Key Post Issues to consider if appealing Compensation for Tracker Mortgage

Jim Stafford

Frequent Poster
We now know that more than 13,000 bank customers were incorrectly charged a wrong rate of interest on their loans by the various banks. The Central bank recently reported that it had found “material deficiencies in certain lenders’ responses” which had required “robust and sustained” Central Bank intervention.

The banks, including Allied Irish Banks, Bank of Ireland, Ulster Bank, PTSB and KBC, are still in the process of identifying affected customers and getting in touch with them. It is now fair to say that the banks have fully embraced the fact that customers need to be compensated. The banks are incurring substantial costs on retaining teams of lawyers and accountants to identify affected customers and calculate the Redress and Compensation amounts.

Some customers have already received offers of “redress and compensation”. The “Redress” payment is the amount calculated as being necessary to return the customer to the position they would have been in if the correct rate of interest had been applied. The “Compensation” payment is exactly that, it is compensation.

From the cases that we have seen it appears that the level of “compensation” being offered can vary from 5% to 30% based on the interest overcharges. The question is: Should customers accept such redress and compensation in full and final settlement? Obviously, every case depends on its particular facts and circumstances. I set out below some of the issues that should be considered when evaluating compensation offers.

What was the correct “prevailing” rate?

In many cases the biggest issue is to determine if the bank is correct in deciding what interest rate should apply to a customer who came off a fixed rate. Some banks may argue that it should be “standard” variable rate, whereas in some cases it should be a tracker rate linked to ECB. Frankly speaking, the underlying documentation can be very ambiguous, and it may take some court cases to decide.

Statute of limitations

Technically the banks could have argued that some of the claims are statute barred. However, as the banks are acknowledging, in writing, the claims then a new period of Statutory Limitations kicks in from the date of the written acknowledgement.

Domino Effect

In some cases the inflated interest charges triggered a loan default which enabled the bank to “call in” the loan and allowed the bank to appoint a Receiver. The losses caused by the “Domino” effect of a bank improperly appointing receivers to properties can be very substantial. In some cases, properties were sold by receivers into a market place where there was no liquidity and thus the properties achieved a low price, in comparison with the value that could be achieved today.

Health Effects

Some people will be able to make claims for stress induced illnesses such as depression, heart problems etc. In some cases, marriages fell apart due to the stress caused. Such customers may be able to make successful claims for additional compensation in respect of medical bills and damage to health. The Central Bank guidelines states that "fair and reasonable" compensation should be paid in respect of stress suffered by impacted customers.

Damage to credit rating

Some people may have found that their access to credit was cut off because of negative reports to the Irish Credit Bureau. This could lead to a claim for defamation.

Professional Fees

A close review of some of our clients' bank statements show that the bank added in legal fees in respect of legal proceedings that were unjustified, and should therefor be claimed back.

In general terms, I believe that the level of fees being initially paid to customers as part of the Redress/Compensation payment is inadequate, and that proper fees should be claimed as part of the Appeal process (if the client decides to appeal.) Any proper assessment of a bank's offer of Redress requires a comprehensive review of the customer's financial circumstances at the time and a thorough review of Letters of Offer,banks statements, credit card statements, medical bills, tax returns and the preparation of complex spread sheet modelling etc

if a customer's appeal is successful then at least some (if not all!) of the professional fees incurred for submitting the appeal should be recoverd.

Costs of finance

Many of our clients were forced to use expensive forms of finance such as credit card debt/overdrafts or money lenders to pay unjustified interest charges, and such "extra" costs may be claimed back.

Is customer already adjudicated a bankrupt?

Some of the 13,000 customers who are being offered compensation may already have been adjudicated bankrupt. If the customer had gone bankrupt because he felt that his situation was hopeless as a result of that particular bank overcharging him, then he may have a substantial claim for compensation.

Is customer going through a PIA/Informal Arrangement?

If the customer had undergone a PIA because he felt that his situation was hopeless as a result of that particular bank overcharging him, then he may have a substantial claim for compensation.

If he is currently going through a PIA/Informal Arrangement with multiple creditors, then any compensation payments may be captured by the “windfall” provisions of the PIA/Informal Arrangement, and thus there may be little motivation for the customer to appeal any settlement offer.

Can the settlement offer be used to do a PIA/DSA or Informal Arrangement?

Some people have been unable to do a PIA/DSA to date because they had no surplus to offer their creditors after allowing for Reasonable living Expenses. A lump sum settlement may enable some people to do a PIA/DSA settling all creditors.

Loss of family home

In a limited number of cases people will have lost their family homes as a direct result of being charged incorrect interest rates. Such customers should be entitled to high compensation.

In threat of losing family home?

Some customers may have had such large mortgage difficulties that even if they had retained their tracker rates they may still face the risk of their house being re-possessed. Giving the receipt of settlement monies, such customers should consider doing a "No Veto" Section 115A PIA.

Should customers avail of the Appeal procedures?

Banks are presently computing redress and compensation payments on a mathematical basis without consulting customers. Accordingly, banks may be unaware of customers having to resort to expensive finance to meet interest payments or may be unware of medical bills incurred etc. Accordingly, we believe that most customers should avail of the Appeal procedures to enable the Appeal Panels to assess any such new information. Like any adjudication process, the best results are obtained with professional advice.

The Central Bank has issued "stern" guidelines to the banks governing the establishment of Appeal Panels "A" and "B" and the composition of such panels.

Our advice is that any appeal needs to be properly formulated, in the same way that Points of Claim are formulated in a court case, so that the Appeal may be progressed rapidly.

The Appeals Process is not a "negotiation" process. Customers need to provide "new" information to the Panel who will then assess it.

Those customers with substantial claims might be advised to immediately instruct solicitors to issue a 7 day “Demand” letter and then follow up with legal proceedings.

Becoming personally liable for legal costs

The benefit of utilising the banks' Appeal procedures is that there is no risk of the bank obtaining an order for legal costs against the customer.

Those customers who take the decision to issue legal proceedings could become liable for both their own legal costs and the bank’s legal costs if they lose.

The banks are very well resourced and will, in my opinion, heavily defend certain legal actions to avoid any legal precedent being set in respect of specific Points of Claim.

In order to be successful in any such legal action it is likely that the customer will need to retain a forensic accountant. In some cases, for example, the accountant might have to calculate the costs of medical bills incurred as a result of the stress caused, and in preparing such calculations he would have to consider whether the customer obtained tax relief etc

Jim Stafford
 
Hi Jim

Excellent post and I have made it a key post.


The question is: Should customers accept such redress and compensation in full and final settlement?
This is not the question at all. The compensation is paid anyway. It is not like a normal dispute where one side makes an offer in full and final settlement.

The borrower should lodge the compensation cheque, whether or not, they consider it adequate.

This is the problem with consulting legal professionals on this. They are used to the "offer in full and final settlement" approach and can't get their heads around the fact that this is more like a payment on account.

For the vast majority of people, the compensation is adequate. They have been financially disadvantaged, but no more than that. The 10% to 15% compensation on top of the redress is acceptable to them.
 
Accordingly, we believe that most customers should avail of the Appeal procedures to enable the Appeal Panels to assess any such new information.
Those customers with substantial claims might be advised to immediately instruct solicitors to issue a 7 day “Demand” letter and then follow up with legal proceedings.
The Appeals Panel are independent of the banks, although appointed by them. In ptsb's serious cases, they have made very substantial awards and upheld nearly every case.

There is absolutely no downside in using the Appeals Procedure. Even if you have a very good case dismissed unfarily by them, it does not affect your rights of going to the Ombudsman or the courts.

In AIB's case, they set out their side of the case, which would be very useful for anyone who decides to reject the Appeals Panel award as inadequate.

Brendan
 
In general terms, I believe that the level of fees being initially paid to customers as part of the Redress/Compensation payment is inadequate, and that proper fees should be claimed as part of the Appeal process (if the client decides to appeal.) Any proper assessment of a bank's offer of Redress requires a comprehensive review of the customer's financial circumstances at the time and a thorough review of Letters of Offer,banks statements, credit card statements, medical bills, tax returns and the preparation of complex spread sheet modelling etc

if a customer's appeal is successful then at least some (if not all!) of the professional fees incurred for submitting the appeal should be recoverd.
Agree fully.

€650 would not cover anyone to do more than a cursory look.

It would take a number of hours to review the redress calculations alone without even reviewing the letter of offer.
 
It would be interesting to develop a scale of the damage done.

No damage beyond the financial damage
Additional cost not material
Didn't result in extra expensive borrowing
Didn't affect my spending or lifestyle at all.



...

Loss of family home directly caused by the overcharging

I voluntarily sold my family home as I could not meet the repayments.
The only reason I could not make the repayments was the overcharging.
Had I been on the correct rate, I would have met the repayments in full or I could have availed of a sustainable restructuring.
(Note: In most cases where people lost their family home, it was because they were paying nothing at all. The loss of the tracker had nothing to do with it. Even if they were on 0% interest rate, they wouldn't have been able to make their repayments.)
 

maunie

Frequent Poster
I am currently putting my appeals pack together which will include all correspondence from bank arrears team, copy of credit card statement showing I had to use my card during times when I struggled to pay mortgage.. anything else needed to go with my appeal??
 

Jim Stafford

Frequent Poster
Maunie, your Appeal should include supporting documentation to support each of your Points of Claim. If you are submitting as a "Lay Person" then the Appeal Panel will give you a certain amount of latitude. As I do not know your Points of Claim I do not know what other documentation you should submit.

Jim Stafford
 

joe351980

Frequent Poster
Hi Jim. How would you view my situation. We never missed a repayment and even sold our second car in 2008 as funds where thight. But my main grievance is actually when we had money. We received 90,000 in late 2009 and we looked to invest this in a rental property. I strongly feel had we been paying the correct amount we would have been able to achieve this. As we were starting out with a young family and with increased prices, by the time the redress came the opportunity to do this had passed. This is a very frustrating for me and even though I'm happy with our redress pack the compensation in no way reflects our loss of opportunity.

What I'm trying to point out is how can you compensate for a point like above.
 

maunie

Frequent Poster
Maunie, your Appeal should include supporting documentation to support each of your Points of Claim. If you are submitting as a "Lay Person" then the Appeal Panel will give you a certain amount of latitude. As I do not know your Points of Claim I do not know what other documentation you should submit.

Jim Stafford
Thanks Jim
I missed one payment in 10 years but we struggled to pay our mortgage as I was unemployed for a while during this time
We struggled to pay back that missed payment but the bank hounded us to pay it.. I have requested records of all calls and letters from arrears..
I got 10% compensation which is an insult
 
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Aisling1

Registered User
Hi there
Thanks for this post . I have been offered redress and compensation but to be honest with you this has turned my life upside down . My marriage broke up , I’m raising my child myself and I’ve had to move in with my elderly parents . I’ve worked the whole time and made my mortgage repayments . Due to having to move in with my parents my child now goes to school in that area away from where my property is . What I want now is to sell my property and my bank to give me s mortgage to buy in the area we are now in . Do you think this is reasonable to ask for as compensation or am I going for a long shot . I really feel that they ruined my life and to get me back on track this is what should be done for my compensation
 

Jim Stafford

Frequent Poster
What I'm trying to point out is how can you compensate for a point like above.
The loss arising from a breach of contact can comprise of direct and indirect losses. The computation of losses around indirect losses is more complex than the computation of losses around direct losses. You really need to consult with a solicitor on the particular facts and circumstances of your case. Given that the banks have employed lawyers and forensic accountants to review all claims, it would not be appropriate to provide detailed guidance in a public forum such as this.

Jim Stafford
 

Jim Stafford

Frequent Poster
Paul McE as advised above, the banks have just made "mathematical" calculations on the compensation payment without consulting customers. If you have "new" information that they should consider, then you should present it in a Point of Claim format.

The value of your claim (if any) will depend on a detailed financial analysis of your financial circumstances at the time. One avenue to explore is whether you could have genuinely traded up to a larger house at the time etc.

Given that the banks have employed lawyers and forensic accountants to review all claims, and actively monitor this forum, it would not be appropriate to provide detailed guidance in a public forum such as this.

You should really see a Personal Insolvency Practitioner or a solicitor for further advice.

Jim Stafford
 

LadyHB

Frequent Poster
My main loss from the over-charging is that I didn’t pay into a pension for a number of years; I prioritised my mortgage.

Had I not been overcharged and had I been on a tracker; the only place that money would have gone was into a pension. I had a rainy day fund. I don’t have kids. I wasn’t supporting anyone. I paid into a pension before I was over-charged and only restarted following a salary increase in the last 2 years.

I would have got 40% tax relief on that money plus the returns over several years. So 10% compensation looks very poor to me.

Anyone any thoughts on the hornet’s nest this opens up for the Banks?
 

Jim Stafford

Frequent Poster
Hi LadyHB

As advised previously on this forum, it would be necessary to have a thorough review of all your circumstances.

If your legal advice was that you could make such a claim, then one way to present your case to the Appeals Panel would be to present a "Before and After" computation i.e. show what the present day value of your pension fund today with what the present day value of the fund would have been if you had kept up your pension contributions.

Jim Stafford
 

Deckchair

Registered User
I'm hoping to appeal. I'm just wondering how I would go about finding an appropriate person to advise me - ie legal advice. The last time I had dealings with a solicitor was when the house was bought.
So just wondering how to find someone - probably in Dublin city centre would be best, if anyone can point me in the right direction. Thanks.
 

Jim Stafford

Frequent Poster
I set out below a copy another posting that I did on a similar query:

There are a number of aspects to this:
  1. Was there a breach of contract? In most "civil" cases you would generally need a solicitor to advise if there was a breach of contract. In the tracker cases that we are seeing, the banks are admitting breach of contract, and thus no solicitor is required to advise if there was a breach of contract.
  2. Borrowers need a forensic accountant to assist in advising on certain elements of the Points of Claim e.g. if the borrower used a credit card to pay interest then a calculation needs to be done on that.
  3. If the forensic accountant advises that there is a financial claim, combined with a possible claim for stress & anxiety, greater than the compensation offered, then the borrower needs advice as to whether they should use the appeal route or the legal route.
As many Personal Insolvency Practitioners are encountering tracker interest claims they can be a good person to initially consult. PIP's would have a network of experienced solicitors that they can access.

The bigger claims will, in my view, need a combination of a forensic accountant and a solicitor to advise.

Jim Stafford
 
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Deckchair

Registered User
Thanks Jim, that is very helpful. It is help with calculations I would need. As you rightly point out, the breach of contract piece has been acknowledged.
 

DeiseBoy 2

Registered User
Hi, would love an opinion on this if possible. I've received the redress but have since sold the house and we've bought again using a different mortgage provider -- now on a variable rate. Are there grounds to appeal in terms of being entitled to go back to BOI on the tracker rate? They've put existing mortgage holders back on tracker rates but if you've sold the house due to high interest payments (and therefore closed the account) should you now not go back on a the tracker if you've subsequently purchased a new house?
 

Mark2018

Registered User
Hi Jim,

Very useful information so thank you. My situation with Ulster Bank is similar to what you perhaps describe. I was on a tracker rate with UB and like many fixed for a period (2 years in my case) in 2007. When we came off the fixed rate we were put onto a very high variable rate and the fixed rates were also very high. We were not advised of any implication in coming off the tracker at the time and when I requested to be put back on it, they refused and said it was no longer available. A period of time later we switched our mortgage to KBC who had a variable rate that was lower but still quite high and we remain with them.

We started formally pursuing this with UB in mid 2016 and we have been getting the standard 60 day letters ever since so not sure where we stand or whether you would suggest we need representation.

I assume there are other customers in the same boat, we had no option but to move at that time to keep our mortgage affordable and it was only a few years ago that the extent of what was done to people and the denial of trackers being restored was brought into the public domain in the way it is now.

Interested to hear your view or indeed the views of others similarly impacted.

Thanks.

Mark
 
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