Bank fights order to put couple back on tracker for remainder of 35 year mortgage
A MORTGAGE lender is trying to overturn an order made by the financial watchdog, directing it to put a couple back on to a cheaper tracker for the remainder of their 35-year mortgage.
The Financial Services Ombudsman made the order against Irish Life & Permanent, after finding that the lender should have made clear, in writing, to the couple that they would lose their right to revert to a tracker mortgage if they opted out of their fixed-rate term early.
The couple, who changed from their fixed-rate term to a variable rate in January 2009 after one of them had become unemployed, complained to the Ombudsman that this had not been clearly explained to them by Irish Life & Permanent, trading as Permanent TSB.
The bank yesterday appealed in the High Court the Ombudsman's decision from February 2011. It argued that the Ombudsman had erred in finding that the bank was in a position of a "fiduciary relationship" with its customer.
The couple took out a mortgage for €395,000 in 2007, with the interest rate fixed for the first three years. It was then to revert to a tracker rate -- which follows the ECB rate -- when the fixed term expired.
In January 2009, they contacted the Permanent TSB branch in Lucan, Co Dublin, to find out if there was an exit fee from the fixed-rate mortgage.
They were told there was "no penalty" and that the only rate available to them would be the variable rate of 4.65pc.
The couple, who did not tell the bank of their financial difficulties, went into the bank and switched rates. The bank stated that an assistant manager would clearly have told them that once they switched, any "price promise" regarding a tracker would be null and void.
Paul Gallagher, for the bank, said the bank was entitled under law "to look after its own interest".
Paul Anthony McDermott, for the Financial Services Ombudsman, said the customers were clearly confused and had been placed in the position where there was "not a shred of writing to record the fact they are losing this right" to revert to a tracker.
He pointed out under the Consumer Protection Code coming into place in January 2012 the "law of the land" would require banks to set out a series of pieces of information when someone loses a tracker mortgage and to inform them that if they switched to a different interest rate they would not be entitled to revert to the tracker.
Mr McDermott said it was "clearly" a problem and an issue for people if it was being emphasised in the code.
"How can the bank say that the Ombudsman is getting it wrong when the law is changing to this?" he queried, after the Ombudsman had found that it should have been set out in writing for the couple.
Mr McDermott said telling a consumer there was "no penalty" when they switched mortgage interest rates would be taken by a consumer to mean no disadvantage.
He added that the bank was taking a legalistic approach with the Ombudsman, who views a case informally in terms of good conscience.
The case continues today.