Lenders will be celebrating while the little guy loses again
Published 25/06/2015 | 02:30
You can bet your heavily taxed last euro that the bankers were popping the champagne corks yesterday.
The courts have just saved them a packet. And by packet, we mean billions of euro.
On the face of it, the Millars from Portmarnock in north Co Dublin had a good case. They successfully argued in the High Court that even though interest rates had fallen since the onset of the global financial crisis in 2008, Danske Bank had allowed its variable interest rate to increase.
But the bank and the ombudsman, whose original rejection of their complaint had prompted the High Court case, appealed the ruling to the Court of Appeal. And the Court of Appeal has just come down on the side of the bank.
It said the contract clauses the Millars were relying on did not entitle them to have a variable interest rate that reflected market rates.
The three judges in the Court of Appeal effectively said it was up to banks to set variable rates based on what they see as their cost of funds.
Victory for the Millars would have seen banks having to radically reduce their rates. Instead, the capitalist system - in the skewed way we operate it - has again punished the little guy. Clerys workers know all about that.
These are banks that have been bailed out, in a move that has imposed financial terror on the taxpayers.
And to thank us they impose some of the highest variable rates in the eurozone on 300,000 mortgage holders.
Then we learn that seven of our main lenders have been playing fast and loose with the rules for those in mortgage arrears. The two are not unconnected. Many of those in arrears are paying punitive variable rates.
Yet the Central Bank, in the guise of its consumer protection function, says it can't name the errant banks and is mealy-mouthed about whether or not it will fine the misbehaving banks.
So we are left with a high-stakes game of poker being played out between Finance Minister Michael Noonan and the same banks. The minister is demanding cuts to the variable rates by next week. So far only AIB has obliged.
Bank of Ireland has cut its fixed rates, but has effectively told Mr Noonan to sod off when it comes to reducing its variable rate. It is coming to the point where Mr Noonan will have to force the issue by legislating.
After all, what we are witnessing is market failure.