I have sent the Ombudsman this letter today, which explains our position.
Brendan
Dear Mr. Deering
Let me assure you that I fully believe in the integrity, independence and the f itness for purpose of your office. While I have not agreed with all of your decisions, I have always acknowledged that they were reached following a procedure which was fair to both sides.
While I have no choice but to accept your decision to keep the file closed in this case, it would be wrong of me not to express my disappointment at what I consider to be an unfair procedure. I also want to explain why I disagree with your decision and, most importantly, I want to make some suggestions which you might consider for future cases.
Lack of fair procedure
We asked AIB for a written explanation of how they calculated the refund of interest and for a schedule of the calculations. They refused both.
We complained to you.
AIB sent you the explanation but appears not to have sent you the schedule of calculations.
You sent their explanation on to us and closed the file.
You gave us no opportunity to challenge their explanation or to check the calculations.
Up until now, in this case and in every other case I have been involved with, you forwarded any submissions from one side to the other side for comment.
I cannot understand why you did not do so in this case.
The substance of the decision
AIB has explained it thus:
Mr Burgess is in effect suggesting we should compound interest on the 12% capital write off balance year on year which refunds on a compounding basis interest that was not charged which is not in keeping with the original decision.
It never occurred to us to seek clarification of your preliminary or legally binding decision. To have asked you to confirm if the interest should be paid on a compound basis, would have been akin to asking you to confirm that the normal rules of addition, subtraction, multiplication and division should apply. Banks charge interest on a compound basis – they refund it on a compound basis.
There have been about 40,000 tracker cases in the Central Bank Tracker Review Programme – to the best of my knowledge, the banks used compound interest in all refund calculations. Karen’s case and the follow-on cohort are the only exceptions.
If it had been your intention to refund the interest on a simple basis, it would have been helpful if you had expressly stated this.
If it had not been your intention to use simple interest, but you feel that the words you used unintentionally implied that and your hands were tied, you should have stated that and called on AIB to do the right thing, even if you were not in a position to legally alter your decision.
It might well be your view that we are being petty asking for interest to be compounded on the 12% refund which was, essentially, an arbitrary figure. Again, while we might not like or agree with that assessment, it would be helpful to know that.
Suggestions for the future
- Where you are making an award which does not refer to an absolute amount, but requires the financial services provider to calculate it, you should add to your decision the wording “and provide the complainant with a schedule to show how the figure was calculated in such a manner as to enable the complainant or their advisor verify the calculation.”
- You should include a wording to the effect “While this decision is final, either side can seek clarification of the calculations used.”
- The award should be made much simpler so that the complainant can calculate it. For example, in this case, you awarded Karen a write down of 12% and a refund with an unnecessarily complicated form of wording which gave AIB the scope to interpret it as simple interest. This also put a burden on AIB to calculate it, and had they shown their calculations to Karen, a burden on her to check it.
It would have been much simpler and clearer to make an order to write down the mortgage by 12% of the balance when the fixed rate ended and to make a cash payment equal to 4% of the balance when the fixed rate ended.
That would have been unambiguous.
That would have been very easy for AIB to calculate and very easy for the complainant to check.
As this was a cohort issue, AIB could have implemented the decision for the other 5,600 borrowers in a much shorter timeframe.
Finally, I want to restate that we accept your decision to close the file. The purpose of this letter is not to ask you to reopen the file, but to express our disappointment at the procedure so that other complainants may benefit from it in the future.