Padraic has written an opinion piece in the Sunday Business Post. Reproduced here with is permission.
Opinion: Ulster Bank tracker case decision
raises serious concerns for Financial Services
Ombudsman
The Court of Appeal was wrong to overturn a lower court's findings after FSPO
awarded refunds and compensation to borrowers, because of how they were handled
by the bank
PADRAIC KISSANE
SEPTEMBER 30, 2024The customers were denied the option to revert to the tracker
margin that existed prior to fixing the rate of interest. Picture: Fergal Phillips
Earlier this month a decision was issued from the three-judge Court of Appeal in
a case involving Ulster Bank and the Financial Services and Pensions
Ombudsman (FSPO).
It concerned customer mortgage accounts with Ulster Bank where individuals
changed their loans to a tracker rate of interest, then selected a fixed rate of
interest for a period. The bank then denied customers the option to revert to the
tracker margin that existed prior to fixing the rate of interest.
The court's decision - overturning a lower court's ruling that the FSPO was right
in awarding refunds and compensation to borrowers due to the bank's conduct -
should raise serious concerns about consumer welfare, particularly in relation to
mortgages.
I want to say in the strongest terms that the decision was wrong and shows a
continued lack of understanding of what the tracker mortgage interest rate
product is, and how it operates.
In addition, the decision from the Court of Appeal went against the very reason
for the original establishment of the FSPO. That was, to address the perceived
imbalance of the consumer when challenging a financial firm - in this case a
bank.
Indeed, built into the Act was clear wording which bestowed on the ombudsman
the power to act in an informal manner and according to fairness and the merits
of the complaint “without undue regard to technicality or legal form”.
However, the Court of Appeal made a significant statement in its report, which
will likely have a profound impact on the FSPO. It stated that the High Court
“ought to have carried out its own analysis of the contractual documents and did
not owe the ombudsman any deference in this regard.”
To let that stand will effectively shut the office of the FSPO and empowers any
finance firm in the future to challenge decisions given in favour of the customer
that might affect wider numbers.
The argument in the case centred around the application of a tracker rate
following a period of a fixed rate of interest. This related to an account that
didn’t originally commence on tracker but had tracker applied by the completion
of what was called a “flexible transfer form”.
No option
When the customers then fixed the rate of interest, the bank did not offer a
return to their tracker rate or a default to their tracker rate.
The argument in this case was simple. Customers completed the flexible transfer
form, created and introduced to provide tracker rates of interest to those whose
loans did not commence on it.
The wording on the form was identical to the wording of a loan offer that
commenced on tracker. The customers who availed of this option were assured
their margin was “fixed for the life of the home loan term” - that is what the
form stated.
There was no if, buts or maybes involved - at this stage. The only event that
changed that intention was the subsequent banking collapse.
All banks, with no exceptions, sought to find ways, words, arguments for
customers to lose their tracker rates because tracker rates became a customer
benefit and a loss to the provider of the loans.
The attempts by Ulster Bank to introduce vagueness to the form, and the
intention of the arrangement, were aimed at the goal of retrieving tracker rate
options from customers.
This was never the intention of the product, as shown in the wording of the
flexible transfer form.