I will be on the Claire Byrne show tonight discussing high SVRs and lost trackers

[moneymakeover]

@Gordon Gekko

Not sure what you mean they had a 20% chance?

Do you mean there was a chance they would get away with it?

They would get away with 1 in every 5?

 

[Nordkapp]

Ethics is part of the problem of culture affecting the country, most regulated entities would and should have a Code of Ethics.

One has to ask were they coerced into screwing the customer over, fired later and the paper trail burnished so the bank could progress to retain solvency?

When insolvency beckons, all bets are off on survival, it does not matter to them who they roll over to survive.

 

[Sarenco]

Fair play Brendan. It's hard to remain rational in the face of unrelenting, populist rhetoric.

So much easier to waffle on about "culture" than actually look at the detail and construct a viable position. Must be nice to live in Fintan's ivory tower.

 

[Paul Reilly]

That debate on Claire Byrne was like dinner at the inlaws.

Everyone saying everything but nobody listening to anything.

A debate like that should be two people.

Like you Brendan and Fintan or Deirdre.

Was surprised you said Central Bank done a marvellous job.

You get very little speaking time on these shows yet all I will remember our hero Brendan say was "the Central Bank did a marvellous job"

Also did Claire not say theyd discuss the Variable Crisis later?

In January? When 300,000 SVR customers see their repayments rise?

We were discouraged off a tracker but it was a verbal agreement and therefore there is not a solitary shred of evidence to support this. I knew very little about Mortgages when I bought my house.

There should be a subject on the Leaving Cert Curriculum called Mortgages

 

[Gordon Gekko]

I am not saying that I agree, and the 20% figure was merely an example to illustrate a point.

Doctors differ and patients die; take something as simple as “you will be entitled to a tracker rate for the duration of your loan”; some loss-making bankers, if told by their lawyers that there’s a 20% chance that it could be successfully argued that fixing constitutes a new loan, might just take a punt and take away the tracker.

That isn’t fraud.

 

[gnf_ireland]

@Gordon Gekko not sure I agree it’s not fraud. If it was systematic and deliberate then it could be very easily argued as fraud

Let’s take a parallel scenario with an organisation with comparable powers to what the banks clearly think they have - the Revenue Commissioners. If I take professional advice and submit a tax return on that basis and the Revenue deem it illegal - I will be slapped with a nice bill including penalties, interest and surcharges.

Personally I believe if the banks were in the wrong here - and I am not sure they are in the wrong in all cases but are in some - they should have to pay the customer back with the same terms as if it was the Revenue they owned the money to. It’s a clear benchmark as to what compensation for illegal behaviour equates to.

 

[gnf_ireland]

I should also state that I am in no way impacted by the tracker issue as they were long gone before I bought a house

 

[Gordon Gekko]

For the avoidance of doubt, I believe that the banks have behaved appallingly and that massive compensation should be paid out. However, I remain to be convinced that it was fraud.

 

[gnf_ireland]

Guess it depends on your definition of fraud. I typed ‘definition of fraud’ into google and got
“wrongful or criminal deception intended to result in financial or personal gain”

I think that would cover it by enlarge. The only debate would be around personal gain, but in theory ongoing salary could cover personal gain. You could also argue the bank is a legal persona due to the fact it’s incorporated.

Whether the Irish statute book has a different definition I cannot comment on !

 

[Brendan Burgess]

@Gordon Gekko not sure I agree it’s not fraud.

As I said repeatedly on the programme - I have no evidence whatsoever that there was fraud involved. But there may have been. If anyone has evidence that there was fraud, they should send it into the Fraud Squad. They would prosecute anyone if the evidence is strong enough.

Brendan

 

[gnf_ireland]

@Brendan Burgess as I have said above there is a difference between the use of the word fraud in the English language context and the legal definition of the word fraud. I am using this in the context of the English definition - as quoted above.

That said, given the widespread behaviour across multiple banks, maybe the next reasonable step is to get the Fraud Squad involved and let them investigate the issue.

As some posters say - this is very different to the SVR issue. This is legal and based on wording in contracts not on ‘doing the right thing and moral duty’

 

[bluestilton]

I have been on a high SVR of 4.5% since I took out my mortgage in 2002. I have made a complaint to the ombudsman regarding what I believe to be unfair terms in my mortgage contract which was a standard contract and not individually negotiated, the wording in relation to interest rates is deliberately vague and in my view in breach of both UTCC Regulations and the Consumer Protection Code. This complaint is now on hold pending the outcome of a court case, god only knows how long it will be before the complaint will be dealt with. The foreign owned bank I deal with have their securitisation prospectus on line which includes reference to unfair terms under risk management indicating to me that they recognise the terms as unfair. How they got a banking licence is questionable. I am not in a position to move banks as I was in arrears in the past which affected my credit rating although all payments now up to date.

 

[Duke of Marmalade]

But I do believe they are linked by the very fact that the tracker scandal is so much worse because of the SVR issue. If a person on a low tracker (say 1% over ECB) was asked to pay the eurozone average of say 2% as opposed to 4.5%, the issue would not have been as bad.

Agreed. This is the excellent point which Brendan has made and which I didn't fully appreciate. Without high SVR we probably wouldn't have the likes of FOT getting in such a lather about the Tracker scam.

Let's just have a brief history lesson. When introduced it wasn't entirely clear whether Trackers were better than SVRs. Our banks could borrow at even less than ECB rate so SVR could be expected to be better than Trackers if that state of affairs persisted.

Then came the banking crash. Our banks' borrowing costs soared. Trackers were hopeless loss makers adding to the insolvency of the banks. SVR went skywards. Now, because of huge intervention both by the ECB and by our own government, bank borrowing costs are down to levels where (according to Dan O'Brien) even Trackers are again profitable. But the lack of competition (which did sort of work in the past, in fact too much so) put parachutes on SVR rates which have failed to fall at the same speed as bank funding costs.

It also remains that anybody who took out any mortgage in say 2004 has finished up paying far less than they would have expected at outset, even if they have been cheated. Just saying.

 

[Brendan Burgess]

Ouch, wrong answer to opening question IMO.

It was a very tough opening question of the "Have you stopped beating your wife?" type. I think it would have been reasonable after a discussion of the issues. I had suggested to them that they start by asking me factual questions of the type:

• How did people lose their trackers?
  
• How many have been identified - can you sort out the confusion in the numbers?
  
• Why have they been so badly affected?

Boss you were brilliant!

Thanks. I had been strongly advised by people not to do it. Given the lynch mob which is out there it would be impossible to get any sort of sensible discussion of the facts in a panel programme. Especially when the facts are the very opposite of what everyone is saying in the media and no one has challenged it at all.

I had suggested to them to balance the panel, they should get someone else who was not afraid to challenge the conventional view e.g. Karl Deeter. I also suggested getting a barrister to explain the distinction between fraud and breach of contract.

I focused on getting two issues out there which have not been discussed.

• This problem is caused by the very high mortgage rates and that affects far more people
  
• The Central Bank has done an effective job (They were treated disgracefully by the Oireachtas Finance Committee.)

When I got those out in the opening bit, I relaxed a bit after that. I did expect to come back to the SVR issue more given that Dearbhail's paper had published my article last week and two articles on it in the Sunday Independent.

I had expected that Dearbhail who was the Legal Editor of the Indo would have explained the difference between breach of contract and fraud. I thought that would be disposed of quickly. Instead it seems like half of the segment was spent on it and when you provide balance in these situations, you end up being portrayed as being on side of the banks. There is a difference between being on the side of fairness and on the side of the banks.

There were many more issues I wanted to discuss

• No one had their tracker taken from them. They all gave up their tracker and in these cases, they were not given back.
• 300,000 people who took out tracker mortgages and who did nothing still have those tracker mortgages
  
• The banks are not dragging their heels
  
• Where there was a deliberate attempt to take people off their trackers, these people should get them back irrespective of the contractual position
  
• The lenders did not understand how valuable trackers were - if they had done, they would not have issued 400,000 of them.

So, on reflection, I am glad I did the programme as I got two key points onto the agenda.

I would have preferred a soapbox to present the full position and then debate it afterwards, but they would not go for that.

Brendan

 

[gnf_ireland]

When introduced it wasn't entirely clear whether Trackers were better than SVRs.

Our banks' borrowing costs soared........ SVR went skywards.

because of huge intervention both by the ECB

Absolutely agree with all of the above. The main issue here is back in 2004-06, the difference between the trackers versus SVR were not material. Add this to the rising cost of the ECB in 2007-08 period, when it peaked at over 5%, it completely changed the dynamic.

Howover, after ECB intervention in 2008, the ECB rate has fallen to the historic lows, the trackers are now gold dust.

The reality is if the SVR was 4.5% and ECB was 3%, the margins are comparable.

The issue here is simply in hindsight people have lost out because they were not offered trackers when they should have been. But if the SVR was lower than the tracker rate, I doubt too many would be shouting to be put back on a tracker.

I will never understand why the banks did not offer ECB + 5% trackers in 2008+ window, and the issue would never have happened.

But they did not, they refused the customers trackers and now we have the issue to address because of this.

 

[gnf_ireland]

The banks are not dragging their heels

I am not sure everyone would agree with this position. The banks could do a few things to ease the pain they have caused, and maybe win some goodwill in the process
(a) any identified customer, move them onto a 0% interest rate until it is resolved. Its would show that they are impacted by the delays also
(b) freeze the mortgage repayments @ 0% interest, until the issue is resolved. So if I have 15 years left in my mortgage, the 15 year window is put on freeze and then restarts once the issue is resolved. If the customer wishes to continue to pay in the meantime they are welcome to do so.

The issue is simply that people do not know if they are impacted or not by it. Given standard contracts were issued by each bank, it should be possible to group them up easily enough and close out each group relatively quickly

So if I took out a mortgage between date x & y, and I fixed at some point, what should I have gone back to ? Tracker or not.. and move on to next group. This is just data analytics and should be possible relatively quickly. I work in IT, and we have to do impact assessments on customer segments pretty regularly and takes a matter of hours. Its simply a matter of grouping the customers together into logical blocks.

 

[Sarenco]

Hi Brendan

Are these positions not somewhat contradictory?

No one had their tracker taken from them. They all gave up their tracker and in these cases, they were not given back

Where there was a deliberate attempt to take people off their trackers, these people should get them back irrespective of the contractual position

Are you thinking about cases where distressed borrowers agreed to give up their trackers in the context of a loan restructuring or some other scenario?

It may not be a popular view on here but I am personally uncomfortable with our Central Bank pressurising banks to act otherwise than in accordance with their interpretation of the applicable contracts. In my opinion, the Central Bank should not be taking positions on the correct interpretation of contracts. The Central Bank is not a Court and has no role in arbitrating on conflicting contractual interpretations.

The directors of any company (including banks) have a fiduciary obligation to act in the best interests of their shareholders. It obviously wouldn't be appropriate for any organ of the State to induce the directors of a company to breach their fiduciary duties.

 

[Brendan Burgess]

Hi Sarenco

Careless language on my part. It should read "Where there was a deliberate attempt to encourage people to give up their trackers..."

In my opinion, the Central Bank should not be taking positions on the correct interpretation of contracts.

I agree in theory. But if permanent tsb has a complaint against it upheld by the Ombudsman and then by the High Court in clear terms and then they appeal to the Supreme Court on very, very doubtful grounds, I think that the Central Bank did the right thing to encourage them to drop the challenge.

Likewise, they are right to tell lenders to look at everything - including the clarity of the communication and the advertising and not just the strict legal wording of the contract.

But where say Bank of Ireland believe and have legal advice that they are in the right over the 1,800 staff trackers, BoI is absolutely within its rights to refuse to put them back on trackers. However, a good solution would be for BoI to agree to let a test case go to the High Court and to agree to follow the result of that case in all other affected cases.

Brendan