Ombudsman rejects a complaint about bank's reckless lending

Brendan Burgess

Brendan Burgess

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Ombudsman rejects couple’s ‘reckless lending’ claim on €2.4m loan used to buy seven properties

Couple, one of whom was a bank employee, had a combined salary of €100,000 when they took out loan during Celtic Tiger
www.irishtimes.com www.irishtimes.com

This is very funny.

A couple who claimed they were recklessly loaned €2.4 million to buy six rental properties and a family home with a swimming pool during the Celtic Tiger have had their case rejected by the Financial Services and Pensions Ombudsman (FSPO).

Deputy Financial Services and Pensions Ombudsman MaryRose McGovern said that there is no tort of reckless lending in Ireland, and that “contract law assumes that those entering into an agreement intend that it should be legally enforceable”.

“It is clear that the complainants sought the facilities, were offered those facilities on certain terms, had the advice of a solicitor available to them, agreed to the terms of the borrowings, drew down the loans and spent the funds, and it falls on them to repay the money borrowed, in accordance with the terms of the loan agreements,” she said.

...
She noted that the couple were “unwilling” to accept suggestions from the lender to downsize their 743sq m (8,000sq ft) family home with a swimming pool, or to dispose of their six rental properties, while the bank also expressed concerns in 2015 that the second complainant was seeking finance for a new car.
 
We give the FSPO additional powers and they ignore them.

Remember folks this is the FSPO that missed the Tracker Mortgage matter by a royal mile.
 
As the FSPO has extensive powers I think they could have waded in a bit on this. I think they are devoid of imagination. I think some strong criticism might have been warranted.

As for the 2000 BoI and 6000 AIBs these were well after the horse had bolted - they did not lead the charge and acted as if they were bankers.

Weep when you read some of their cases.
 
WizardDr said:
As the FSPO has extensive powers I think they could have waded in a bit on this. I think they are devoid of imagination. I think some strong criticism might have been warranted.

As for the 2000 BoI and 6000 AIBs these were well after the horse had bolted - they did not lead the charge and acted as if they were bankers.

Weep when you read some of their cases.
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I guess that the prevarication means "no"?
ClubMan said:
You really think that this complaint has merit? o_O
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I have zero sympathy for the borrower or the lender here.

But the concept of "reckless lending" does indeed exist even if there is no legal breach.

Banking supervision in 2023 is a world away from the madness of 2006 and this kind of thing doesn't happen anymore. But we should accept the principle that there are limits to what banks should lend to individuals no matter how keen they are to accept the credit.
 
NoRegretsCoyote said:
I have zero sympathy for the borrower or the lender here.

But the concept of "reckless lending" does indeed exist even if there is no legal breach.

Banking supervision in 2023 is a world away from the madness of 2006 and this kind of thing doesn't happen anymore. But we should accept the principle that there are limits to what banks should lend to individuals no matter how keen they are to accept the credit.
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Surely, in the interests of balance, you'd agree that there is also a concept of "reckless borrowing" which should be punished by the borrowers being compelled to wear a dunce's cap for a period not less than the remaining period of the loan repayment?
 
Shirazman said:
Surely, in the interests of balance, you'd agree that there is also a concept of "reckless borrowing"
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Large organisations with risk departments should be held to an infinitely higher standard than punters like you and me.

By analogy, I might like the taste of raw chicken but there is no way that a restaurant should serve it to me at any price.
 
NoRegretsCoyote said:
Large organisations with risk departments should be held to an infinitely higher standard than punters like you and me.

By analogy, I might like the taste of raw chicken but there is no way that a restaurant should serve it to me at any price.
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To quote a knowledgeable commentator "I guess that the prevarication means "no"?" :p
 
Brendan Burgess said:
Deputy Financial Services and Pensions Ombudsman MaryRose McGovern said that there is no tort of reckless lending in Ireland
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This is a key point. You and I might consider the banks' lending reckless, but the High Court has been very clear on this. Had the Ombudsman sanctioned the bank for reckless lending, the High Court would have struck down their finding.
 
WizardDr said:
We give the FSPO additional powers and they ignore them.

Remember folks this is the FSPO that missed the Tracker Mortgage matter by a royal mile.
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ah come on - the couple live in an 8,000 sq ft mansion with a swimming pool and refuse point blank to downsize or sell any properties.

One of them also worked in the bank, so its not as if they didn't know what they were doing.

This was a free roll of the dice to try and delay the inevitable further.

There'd be a case if they had a small salary and were given 10 times salary to purchase a modest home at the height of the boom, but this was a multi unit investment and a spatial luxury residence. I suspect they knew exactly what they were doing.
 
If they are consistent in their belief that "it's all someone else's fault", then presumably their next step will be to sue their solicitor for providing bad advice!
 
@ClubMan - the point being that the FSPO don't use its powers that they have been given. Did you read that?

@BrendanBurgess the High Court have not dealt with the new Act and one of the major points about tribunals is that the Courts act in deference to such tribunals as they are felt to be experts.
 
Brendan Burgess said:
This is a key point. You and I might consider the banks' lending reckless, but the High Court has been very clear on this. Had the Ombudsman sanctioned the bank for reckless lending, the High Court would have struck down their finding.
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Chapter 5 of the 2012 Consumer Protection Code now places a responsibility on lenders to "know the customer " and do risk assessment on a much more rigorous level than the Celtic Tiger days , I could not see and Bank lending money like that case in the current climate and if they did would the argument of " reckless lending " come into play , however reckless borrowing should come with hazards also .
 
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