Key Post Success! After 7 months fighting, AIB agrees to reduce break fee to what it should have been!

Seagull

Frequent Poster
Messages
1,196
Don't hold your breath waiting for a letter. And even then, they'll probably only be in touch with anyone who actually did break out of their rate, not people who were given an excessive break out fee and stayed put.
 

_ripped_off

Registered User
Messages
45
Congrats to @_ripped_off, @RedOnion and @Brendan Burgess - fantastic result.

I wonder will the Central Bank sanction AIB for breaching these regulations?
This is is something I have wondered all along about the central bank. It appears to me they have been turning a blind eye to it and believe AIB when they said they acted within the legislation. Despite being queried at least twice by the minister for finance on same. Their only response was customers should open a complaint with the FSPO. Maybe I have an incorrect understanding of the role of the central bank but in my own line of work they certainly seem to have a fairly heavy hand when it comes to enforcing rules & regulations.
 

RedOnion

Frequent Poster
Messages
3,288
Adam Maguire interviewed Colin Hunt on Morning Ireland this morning to talk about Green Bonds. At the end of the interview, he asked him about the breakage fees.
I've only had time this morning to listen back to the interview. After 2 years of seeing standard responses to customers, and press office responses to journalists / TDs, it's almost surreal to hear the CEO being directly quizzed on this on national radio.

One way or another, this topic has now got attention so there will be a proper thought through response, which is the very least customers deserve.

As an aside, both here and in the 'real world', I've reviewed probably over 200 break fee calculations. In all of those AIB is the only one of the main banks that I have ever challenged in any case.
It's also interesting that none of the other banks had to make any changes to their calculation when the MCD came into effect in 2016 - they were already doing what I consider to be what's required to be compliant. There are slight variations in how each bank uses rates, but nothing material.

Apart from the main banks, I helped a poster here challenge a 5k break fee from Dilosk, and they immediately put their hands up and said they were wrong and waived the fee entirely.

I wonder will the Central Bank sanction AIB for breaching these regulations?
I don't know about sanctions, but I personally think CBI have been lacking in their response to this topic. Part of the problem with the MCD is there are some terms without definition. When questioned on the issue, CBI said it wasn't their place to provide guidance because it was an EU harmonisation legislation so guidance should come from EBA.

Here is CBIs response to Deputy McGrath almost a year ago. They discuss different funding costs / hedging arrangements from banks leading to different calculation (that bit is fine in my view) but never addressed AIBs then methodology.

 

_ripped_off

Registered User
Messages
45
Great post Red.
As a matter of interest I asked Michael McGrath to look at this again on 12th of July when I paid the break fee of over 2k to AIB. 16th July he responded that he had raised the matter again - AIB changed their methodology on the 15th July.
Minister for finance received more or less the same response as above from the CBI. I received below on 23rd July.


“QUESTION

To ask the Minister for Finance if he is satisfied that all lenders are correctly applying the new rules governing the calculation of breakage fees for mortgage customers that wish to come off a fixed rate product early; and if he will make a statement on the matter.

REPLY

The Central Bank of Ireland is the independent regulator of all regulated financial service providers and it has advised that it has checked the methodologies applied by lenders to calculate fixed rate breakage fees on mortgages subject to the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 and that it has seen no evidence of material failings in this regard.

The Central Bank has also said that it cannot comment specifically on the compliance by individual financial service providers with their obligations under financial services legislation due to the Central Bank’s confidentiality obligations and the requirement to apply fair procedures. However, the Central Bank has indicated that it has intervened with a small number of lenders to ensure that the information provided to consumers on fixed rate breakage fees is clear and transparent.

More generally it could also be noted that if an individual consumer is not satisfied with the way a financial service provider is providing a financial service, s/he may make a complaint to the independent Financial Services and Pensions Ombudsman.”
 

Bronte

Frequent Poster
Messages
13,681
REPLY

The Central Bank of Ireland is the independent regulator of all regulated financial service providers and it has advised that it has checked the methodologies applied by lenders to calculate fixed rate breakage fees on mortgages subject to the European Union (Consumer Mortgage Credit Agreements) Regulations 2016 and that it has seen no evidence of material failings in this regard.
Is that not an outright falsehood by the Cental Bank, if they had checked AIB's breakage calculations they must have known they did not comply.

Must say though I'm not one bit surprised withe the CB getting things wrong. It took Burgess nearly three years to get them to change their calculations on mortgage rates.
 

Brendan Burgess

Founder
Messages
38,559
Is that not an outright falsehood by the Cental Bank, if they had checked AIB's breakage calculations they must have known they did not comply.
Hi Bronte

Both AIB and the Central Bank claim that the way AIB did it complied with the regulations.

Red disagrees. But it's a matter of opinion.

All the other banks including EBS do it differently, so I am in the Red corner on this one.

Brendan
 

NoRegretsCoyote

Frequent Poster
Messages
872
Is that not an outright falsehood by the Cental Bank, if they had checked AIB's breakage calculations they must have known they did not comply.

Must say though I'm not one bit surprised withe the CB getting things wrong. It took Burgess nearly three years to get them to change their calculations on mortgage rates.
It's a bit more subtle than that. Read carefully the letter from the Central Bank to Michael McGrath TD.

The Central Bank is saying that it doesn't think it has the power to determine the correct rate for banks to use in the circumstances.

It's passing the buck to a little-known body in Paris called the EBA, which interprets EU legislation in this regard and hasn't provided guidance to date on the issue.

Legally it's a grey area as to who should give guidance, either EBA or Central Bank. The Central Bank clearly doesn't want the task, as it would be more work for them to monitor compliance and impose sanctions.


^^^^^^^I am not condoning this, just explaining what is going on^^^^^^

ripped off said:
Who is the central bank accountable to?
I guess their actions are open to judicial review but that is not really relevant here.

Keep up your case with the Financial Services Ombudsman. He has the power to rule that the breakage charge AIB applied was greater than the "financial loss" that AIB would suffer under the Mortgage Credit Directive. I am speculating here but this could de facto become the regulatory standard that the Central Bank would then have to monitor compliance with.
 

RedOnion

Frequent Poster
Messages
3,288
Ok, in defence of CBI on this one, depending on how you inspect this there might not be an apparent issue.

To give an example:
In April this year AIB reduced their fixed rates.
1& 2 year are 3.15%, and 3, 4 & 5 year are 2.85%
Anyone who fixed at those rates CANNOT be charged a breakage fee unless and until AIB reduce fixed rates for new business under the rate the customer fixed at. This is under the 'retail rate' method that AIB use.

If CBI asked for breakage fee today for a 5 year mortgage fixed in May, today the break fee is zero. It'll be higher with other banks because funding rates have dropped over the summer. Suddenly AIBs method looks great!

There is no issue when AIB doesn't drop rates, or if they drop rates in line with funding costs. The issue in the case in this thread is that they made a pricing decision to have a lower margin on new mortgages. Then when a customer requested a break fee, AIB sought to be compensated for both the movement in rates and the difference in margin they were giving up for the remainder of the fixed term. Customers were penalised for pricing decisions made by AIB to get more new business.


Note: AIB have not said they did anything wrong, and have said they were always in compliance with relevant legislation.
My posts are my opinion based on my interpretation of the relevant legislation.
 

Bronte

Frequent Poster
Messages
13,681
Both AIB and the Central Bank claim that the way AIB did it complied with the regulations.

Red disagrees. But it's a matter of opinion.

All the other banks including EBS do it differently, so I am in the Red corner on this one.
Why on earth would AIB change their calculations if they were complying with the regulations. And why would any other bank for that matter have changed how they did their calculations.
 

Brendan Burgess

Founder
Messages
38,559
Why on earth would AIB change their calculations if they were complying with the regulations.
Hi Bronte

I have been thinking about this.

It's a bit like the prevailing tracker rate issue. AIB insists that they did nothing wrong in not offering people a tracker rate when their fixed rate ended. But just in case, they restarted offering the prevailing rate to people in Nov 2013.

So AIB insists that it is right. But just in case it finds that it's wrong, it is changing its calculations to limit the damage.

Brendan
 

ceoldude

Registered User
Messages
11
I'm raging reading this.

I have about ten to fifteen letters in my file from AIB where I requested early redemption figures from them over the last number of years and they calculated crazy numbers that always outweighed any benefit of me leaving the fixed rate.
So I reluctantly stayed and just finishing the term now.
I'm pleased for the customers who recovered a refund of the difference.
If I had received legitimate calculations I would have been long gone from AIB as a customer years ago.
It appears my only option is to write a strongly worded letter to the omdudsman. Not much point.
 

NoRegretsCoyote

Frequent Poster
Messages
872
I'm raging reading this.

I have about ten to fifteen letters in my file from AIB where I requested early redemption figures from them over the last number of years and they calculated crazy numbers that always outweighed any benefit of me leaving the fixed rate.
So I reluctantly stayed and just finishing the term now.
I'm pleased for the customers who recovered a refund of the difference.
If I had received legitimate calculations I would have been long gone from AIB as a customer years ago.
It appears my only option is to write a strongly worded letter to the omdudsman. Not much point.

Don't write a strongly worded letter.

Make a complaint.

Calculate how much you could have saved through switching if a lower rate had applied.

There could be actual money in this for you if you can demonstrate that AIB used incorrect figures.
 

RedOnion

Frequent Poster
Messages
3,288
It appears my only option is to write a strongly worded letter to the omdudsman
Your case might be different, because you fixed in 2014 when interest rates (both retail and wholesale) were much higher.
I'd happily take a look at the calculations for you if you send me details.
 

_ripped_off

Registered User
Messages
45
Just don’t expect a speedy resolution. I’ve had a 2nd letter in a week just to let me know they are still reviewing our request for how they actually calculated the updated breakage fee of €952. its a key issue and failing they seem to have in not being able to provide calculations.

@ceoldude make sure you reference that interview with the ceo of AIB that Brendan posted here last week.

the more people that hound them and complain the better.
 

ceoldude

Registered User
Messages
11
Your case might be different, because you fixed in 2014 when interest rates (both retail and wholesale) were much higher.
I'd happily take a look at the calculations for you if you send me details.
By all means - How do I contact you? The "Start Conversation" function is not available on your username.
Thanks
 

_ripped_off

Registered User
Messages
45
Just to keep this thread updated. We got a calculation breakdown of the revised breakage fee of €972. It seems reasonable.
They are not however willing to budge on the loss we suffered by not being able to switch in February.

They also claim they did not change the way they calculate the breakage fee because of the MCD but because “changing the way they calculate fixed breakage feed is in keeping with their customer first policy”

myself and mr ripped off will take a few days to consider all this and whether we will now just accept the refund with AIB. We’ve had some personal bad news in recent days and I’m not sure I’ve any fight left in me to expend further on AIB.
 
Top