This comes up in a few cases where the complainant says that the bank did not advise the customer of the negative implications of something.
The courts have upheld that, in normal circumstances, a bank does not have a fiduciary relationship with a customer. But there is a very interesting ruling which might benefit people who are making complaints.
47. While all of this [that banks do not have a fiduciary duty their clients] is true, at the same time some measure of realism must also temper this analysis. The banking system is, by its nature, a highly regulated one which, is- or, at least, ought to be- based on trust: see, e.g., Director of Corporate Enforcement v. D 'Arcy [2006] 2 I.R. 163, 177, per Kelly J. The laissez-faire rules which might apply in the case of the borrowing and lending on the international capital markets cannot be applied in exactly the same way in the case of the domestic mortgage market, given that these are matters which gravely affect the long term welfare of most members of the general public. The very fact that the Office of the Financial Services Ombudsman was established by the Oireachtas is itself living testimony ofthis.
48. All of this means that the engagement by a Bank with its customers in relation to the domestic mortgage market must be viewed in this light. Just as with the construction of contractual documents, it would be unrealistic to suppose that retail customers should be aware of the finer points of the law in relation to fiduciaries. Nevertheless, it is important to recall that in all four appeals, the customers dealt with representatives of ILP's "Mortgage Advice Department" and these representatives were frequently described by the Bank as "mortgage advisors" or "advisors": see, e.g., the letter from ILP to the Ombudsman on 161h May 2011 in relation to the Healy appeal. The voluminous documentation accompanying these appeals are replete with references (by both customer and Bank alike) to mortgage advisors.
49. While counsel for the Bank, Mr. Murray SC, emphasised that ILP saw its role as simply giving information and not advice, this is not quite the picture which emerges from the documentation, or, again, at least, the Ombudsman- who, after all, is possessed of special skill and competence in this area - was entitled so to think.
...
53... In the present cases ILP - with its reference to mortgage advisors and a mortgage advice centre - appears to have created something of a similar aura and expectation on behalf of customers. In these circumstances, I consider that the Ombudsman was entitled to hold that Mr. and Ms. Thomas had contacted ILP for advice as well as for information in relation to their mortgage products and that the Bank's response should be judged against that background. The Ombudsman was, moreover, entitled to find that the Bank had not given the appropriate information as to the implications of a switch. 54. For good measure I would also add that the Ombudsman was entitled to invoke Chapter 2.12 ofthe Consumer Protection Code (2006) which provides that:
"A regulated entity must ensure that that all information it provides to a customer is clear and comprehensive and that key items are brought to the attention of the consumer. The method of presentation must not disguise, diminish or obscure important information."
It seems to me to be a common sense decision that if a financial institution calls some its staff "advisors" that they should then be held accountable for their advice.
It seems to me to be a common sense decision that if a financial institution calls some its staff "advisors" that they should then be held accountable for their advice.
