A
Asphyxia
Guest
On examination of the original investigation by the F.S.O. with regard to the Millar's complaint, in particular, the response by Danske Bank to question 21(4) posed by the F.S.O. ( see below)
21. As part of that investigation, the Ombudsman on the 26th September, 2013, served on the bank a summary of the Millars’ complaint and a schedule of questions and evidence required from the bank. The bank responded on the 24th October, 2013. These are the questions posed and the answers given:
(i) independent verification that the Bank's cost of funds had increased.
(ii) the bank supplying the F.S.O. with such information.
This is particularly important as it formed part of the Millar's complaint.
Now examining European Communities (Unfair terms in Consumer Contract Regulations) 1995,( SI 27/1995 refer ) in particular Schedule 3 of the Act, terms which have the object or effect of being unfair.
( j ) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;
( b ) Subparagraph (j) is without hindrance to terms under which a supplier of financial services reserves the right to alter the rate of interest payable by the consumer or due to the latter, or the amount of other charges for financial services without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract immediately.
Therefore the F.S.O. should have sought the necessary documentation from Danske Bank that clearly showed that there was, in fact, an increase in the bank's cost of funds, as asserted by Danske Bank. To do otherwise, would be a dereliction of it's investigative duties. It appears to me that the F.S.O. failed in it's duty to investigate the complaint thoroughly, moreover, the F.S.O. took the Bank at their word, which is wholly unacceptable. It is essentially, within the context of the Millar's complaint, that Danske Bank truthfully answered the question posed by the F.S.O. and that the F.S.O. are in possession of all pertinent material necessary for them to come to a valid determination.
21. As part of that investigation, the Ombudsman on the 26th September, 2013, served on the bank a summary of the Millars’ complaint and a schedule of questions and evidence required from the bank. The bank responded on the 24th October, 2013. These are the questions posed and the answers given:
1. Please clarify whether or not the bank is willing to list any of the criteria taken into account by the bank when calculating the increase in the variable rate of interest.
A. No, the bank is not prepared to divulge commercially sensitive information to the Complainants. However, we confirm that funding costs are most certainly taken into consideration. Indeed, these would be a primary driver of the decision.
2. Please clarify whether or not the criteria relied on by the bank when making its decision to increase the variable standard rate were audited by any external independent entity in order to verify that the increase was set in accordance with accepted banking procedures and if it was commercially justifiable.
A. We have not had an audit carried out by an external independent entity. The bank is not subject to regulated pricing on mortgage interest rates, as these decisions do not fall under the scope of s. 149 of the Consumer Credit Act 1995.
However, we have a full governance process in place in relation to pricing decisions and this would include interest rate changes. All such changes are approved through the Pricing Committee and subsequently by Change Control Committee. In addition, the bank has conducted our own internal audit of our pricing decisions.
3. If the bank did not commission such an audit please provide a detailed explanation for the reason why the bank did not deem such independent verification necessary.
A. As outlined in our response to question 2, the bank is not subject to regulated pricing on mortgage interest rates. We are therefore not subject to external independent verification (although as outlined, we internally audit this area to ensure that we act in accordance with standard banking practice). The bank can confirm that all pricing decisions are only taken after robust due diligence has been undertaken and all the risks and benefits have been discussed in detail.
4. Does the bank accept that in the absence of such independent verification, the increase in the bank’s variable interest cannot be objectively justified? If the bank rejects this assertion, please state the basis on which the bank contends that this assertion is incorrect.
A. No we do not accept this. As outlined, we operate a robust process whereby the bank’s Pricing Committee carefully consider the commercial justification of any and all price changes. This process is audited by the bank’s internal audit team whose purpose is to ensure that we act in accordance with our own processes, procedures and that we act with probity. We are not required to seek external assessment of commercial decisions relating to increases in our Standard Variable Rate.
Ultimately, our customers will make their own assessment of our rates and take action if they are dissatisfied by changing provider, which will obviously have clear, measurable consequences for the bank. That is why such decisions are referred to as “commercial decisions” – if our customers do not feel they are justified, they will cease being our customers – the bank therefore considers all factors carefully prior to a price increase.
(i) independent verification that the Bank's cost of funds had increased.
(ii) the bank supplying the F.S.O. with such information.
This is particularly important as it formed part of the Millar's complaint.
Now examining European Communities (Unfair terms in Consumer Contract Regulations) 1995,( SI 27/1995 refer ) in particular Schedule 3 of the Act, terms which have the object or effect of being unfair.
( j ) enabling the seller or supplier to alter the terms of the contract unilaterally without a valid reason which is specified in the contract;
( b ) Subparagraph (j) is without hindrance to terms under which a supplier of financial services reserves the right to alter the rate of interest payable by the consumer or due to the latter, or the amount of other charges for financial services without notice where there is a valid reason, provided that the supplier is required to inform the other contracting party or parties thereof at the earliest opportunity and that the latter are free to dissolve the contract immediately.
Therefore the F.S.O. should have sought the necessary documentation from Danske Bank that clearly showed that there was, in fact, an increase in the bank's cost of funds, as asserted by Danske Bank. To do otherwise, would be a dereliction of it's investigative duties. It appears to me that the F.S.O. failed in it's duty to investigate the complaint thoroughly, moreover, the F.S.O. took the Bank at their word, which is wholly unacceptable. It is essentially, within the context of the Millar's complaint, that Danske Bank truthfully answered the question posed by the F.S.O. and that the F.S.O. are in possession of all pertinent material necessary for them to come to a valid determination.
