Brendan Burgess
Founder
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Ross Maguire S.C. of New Beginning has kindly accepted our invitation to attend the SVR Campaign public meeting and explain the legal options open to challenging the high SVRs.
He has summarised them in an email to me, which I reproduce with his permission.
We are currently preparing cases but may look for further plaintiffs to cover different banks and differing wording in various loan documents.
There are 2 basic arguments. The first relates to an ambiguity in some loan agreements referring to "market rates" or some such unclear term. This has been covered in the Millar judgement which is now under appeal to the Court of Appeal where judgement is awaited. If, as is expected, the High Court is upheld it will pave the way for cases on this point to be litigated.
The second and more common and important point relates to circumstances where a bank is given power in the contract to vary the interest rate at its absolute discretion. Most of the Irish banks have this wording.
Consumers are at serious disadvantage when it comes to contracts made with commercial entities. Most contracts are extremely complicated and are presented on a take it or leave it basis. Consequently, and as far back as 1993, the European Union enacted a series of Regulations aimed at protecting consumers in this area.
One of the most important of these regulations came into law in Ireland in 1995 and is known as the Unfair Terms in Consumer Contracts Regulation. This regulation means that a term in a consumer contract that is deemed unfair is not capable of being relied upon against the consumer. Consumer is defined as somebody acting outside his/her business or profession and would therefore catch all home-buyers.
The regulation sets out what might constitute an unfair term.
One of these is a term which has the effect or object of enabling a seller or supplier to alter the terms of the contract unilaterally, without a valid reason which is specified in the contract.
Irish home owners are charged the highest variable interest rates in Europe. Banks have all unilaterally increased those rates over the last number of years despite general interest rates in Europe and beyond having decreased significantly.
Changing the interest rate in a home loan constitutes a change in the term. Can such a term be considered unfair?
The question comes down to a consideration of what a “valid reason” is.
We know what the reasons for the increased rates are and they are:
Arguably they are not because they have nothing to do with the individual contracts entered into between the parties. If, for example, the bank's costs of funds had increased it may be valid for the bank to pass that on to the borrower and really the contract should state that. As we know, the banks costs of funds have substantially decreased.
New Beginning will shortly began to launch a series of test cases aimed at overturning the variable rate increases over the past years and returning such overcharged funds to borrower
He has summarised them in an email to me, which I reproduce with his permission.
We are currently preparing cases but may look for further plaintiffs to cover different banks and differing wording in various loan documents.
There are 2 basic arguments. The first relates to an ambiguity in some loan agreements referring to "market rates" or some such unclear term. This has been covered in the Millar judgement which is now under appeal to the Court of Appeal where judgement is awaited. If, as is expected, the High Court is upheld it will pave the way for cases on this point to be litigated.
The second and more common and important point relates to circumstances where a bank is given power in the contract to vary the interest rate at its absolute discretion. Most of the Irish banks have this wording.
Consumers are at serious disadvantage when it comes to contracts made with commercial entities. Most contracts are extremely complicated and are presented on a take it or leave it basis. Consequently, and as far back as 1993, the European Union enacted a series of Regulations aimed at protecting consumers in this area.
One of the most important of these regulations came into law in Ireland in 1995 and is known as the Unfair Terms in Consumer Contracts Regulation. This regulation means that a term in a consumer contract that is deemed unfair is not capable of being relied upon against the consumer. Consumer is defined as somebody acting outside his/her business or profession and would therefore catch all home-buyers.
The regulation sets out what might constitute an unfair term.
One of these is a term which has the effect or object of enabling a seller or supplier to alter the terms of the contract unilaterally, without a valid reason which is specified in the contract.
Irish home owners are charged the highest variable interest rates in Europe. Banks have all unilaterally increased those rates over the last number of years despite general interest rates in Europe and beyond having decreased significantly.
Changing the interest rate in a home loan constitutes a change in the term. Can such a term be considered unfair?
The question comes down to a consideration of what a “valid reason” is.
We know what the reasons for the increased rates are and they are:
- Because the banks can;
- To shore up losses on the tracker interest rate loans
- To make profit for the banks
Arguably they are not because they have nothing to do with the individual contracts entered into between the parties. If, for example, the bank's costs of funds had increased it may be valid for the bank to pass that on to the borrower and really the contract should state that. As we know, the banks costs of funds have substantially decreased.
New Beginning will shortly began to launch a series of test cases aimed at overturning the variable rate increases over the past years and returning such overcharged funds to borrower