few months to get a reply.
They can then go to the Ombudsman which would take a few years to get a decision.

I would expect that the High Court will have decided on the Appeal in the meantime.  

Assuming that they uphold the Ombudsman's decision,  the Central Bank will tell permanent tsb to roll it out to other affected customers. 

*And we are assuming that this is the issue which ptsb is appealing. It probably is, but it could be some other issue completely.*

Brendan


----------



## Gregmill (25 Nov 2021)

Hi Brendan

I note your point above, are we talking about the same case?.  Initially I thought we were, but the High Court challenge appears to be relating to a totally separate case.


The High Court Challenge appears to be related to where the FSPO decision was to include a bank customer for tracker-mortgage compensation, after being disregarded in an industry -wide examination overseen by the Central Bank.









						PTSB takes legal challenge over ombudsman tracker decision
					

Industry observers speculate outcome may set precedent for wider group of borrowers




					www.irishtimes.com
				




There was no mention of any compensation in the Final decision by the FSPO 2020-0214 so it appears very unlikely we are talking about the same case.

So assuming we are not talking about the same case, then where does one go from here, if as Brendan mentions the FSPO or indeed a legal challenge if someone were to take it on, could take years.


----------



## Kh1234 (17 Dec 2022)

Hi there, How long typically does it take a case like this to come before the High Court and for a decision to be made? 
Thanks,


----------

