# AIB Loan facility states it would track ECB main refinancing operations Minimum Bid Rate, it did not!



## DARKMATTERS (7 Feb 2021)

My AIB loan facility at clause 3.6.1 states;

“ The Tracker rate is made up of two parts
(A) the European Central Bank’s main refinancing operations minimum bid rate; (”ECB”) which is variable and
(B) the Tracker Margin as stated in Part 1 of the Particulars of Offer of Mortgage Loan, subject to 3.6.3 below.”

At clause 5.3 entitled “Notice of. Variation” it states;

“Save for any period of a fixed interest rate loan, the Bank shall give notice to the Customer of any variation in the interest rate applicable to the Mortgage Loan, either by specific notice in writing served on the Customer in accordance with the Lender’s Mortgage, or generally by newspaper advertisement published in a least one National Daily Newspaper. Such notice or advertisement shall state the varied interest rate and the date from which the varied interest rate shall apply.”

I have recently discovered that the ECB discontinued the ECB mro minimum bid rate in October 2008 and AIB did not inform me of same. Is this a breach of contract or is it unreasonable behavior by AIB?


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## Palladin (7 Feb 2021)

DARKMATTERS said:


> My AIB loan facility at clause 3.6.1 states;
> 
> “ The Tracker rate is made up of two parts
> (A) the European Central Bank’s main refinancing operations minimum bid rate; (”ECB”) which is variable and
> ...



Hello DARKMATTERS,

you have a very interesting post here that I just had to respond to.

If you are suing AIB you would have to show loss. For example, if you owned 5 buy to lets with AIB and the Bank appointed a receiver over these in say 2014, then your legal team could certainly argue that you lost these properties due to AIB not informing you of this change in the interest rate applicable to your mortgage. 

Before any other posters says "How could you show loss?", I will say the following; if AIB had informed you (as contractually obliged to), you might have realised that this change in the ECB's monetary policy regarding main refinancing operations signaled that the interbank market had grinded to a halt. When this happens over a protracted period, a recession follows, as banks will not lend to business etc. This is precisely what occurred. You would have sold your portfolio and got out of the rental market in late 2008, early 2009 when property prices were still high. This is your loss. I will also add that AIB itself knew the implications of this policy change as they withdrew their tracker mortgage products days later.  

If this only relates to your home, the same argument could possibly be made, but I suggest that you go to the FSPO as they can decide on issues that are not strictly legal, like fairness or reasonableness as you said in your post.

By the way, this issue also affects BOI, ICS, EBS, KBC and others. I am aware of several High Court cases were this matter will be touched upon. However AIB's wording in its mortgage loan is certainly the hardest for the bank to defend.


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## DARKMATTERS (8 Feb 2021)

Thanks you so much for your post, it was most helpful. I can’t believe that this tracker issue effects all those other banks you mentioned.  How come it is only coming before the courts now. Where was the Central Bank of Ireland in all of this? Did it not discover this issue during its tracker mortgage review or is it just too thorny of a matter for them to handle? To tell you the truth, I’m thinking of trying to get on the Joe Duffy show to talk about this, it’s a national scandal.


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## DARKMATTERS (9 Feb 2021)

Has anyone on this site taken this matter to court or the Ombudsman?


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## DARKMATTERS (30 Apr 2021)

I have heard there are several Circuit Court Appeals to possession in the High Court looming, where this argument will form part of the borrower’s defense. The Banks include EBS, AIB and BOI.  If the borrowers are not successful, as in, their respective defences are not enough to stop possession being granted as the Court takes the view that the bank’s conduct regarding same does not extract the borrower from their overall arrears position, the same argument may well win with the FSPO with regard to the bank’s conduct being unfair and unreasonable.


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## Brendan Burgess (30 Apr 2021)

Hi Dark Matters

I have read your post. How did you suffer any loss as a result of this? 



Brendan


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## DARKMATTERS (1 May 2021)

Hi Brendan,

My loss is this, AIB should have notified me, as per the terms of its drafted contract with me, that the ECB had changed the ECB main refinancing rate procedure from the ECB main refinancing operation minimum bid rate to the ECB main refinancing rate fixed rate full allotment in October 2008. If they had done this, as contractually obligated to do, I would have  taken professional financial advice and would have been informed that at this time, the inter bank money markets had ceased to function within the Eurozone and the ECB, instead of being a lender of last resort, had in fact become the only lender in the Eurozone. When Eurozone Banks stop lending to one another they invariably stop lending to businesses and the wider economy and a recession quickly follows. In a recession capital values drop. This is what occurred.

If AIB had informed me (as contractually obligated to do), I would have sold my btl properties in late 2008, early 2009 and taken substantial profit. AIB copped on what was happening and immediately withdrew its tracker mortgages products from the market (as did most lenders in Ireland) as it knew interest rates would head for zero as the ECB attempted to provide cheap liquidity to the Eurozone Banks (which it did).

It was incumbent on AIB to inform me of this change in the ECB main refinancing rate procedure as per its own drafted clause in my various loan offers. The failure by AIB to so inform me of the ECB change in the main refinancing rate procedure within my various loan contracts had the consequence of denying me the opportunity to liquidate my property portfolio and take profit. This is my loss.


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## Brendan Burgess (1 May 2021)

So you had a tracker with AIB. 
The reference rate changed. 
You were not aware of it.
They didn't notify you of it. 

And you say, that you would have had the foresight to...
1) Gone to a professional advisor 
2) She would have told you that this meant that property prices were going to crash
3) You would have believed her 
4) You would have sold all your property at the inflated prices

And, of course, you  can offer in evidence the advice given by lots of financial advisors at the time to their clients that, despite having a cheap tracker, they should sell their property? 

And people wonder why the Financial Services Ombudsman rejects 90% of complaints!

Brendan


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## Johnno75 (1 May 2021)

Loss of opportunity is a more difficult claim to sustain in the courts than actual loss. Whether or not AIB failed to notify you of the change would not absolve you entirely of your own responsibility to inform yourself of what was happening in the financial world.

The key thing is this: did AIB’s breach of contract cause, or substantially give rise to, the loss? While AIB’s actions may or may not have constituted a breach, your issue is demonstrating that the breach caused the loss.


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## skrooge (1 May 2021)

What did the bank say when you raised this with them?

So they didn't write to you but did they meet their obligation with a newspaper advert? Going to court seems to be a long way to go without checking that little nugget

Yes the ECB changed its allocation policy, and the name, but the material impact on you was zero as the rate was the same?

Is it credible to think you would have reacted differently if you had been made aware of this change? We introduced a bank guarantee scheme the month before. If a €440 billion bank emergency measure wasn't enough it's hard to see this change being the straw to break the camels back?


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## Brendan Burgess (1 May 2021)

skrooge said:


> We introduced a bank guarantee scheme the month before. If a €440 billion bank emergency measure wasn't enough it's hard to see this change being the straw to break the camels back?



Excellent point which really highlights the insignificance of AIB's breach of contract. 

Brendan


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## DARKMATTERS (1 May 2021)

Hi Skrooge,

I never had the opportunity of raising this issue with the Bank as when I found out about this particular issue they had already sold my mortgages onto Everyday Finance DAC (Promontoria). You see the Bank never informed me or any other of its customers of this change as contractually obligated to do. Nor did it place an advert  in any of the national newspaper at the time. In other words, they concealed it and indeed continue to do so, as can be borne out within the wording of AIB’s tracker mover mortgage product where it reiterates that the rate your mortgage will track will follow the ECB main refinancing operations minimum bid rate. I now know that this rate/ rate procedure ceased to be available to the market from the 15 October 2008. However, the Bank’s own reaction was to immediately withdraw its Tracker Mortgage products as they knew the impact that the change in ECB monetary policy would have. The onus was solely on the Bank (contractually) to inform its customers. Most customers would not have a clue about what the Banks Guarantee was all about. Indeed most customers (like most Banks) did not know what a Tracker Mortgage was as was borne out by the recent Tracker Mortgage scandal.

It must be a serious enough issue as three separate High Court Judges have remitted the matter to plenary hearing and another summary judgment matter was also remitted to plenary based solely on this point. It is the Bank that has an obligation to act honestly, fairly and reasonably in conducting its business activities. It is obliged to act with due skill, care, dillegence and must act recklessly or negligently or mislead its customers.


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## Johnno75 (1 May 2021)

DARKMATTERS said:


> It must be a serious enough issue as three separate High Court Judges have remitted the matter to plenary hearing and another summary judgment matter was also remitted to plenary based solely on this point.


Can you provide the names of these cases, please?


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## NoRegretsCoyote (1 May 2021)

DARKMATTERS said:


> Most customers would not have a clue about what the Banks Guarantee was all about.


Maybe.

But the bank guarantee and EU-IMF bailout two years later was impossible to avoid if you consumed literally any Irish media at the time.


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## Brendan Burgess (1 May 2021)

DARKMATTERS said:


> the Bank that has an obligation to act honestly, fairly and reasonably in conducting its business activities. It is obliged to act with due skill, care, dillegence and must act recklessly or negligently or mislead its customers.



Correct, but you have absolutely zero loss as a result. 

Brendan


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## skrooge (1 May 2021)

DARKMATTERS said:


> I now know that this rate/ rate procedure ceased to be available to the market from the 15 October 2008. However, the Bank’s own reaction was to immediately withdraw its Tracker Mortgage products as they knew the impact that the change in ECB monetary policy would have.




The change in how the ECB conducted monetary policy and the decision to withdraw tracker products are separate. 

For the purpose of tracker mortgages it was only a name change. ECB policy would have been the same I.e., a rate cut regardless of what they called it. The allocation process didn't matter. They offered you the same product. Ok they didn't tell you the name had changed but that's all.

The reason banks withdrew trackers was simple their costs and ECB rates diverged significantly. 



DARKMATTERS said:


> Most customers would not have a clue about what the Banks Guarantee was all about.



Surely the same logic holds for the ECBs decision to change its allocation process. Why would a procedural change by a central bank conducting monetary policy raise more of an alarm bell than a state guaranteeing every last cent of Irish banks?


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## DARKMATTERS (1 May 2021)

Jaycom,

Can you provide the names of these cases, please?
This particular case has been posted on the internet for all to see, so I will give you this case number [2020] IEHC 484.


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## Johnno75 (1 May 2021)

DARKMATTERS said:


> Jaycom,
> 
> Can you provide the names of these cases, please?
> This particular case has been posted on the internet for all to see, so I will give you this case number [2020] IEHC 484.


Thanks.


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## DARKMATTERS (1 May 2021)

skrooge said:


> The change in how the ECB conducted monetary policy and the decision to withdraw tracker products are separate.
> 
> For the purpose of tracker mortgages it was only a name change. ECB policy would have been the same I.e., a rate cut regardless of what they called it. The allocation process didn't matter. They offered you the same product. Ok they didn't tell you the name had changed but that's all.
> 
> ...


The significant change in ECB monetary policy that was announced on the 8th October 2008 when the ECB announced a change from the ECB minimum bid rate to the fixed tenders full allotment rate signaled to the Eurozone Banks and others that the ECB was going to prop up the inter bank money market and become the lender of first choice as oppose to being the lender of last resort. From October 2008 to May 2009 the ECB rate dropped significantly to keep the Banks afloat. The ECB also allowed the Eurozone banks to use significantly poorer collateral in which to exchange for funds. All tender were accepted no matter what the level was. The Eurozone Banks knew they had extensive toxic loans on their individual loan books so they would not lend to one another. This is why the ECB had to intervene. The Banks also knew that because lending into the wider economy was going to be substantially reduced that a recession was imminent. In a recession property prices fall.

The fact that AIB failed to inform me of this significant change in the interest rate applicable to my loans as contractually obligated to, was unreasonable and unfair as well as being opaque, and contributed significantly to my loss of opportunity (ie to liquidate some or all of my portfolio). This is my loss.


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## DARKMATTERS (1 May 2021)

Hi, NoRegretsCoyote,


NoRegretsCoyote said:


> Maybe.
> 
> But the bank guarantee and EU-IMF bailout two years later was impossible to avoid if you consumed literally any Irish media at the time.


 By the time the EU-IMF bailout happened two years later the horse had already bolted so as to speak, the value of Irish Property had halved and was in the doldrums.


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## Brendan Burgess (1 May 2021)

Yes. And that was all because AIB didn't notify you of something that the World and his mother already knew.

Brendan


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## skrooge (1 May 2021)

DARKMATTERS said:


> The significant change in ECB monetary policy that was announced on the 8th October 2008 when the ECB announced a change from the ECB minimum bid rate to the fixed tenders full allotment rate signaled to the Eurozone Banks and others that the ECB was going to prop up the inter bank money market and become the lender of first choice as oppose to being the lender of last resort. ......
> The fact that AIB failed to inform me of this significant change in the interest rate applicable to my loans as contractually obligated to, was unreasonable and unfair as well as being opaque, and contributed significantly to my loss of opportunity (ie to liquidate some or all of my portfolio). This is my loss.



You summarise the change well. 

However, I don't see that AIB had a  responsibility to advise you on the spectrum of potential outcomes and financial consequences associated with an ECB policy change. That policy and the rationale was publish in the ECB website. AIB did not hide it from you.

You state there was a significant change in interest rate applicable on your loan.  This is factually not the case. 

Did they fail to honour the exact wording of the contract -yes*. Did they break the spirit of it - no.

*I'm still not sure there isn't an advert in a paper somewhere


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## DARKMATTERS (1 May 2021)

skrooge said:


> You summarise the change well.
> 
> However, I don't see that AIB had a  responsibility to advise you on the spectrum of potential outcomes and financial consequences associated with an ECB policy change. That policy and the rationale was publish in the ECB website. AIB did not hide it from you.
> 
> ...


Hi Skrooge,

Clause 5.3 within my loan facilities specifically states  “ the Bank shall give notice to the Customer of any variation in the interest rate applicable to the Mortgage Loan, either by specific notice in writing served on the Customer in accordance with the Lender’s Mortgage, or generally by newspaper advertisement published in at least National Daily Newspaper. Such notice or advertisement shall state the varied interest rate and the date from which the varied interest rate shall apply.”

This they failed to do. If you can provide me with a newspaper article by the Bank from this period I will stand corrected, but I would have thought such a newspaper article would have been previously exhibited by the Bank at such High Court proceedings. I don’t think the average Bank Mortgage customer would be perusing the extensive press releases from the ECB. I say from my reading of the Bank’s drafted clause that it was incumbent on the Bank to so inform me of this change.


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## Brendan Burgess (1 May 2021)

That reads to me as if they will inform you when the interest rate rises or falls, not when the ECB changes the name of a reference rate. 

Brendan


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## DARKMATTERS (1 May 2021)

Brendan, with all due respect to you that is not my reading of the clause, particularly when looking at the facility as a whole (which you do not have the benefit of).

Variation from the dictionary means;

“a change or slight difference in condition, amount, or level, typically within certain limits.”

Therefore the variation by the ECB regarding the main refinancing rate/ rate procedure in October 2008 is encompassed within the provisions of clause 5.3. of my various loan facilities. This is particularly more pertinent as clause 3.6.1 within the various facilities states;

“ The Tracker rate is made up of two parts
(A) the European Central Bank’s main refinancing operations minimum bid rate; (”ECB”) which is variable and
(B) the Tracker Margin as stated in Part 1 of the Particulars of Offer of Mortgage Loan, subject to 3.6.3 below.”

Three separate High Court Judges have sent this matter to full plenary hearing as they must believe there is a reasonable defense for the borrower to rely on.

Also, if a complaint is made to the FSPO about this matter, it has a unique hybrid jurisdiction within the Irish State so it can also find against the Bank regarding the Bank’s conduct regarding this issue on matters such as non transparency, improper conduct etc..


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## Brendan Burgess (1 May 2021)

DARKMATTERS said:


> Also, if a complaint is made to the FSPO about this matter, it has a unique hybrid jurisdiction within the Irish State so it can also find against the Bank regarding the Bank’s conduct regarding this issue on matters such as non transparency, improper conduct etc..



The Ombudsman is characterised by common sense. He would dismiss this complaint out of hand.  

Brendan


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## DARKMATTERS (1 May 2021)

Sorry to burst your bubble, but my complaint and other similar complaints are already before the FSPO and have been accepted as valid complaints, they have been  assigned complaint numbers etc. They have not been dismissed out of hand as you allege. They have all been put on hold depending the outcome of the court cases as previously referred to. This application was made by AIB.


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## skrooge (1 May 2021)

we can toss this back and forth but what it will come down to is the interpretation of the contract and materiality of the change in the ECB's refinancing  operations. As you say its before the courts so we shall see who is right.   If you are right it will effect a great many people. 

Looking at the case mentioned above paragraph 17 jumps out - they relate to the banks point of view:

"[the defendant] confuses the interest rate applicable with the tendering procedure and that the ECB MRO has always applied"

If you follow their argument you shouldn't have been charged any interest on your mortgage after October 2008  - though paragraph 24 counter thats 

What does your contract say your rate should default to if their is no ECB rate?


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## Brendan Burgess (1 May 2021)

DARKMATTERS said:


> are already before the FSPO and have been accepted as valid complaints, they have been assigned complaint numbers etc.



That means absolutely nothing.  I am sure the guy who complained that he wasn't offered a tracker although his neighbour had one was also treated with the respect he deserved.

Brendan


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## DARKMATTERS (1 May 2021)

Hi Skrooge ,

My AIB facilities have no default clause if the ECB main refinancing operations minimum bid rate becomes unavailable.


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## Palladin (12 May 2021)

Brendan Burgess said:


> So you had a tracker with AIB.
> The reference rate changed.
> You were not aware of it.
> They didn't notify you of it.
> ...


Brendan,
I am dismayed. There was a breach of contract by the bank. How could anyone offer in evidence any advice given by other financial advisors at the time that despite having a cheap tracker they should sell the property regarding this particular situation? I doubt any financial advisor at the time would have been aware of the significant change in monetary policy stance by the ECB, particularly so, when the AIB itself failed to notify its respective customers of this variation in the interest rate applicable to its customers as obliged to do so. The wording of DARKMATTERS notice clause within his/her facility is unequivocal, in that it was incumbent on the Bank to so inform of any variation in the interest rate applicable to his/her Mortgage Loan. There was a variation in the interest rate applicable to DAKMATTERS loan (as specifically described by the Bank) from the 15 October 2008 going forward. This is a fact or am I missing something?


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## Johnno75 (12 May 2021)

Palladin said:


> This is a fact or am I missing something?


There is a rule when claiming damages for breach of contract that (1) the offended party has suffered loss and (2) that loss has to have been substantially caused by the breach. This is what is known as causation.

That the bank failed to notify the customer as per its contractual requirement to do so may well have constituted a breach of contract, but did that sole breach cause the damages alleged by the complainant? I doubt it. 

Just because a party breaches a contract does not automatically equate to substantial damages being claimable by the offended party.


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## DARKMATTERS (18 May 2021)

Jayom75 said:


> There is a rule when claiming damages for breach of contract that (1) the offended party has suffered loss and (2) that loss has to have been substantially caused by the breach. This is what is known as causation.
> 
> That the bank failed to notify the customer as per its contractual requirement to do so may well have constituted a breach of contract, but did that sole breach cause the damages alleged by the complainant? I doubt it.
> 
> Just because a party breaches a contract does not automatically equate to substantial damages being claimable by the offended party.


Hi Jayom75,

AIB by their own drafted contract were obliged to tell me of any variation in the interest rate applicable to my mortgage. The Bank contractually set out that my mortgage would follow the ECB main refinancing minimum bid rate and no other rate. The bank failed to put in a default clause. I thought that to claim damages in relation to this issue in court, I had to prove the damages were proximately caused by the breach and that such damages were foreseeable by the bank when drafting the contract. I would have thought that by failing to put in a default clause and by not informing me of the change, the Bank’s conduct helps proves my case. 

However, I am not going to court, I am taking the FSPO route, where, should the FSPO uphold my complaint or part thereof, they can find that the bank’s conduct was contrary to law, but also, that the conduct complained of was unjust or unreasonable or was otherwise improper. What do you think, should the bank have informed me and at least brought my attention to same?


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## NoRegretsCoyote (18 May 2021)

DARKMATTERS said:


> However, I am not going to court, I am taking the FSPO route


For something that happened in 2008?

Are you not out of time?


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## DARKMATTERS (19 May 2021)

NoRegretsCoyote said:


> For something that happened in 2008?
> 
> Are you not out of time?


,
Hi NoRegretsCoyote,

No section 51 (2) and (3) of the FSPO Act can be invoked as the bank concealed the change from me in breach of its own contract. I only became aware of the issue in 2020 when I went to a company that properly constructs complaints against the Banks to the FSPO. It informed me of the issue as well as other issues regarding the bank’s conduct.


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## DARKMATTERS (13 Jun 2021)

Speaking with a counsel the other day, who informed me that a summary judgment debt matter relating to AIB was adjourned generally by the Court until after the minimum bid rate issue was fully heard at a plenary hearing  (set down for December this year). The borrower’s defense team had included the minimum bid rate argument as part of the borrower’s defence to summary judgment in this instance.


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## Palladin (23 Jun 2021)

Greetings DARKMATTERS,

have you approached the Central Bank or the ECB about this matter? Appears to me that it must affect 1000's of borrowers in Ireland.


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