Brendan Burgess
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An interesting High Court case
www.irishtimes.com
The bank had “no validated, empirical basis” for the “unconscionable and extravagant” surcharge interest rate of 9 per cent, she held.
While it was contractually entitled to charge surcharge interest, which is additional to regular interest, on the debt due, the rate charged was “not a genuine pre-estimate of its loss” as of the date of the 2017 loan agreement.
The rate was also more than three times the original lending rate of 2.86 per cent, she noted.
Mr Boyle snr was offered the €1.2 million loan facility in 2017 to restructure existing borrowings by him and his wife, who predeceased him, to develop five houses on his lands.
The bank was entitled, under a clause in the agreement, to apply “proportionate, reasonable and fair” surcharge interest of 0.75 per cent per month to any due amount not paid, the bank argued.
When the loan was not repaid, the bank in May 2022 obtained judgment against Mr Boyle snr of €1.15 million. The issue of liability for the surcharge interest of €213,671, charged between August 2018 and May 2020, was adjourned to a full hearing.
In her recently published judgment, Ms Justice Bolger noted Bank of Ireland’s surcharge interest rate of 9 per cent was struck in 2008 and was the subject of correspondence with the Central Bank of Ireland and the then Irish Financial Regulatory Authority.
The imposition of surcharge interest on a defaulting customer is a “penalty” as well as a means of costs recovery and the surcharge interest clause in the 2017 loan agreement “clearly offends against the rule against penalty clauses”, she held.
The surcharge interest was also “not a genuine pre-estimate” of the bank’s loss in the event of default, the judge found.
No valid basis for Bank of Ireland’s ‘unconscionable’ €213,000 surcharge interest over farmer’s default on €1.2m loan, High Court rules
Decision on lead case raises doubt about ability to enforce surcharge interest clauses over loan defaults
The bank had “no validated, empirical basis” for the “unconscionable and extravagant” surcharge interest rate of 9 per cent, she held.
While it was contractually entitled to charge surcharge interest, which is additional to regular interest, on the debt due, the rate charged was “not a genuine pre-estimate of its loss” as of the date of the 2017 loan agreement.
The rate was also more than three times the original lending rate of 2.86 per cent, she noted.
Mr Boyle snr was offered the €1.2 million loan facility in 2017 to restructure existing borrowings by him and his wife, who predeceased him, to develop five houses on his lands.
The bank was entitled, under a clause in the agreement, to apply “proportionate, reasonable and fair” surcharge interest of 0.75 per cent per month to any due amount not paid, the bank argued.
When the loan was not repaid, the bank in May 2022 obtained judgment against Mr Boyle snr of €1.15 million. The issue of liability for the surcharge interest of €213,671, charged between August 2018 and May 2020, was adjourned to a full hearing.
In her recently published judgment, Ms Justice Bolger noted Bank of Ireland’s surcharge interest rate of 9 per cent was struck in 2008 and was the subject of correspondence with the Central Bank of Ireland and the then Irish Financial Regulatory Authority.
The imposition of surcharge interest on a defaulting customer is a “penalty” as well as a means of costs recovery and the surcharge interest clause in the 2017 loan agreement “clearly offends against the rule against penalty clauses”, she held.
The surcharge interest was also “not a genuine pre-estimate” of the bank’s loss in the event of default, the judge found.