KBC Customer suing KBC over €202k redress inadequate

Interesting case in today's Irish Times


It's a bit confusing. But it appears

1) He got a refund of €664k in overcharged interest
2) He got redress of €202k on top of that.
3) It arose because they took his tracker from him as part of a restructuring deal
4) They appointed receivers to his 5 buy to let properties
5) KBC deny that he lost the properties due to the overcharge.

If KBC withdrew the tracker as part of a restructuring of a buy to let portfolio, it suggests that he was already unable to meet his repayments with the tracker mortgage in place.

If I were facing a problem with my buy to let and the lender said that they would restructure it only if I gave up my tracker, I would see if it were possible to sell some of the properties or raise finance elsewhere to keep the tracker.


Brendan

I'm not getting the same reading as Burgess from that article. I think the interest refund is on the 5 buy to let's, seems way to high to be a normal house mortgage. If the increased interest meant the man could no longer pay his mortgage than the bank is at fault.

Also in the situation of a receiver, tenant's can act up, receivers can be tardy, there may be lost rent. Would the man owe more because of that kind of thing

Separate to that is the immense pressure that this kind of financial burden can bring on people. Including marriage breakups.

Brendan Burgess said:

3) It arose because they took his tracker from him as part of a restructuring deal

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@Brendan Burgess I am not getting this bit either:

Between 2006 and 2008, he made regular mortgage payments on five buy-to-let homes he owned.
But in January 2009, by which time the wrong interest rate was being applied, he was starting to struggle to pay his increased monthly mortgage payments.
He tried to restructure his loan and reach an accommodation with KBC Bank but failed.

If we take those comments at face value, he was paying his mortgage repayments until the interest rate increased.

The bigger question in this case is what category of KBC customer does he fall into, in terms of why the tracker was taken off him? The article does not state this (based on my reading)

Bronte said:

Separate to that is the immense pressure that this kind of financial burden can bring on people. Including marriage breakups.

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I have to agree here - there is a non-financial cost that simply cannot be measured in a lot of cases. If he was due ~600k in interest, he must have had property worth millions. It is likely he had a very successful career at the time to be able to borrow that sort of money (I would hope). He is now unemployed and his marriage broke up. How much of the last decades life journey relates to the actions of the bank? That is for the courts to decide.

But, I am glad to see at least one case go to court on this, and I genuinely hope it is not settled out of court. There needs to be a precedence set for actions of 'corporate bodies' in relation to the way they deal with their customers. A hollow sorry is not always enough.

People forget that private rents fell 25% in just two years from 2008 to 2010. At the same time as the tracker was withdrawn, this man was facing tenants looking for massive discounts and likely voids in between tenancies too. The tax regime on landlords was tightened over the period as well.


If the Irish economy hadn't crashed, I suspect he'd still have his BTLs. It's convenient to blame the banks for everything but it's not the full story.

As I said, it's confusing. This is the bit which made me think that he was struggling before they took the tracker

“In 2008, we withdrew a tracker interest rate from you during the period of your payment arrangement, which should not have happened.

So in 2008 he was in a payment arrangement before they withdrew the tracker interest rate.

So, although he was on a cheap tracker, he needed a payment arrangement.

KBC and BoI did make restructures of buy to lets contingent on the borrower giving up the tracker.

Brendan

Brendan Burgess said:

As I said, it's confusing. This is the bit which made me think that he was struggling before they took the tracker

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@Brendan Burgess Yes, like most things, the devil is in the detail. This is why a legal case on this will be good, as its likely the full facts and timelines will be made public and we will be able to see for ourselves when the events occurred.

If the party was falling into arrears in 2008, before the tracker was removed and before the fall in rents started to take real effect, then this is one scenario. Its likely the party cannot reasonably place as much blame on the banks as they would like.
However, if at the time the tracker was removed, the person was not in arrears in any way (e.g. removal of tracker came as a result of fixing the loan), then I think the party has a much stronger claim
Now, if the tracker was removed as part of a move from interest only to interest & principal, and based on the banks revised assessment he was unable to afford the principal & interest sum , and had to restructure the loan at that stage, then yes this is another matter also.

NoRegretsCoyote said:

It's convenient to blame the banks for everything but it's not the full story.

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Absolutely agree, and they have been a scapegoat for many for a decade - which is why it would be good to see this case go to court so the activities of both parties are made public and we can see how 'bad' the banks really were in the 'cause' of these problems

NoRegretsCoyote said:

People forget that private rents fell 25% in just two years from 2008 to 2010. At the same time as the tracker was withdrawn, this man was facing tenants looking for massive discounts and likely voids in between tenancies too. The tax regime on landlords was tightened over the period as well.


If the Irish economy hadn't crashed, I suspect he'd still have his BTLs. It's convenient to blame the banks for everything but it's not the full story.

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Yes it is true to say rents fell. But that doesn't mean all landlords had rents fall. You'd be a pretty bad landlord if two years of rent reductions put you out of business. As regards the tax regime, I presume you're talking about mortgage interest relief being cut. So I decided to have a look back at my own tax returns. Just gone back to 2006 to 2010. Rents were the same (or thereabouts) for all years except 2010. The 75% interest reduction was from 7 April 2009 which is an odd date but that's what I've in my notes. 2010 looks like it was a bad year for me as I wrote that a lot of non nationals were leaving Ireland and I'd a high turnover of tenants at the time.

Cream Egg, you keep all your records, did you have a similar experience.

**********
Between 2006 and 2008, he made regular mortgage payments on five buy-to-let homes he owned.
But in January 2009, by which time the wrong interest rate was being applied, he was starting to struggle to pay his increased monthly mortgage payments.
He tried to restructure his loan and reach an accommodation with KBC Bank but failed.
Receivers were appointed to his five properties in December 2011 and repossessed.
***********

- He was paying his mortgages regularly until 2008
- A wrong interest rate was applied by KBC
- He was struggling by January 2009

Comment: clear link there based on those facts that he was stuggling to pay the mortgage because of the wrong interest rate, there may be other factors, but maybe not. And once you start down the slippery slope of not paying your mortgages than you are in a scenario of being at the mercy of the bank.

- Receivers appointed December 2011

Comment: Does that mean the properties, and control of rents, was taken off him then. And all the while the bank was putting immense financial pressure on him, mortgage arrears, wrong interest being charged, interest and penalties on that, losing the rents, losing control, he actually might have been able to withstand all that if the correct interest rate had been applied.

test

Today I can not Italic or bold.

Bronte said:

Yes it is true to say rents fell. But that doesn't mean all landlords had rents fall. You'd be a pretty bad landlord if two years of rent reductions put you out of business.

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I like to rely on CSO stats but if we're trading anecdotes I bargained my rent down from €1350 to €1100 in the year 2009 alone!

From memory 2009 was the peak for the glut of rental stock on daft. I viewed a lot of places (near-prime Dublin) at the time and landlords were biting my hand off. Stuff seemed to linger on daft for 6 weeks at a time.

You may have been the exception but between 2007 and 2010 the vast majority of landlords saw falls in income on their portfolio.

Bronte said:

As regards the tax regime, I presume you're talking about mortgage interest relief being cut.

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That indeed, but also the introduction of the income levy from 2009 (replaced by USC in 2011) and the reduction in personal credits in 2011. This guy had a lot of rental income, and the vast majority of it would have been subject to the new regime.

The information in the article is conflicting, so none of use really knows.

The letter from KBC was clear, but it may have been wrong.

I have yet to see a case where someone lost ownership of a property due to loss of the tracker.

I have seen plenty of cases where people lost ownership because they were not paying their agreed repayments.

Brendan

That's an incredible statement Brendan. The overcharging by the banks, that's every month over many years, forced people into financial breakdown and left them unable to pay their mortgages and many subsequently lost their homes...., had them repossessed, voluntarily surrendered them or sold them under pressure from banks. Hundreds of euros every month over years of a mortgage was enough to tip people over the edge, particularly as the period in question coincided with the collapse of the Irish economy.

Page 6 of the Central Bank's final report (in the executive summary) says as of end of May 2019, 99 PDHs (I.e. people's homes) and 216 but to lets (that's people's livelihoods and/or pensions/futures) were lost, and I quote, "as a result of lenders' failings".

Hi Gimmestrength

I simply don't agree with the Central Bank's statement.

I have not yet seen any case where someone lost their home because they lost their tracker.

And here is why.




Anyone with a €300k loan paying the SVR of 4% would have had repayments of €1,800. If they got into difficulty and engaged with their lender and paid at least €1,379, they would have kept their house. A simple extension of the term would have resulted in an affordable loan.

Most of the people who lost their home were not paying anything at all because they had no income. If the interest rate had been zero, they would still have been in huge arrears.

There is a grey area as follows:
If I had been on 1% , my repayments would have been €1,379
However, I could have paid €700.
If you had given me a split mortgage I could have afforded €700 so I lost my home because I lost my tracker.

The Central Bank and the Appeals Panels have bought this nonsensical argument and awarded these guys huge compensation.

Brendan

It is just not that simple.... personal finances are complex and the cause and effect is not easy to track in reverse. However banks themselves have agreed in 315 cases at least that their overcharge was the causing factor in the house loss.

You assume banks were behaving reasonably and rationally and working with the best outcome for the customer in mind.

Your analysis doesn't consider that the overcharge over years meant people had no savings when hard times came because of the accumulated damage to their finances

...These savings could otherwise have been used as a buffer to keep mortgages on track, which would of course have been best for bank, the country and individuals. This is not to mention the benefit to the economy had the overcharges amount been circulating rather than sitting in bankers' pockets and the exponential positive effect that would ha e had. The banks, as well as redressing those they overcharged, should opt to start paying tax on their massive profits again (they pay virtually nothing now because they can write off against losses during the recession) as a way of boosting the economy they damaged....

Gimmestrength said:

Your analysis doesn't consider that the overcharge over years meant people had no savings when hard times

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That is a fair point in theory, but I don't think it applies in practice.

By the way, I am referring to family homes here. There were buy to lets lost due to the loss of trackers.

People lost their trackers generally from 2010 onwards. It took a few years for the SVR to go a lot higher than the trackers. But most people who lost their homes were already in trouble because of the Great Depression. And most had stopped paying their mortgage or were paying very little.

You do have to remember that over 100,000 people had their mortgages restructured. The people who lost their homes were those who were well beyond restructuring, who gave up their homes to escape negative equity, who stopped making any effort for repayments.

But what you say could have happened in theory and the Appeal Panel would make any such assessment and they always err hugely on the side of the borrower in these cases.

Brendan

I think the key in all these cases is the approach the banks took when the person attempted to engage with them to restructure the mortgages. I think this article said that they attempted to restructure but the banks would not agree. It would be very interesting to see what the terms offered on both sides were and whether the borrower offered any sort of reasonable terms.
If I had say 2m of debt, and repayments were 10k a month, and I offered 1k - these are not reasonable terms. If I offered 8k, then its a different matter.

The bigger issue, rightly or wrongly, is some people put their heads in the sand and hoped the problem would go away. Instead of paying something, they paid nothing - some hoping for a massive cash write down at some stage. And some actually appear to have received it - as is evident in some of the media cases published.

But yes, I agree that it took a long term of non-payment for a repossession order to be granted by the bank. However, some people could not handle this and either surrendered voluntarily or worse to avoid the harassment suffered from the banks actions. I don't think many of us will ever understand the impact on someone's life this type of behaviour is, and how long it will actually take to recover from it.