KBC KBC: Tracker vs Variable Rate

PJDCol

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Thanks odonovanpm for your response.

Yes this has all gone a bit quite the last few months and I am surprised it wasn't a bigger topic during the election debate. Maybe there isn't enough of us in this situation. Do you mind explaining what exactly the FSO and Central Bank have said to you?

KBC of course told me to go away and wouldn't even respond to my 2nd complaint, while the FSO wouldn't look at my case as it was from 2006. I also recently spoke to a solicitor on this website who advised he is in the process of bringing a similar case to KBC.

Thanks again
 

PJDCol

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There have been calls this evening for AIB to establish a full redress scheme for individuals who were wrongly moved off tracker mortgages.

Last week the bank said it had set aside €105m for customers who would have to be repaid after they were moved to standard variable loans with higher interest rates.

RTÉ News has seen a letter sent to one customer of the bank in recent days.

In the correspondence the client has been told their mortgage will be reduced by €15,000 because they were overcharged.

However, the letter does not mention compensation - this is in contrast to a similar situation at Permanent TSB, which offered compensation up front.

David Hall, director of the Irish Mortgage Holders Organisation, said AIB should introduce a full redress scheme for customers.

RTÉ News understands that although the bank did not mention compensation in its letter to the mortgage holders it does not mean there will not be further reimbursement at a later stage.

In a statement, AIB said it was undertaking a comprehensive review of the tracker mortgage issue, which will take some time to complete.

It said the process would be verified by the Central Bank and a third party.

It said when the review is completed it will be contacting all affected customers.

However, it said that it may be in contact with some customers during the review.

In a statement, the Central Bank said "the tracker mortgage examination is currently under way and the examination requires lenders to carry out a review in order to identify customers who have been negatively impacted and, where there has been detriment, to provide redress."
 

PJDCol

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I spoke to KBC about the Central Bank statement but it seems the customer service team know nothing and have not informed their customer service team about this topic.

KBC seem to be the only bank not getting any complaints or any news time regarding this topic compared to AIB, PTSB, Ulster, etc. Are the other loan agreements in those banks even weaker then the KBC one? On the other hand maybe there hasn't been many complaints to KBC.
 

PadKiss

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Rest assured that KBC are on my horizon and will have a case to answer, whether they like it or not. Being progressed at present on behalf of customers who have contacted me and given me a large bank of evidence over the last 2 years (yes it has taken me that long to put it together) Padraic
 

PJDCol

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That's great thanks a million again for the update Padriac.

Do you believe it is worth at this stage going back to the FSO and complain about the latest legal precedents set and also the fact KBC are not communicating with their customers on this topic raised? I see the FSO also sent 500 similar cases to the Central Bank for review.
 

odonovanpm

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Thanks odonovanpm for your response.

Yes this has all gone a bit quite the last few months and I am surprised it wasn't a bigger topic during the election debate. Maybe there isn't enough of us in this situation. Do you mind explaining what exactly the FSO and Central Bank have said to you?

KBC of course told me to go away and wouldn't even respond to my 2nd complaint, while the FSO wouldn't look at my case as it was from 2006. I also recently spoke to a solicitor on this website who advised he is in the process of bringing a similar case to KBC.

Thanks again
pcoleman - the FSO, Central Bank and KBC all confirmed that cases are going to be reviewed. In my opinion, it is inevitable KBC are going to have to reinstate trackers stemming from fixed rate forms in 2006. Under the customer code of conduct being analysed in this review, the contract would have needed to explicitly state that the tracker condition was being REMOVED. Of course they can argue the point, but they will have to make the argument in court. Banks have their backs against the wall on this topic and I'm afraid there's no way out for them.
 

Sarenco

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In my opinion, it is inevitable KBC are going to have to reinstate trackers stemming from fixed rate forms in 2006.
Why 2006? KBC were still offering trackers back in 2006.

The context in Q4 2008 was completely different and I agree that KBC may well find themselves in difficulties as regards borrowers on tracker rates that fixed during this period if KBC do not have a very clear paper trail evidencing that borrowers fully understood the consequences of what they were signing.
 

odonovanpm

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Why 2006? KBC were still offering trackers back in 2006.

The context in Q4 2008 was completely different and I agree that KBC may well find themselves in difficulties as regards borrowers on tracker rates that fixed during this period if KBC do not have a very clear paper trail evidencing that borrowers fully understood the consequences of what they were signing.
I simply stated 2006 as I have seen that particular form. Not sure what you mean by "The context in Q4 2008 was completely different"? My understanding is they need to show paperwork clearly stating the marginal ECB interest rate in the original contract was being removed. Otherwise they are in violation of the customer code of conduct. I personally think it's only a matter of whether KBC decide to return trackers the easy way or the hard way. If they choose the hard way then I would like to think they are only increasing the compensation that will eventually be due to customers.
 

Sarenco

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The ECB famously continued to increase interest rates right through the summer of 2008 and Irish banks stopped offering trackers as soon as the financial crises erupted in Q4 2008 (because the ECB refi rate was no longer reflective of their cost of funds). There was a concern at the time that banks were inappropriately offering competitive fixes to customers in order to lure them off their trackers (KBC was very much in the frame in this regard).

The Central Bank unusually issued a public warning to the banks at the time.

https://www.centralbank.ie/press-area/press-releases/Pages/MortgageLendersMustActinBestInterestofConsumers.aspx

The situation in 2006 was completely different. Banks were still offering increasingly competitive trackers and the financial crisis wasn't even on the horizon. So why would banks be interested in luring customers off tracker rates at that time? A borrower could simply walk across the road and get a tracker rate from a competitor.

The Central Bank's original Consumer Protection Code didn't come into full effect until July 2007. In any event, the Code does not contain the suggested wording and does not create actionable rights for a customer.
 

Leighlinboy

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The bulk of the rate rises took place between June 06- July 07.
I haven't seen the 06 form but I carry the 07 one in my wallet and its far from clear.
To the best of my knowledge from December 06 - March 07 the unsolicited letters became more frequent.
So they were making a concerted effort to get people to fix in 2006.



2006-15 Jun. 2.75
2006-9 Aug. 3.00
2006-11 Oct. 3.25
2006-13 Dec. 3.50
2007-14 Mar. 3.75
2007-13 Jun. 4.00
2008-9 Jul. 4.25
2008-15 Oct. 3.75
 

emeralds

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Why would the banks try to take people off trackers in 2006/2007? They were still being sold at that stage...
 

Pinesky

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Why would the banks try to take people off trackers in 2006/2007? They were still being sold at that stage...
Because it was seemingly better for the customer ,rising interest rates, and fixed rates gave a better margin to the banks .
I don't believe banks tried to get customers "off" trackers until mid 2008
 

odonovanpm

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The ECB famously continued to increase interest rates right through the summer of 2008 and Irish banks stopped offering trackers as soon as the financial crises erupted in Q4 2008 (because the ECB refi rate was no longer reflective of their cost of funds). There was a concern at the time that banks were inappropriately offering competitive fixes to customers in order to lure them off their trackers (KBC was very much in the frame in this regard).

The Central Bank unusually issued a public warning to the banks at the time.

The situation in 2006 was completely different. Banks were still offering increasingly competitive trackers and the financial crisis wasn't even on the horizon. So why would banks be interested in luring customers off tracker rates at that time? A borrower could simply walk across the road and get a tracker rate from a competitor.

The Central Bank's original Consumer Protection Code didn't come into full effect until July 2007. In any event, the Code does not contain the suggested wording and does not create actionable rights for a customer.
I did not say that the wording was in the Consumer Protection Code, but the broader Central Bank review, which is more customer-focused than the FSO, does require banks to show how they communicated that the tracker rate would be removed.
 

Sarenco

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I did not say that the wording was in the Consumer Protection Code, but the broader Central Bank review, which is more customer-focused than the FSO, does require banks to show how they communicated that the tracker rate would be removed.
Well I was responding to your comment that a bank would have been in breach of the Code if they didn't provide a particular statement. Absolutely agree that the purpose of the Central Bank's review should be broader than simply identifying possible breaches of their Code.

However, I don't see how it will be possible to demonstrate that any bank was systematically or deliberately trying to lure anybody of a tracker back in 2006. That would be bizarre thing to do at a time when they were still actively marketing trackers.

Again, the context in Q4 2008 was completely different...
 

odonovanpm

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Well I was responding to your comment that a bank would have been in breach of the Code if they didn't provide a particular statement. Absolutely agree that the purpose of the Central Bank's review should be broader than simply identifying possible breaches of their Code.

However, I don't see how it will be possible to demonstrate that any bank was systematically or deliberately trying to lure anybody of a tracker back in 2006. That would be bizarre thing to do at a time when they were still actively marketing trackers.

Again, the context in Q4 2008 was completely different...
It is not bizarre at all, especially if you consider the last part of your comment. Trackers were a product produced and "marketed" by the banks to attract customers. However, no bank, or any other business for that matter, wants to have a contractual/permanent cap on their profit margin. While there was no danger in 2006 of the ECB rate plummeting to 0%, the banks were still very much aware of their potential long-term exposure to ECB fluctuations.
 

Sarenco

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However, no bank, or any other business for that matter, wants to have a contractual/permanent cap on their profit margin.
In that case why did banks continue to offer trackers, at increasingly competitive margins, right up until Q4 2008? If banks wanted to remove any possible cap on their margins in 2006 wouldn't you have expected them to stop offering trackers in 2006?

Nobody could possibly have anticipated in 2006 that the spread between standard variable rates and tracker rates would develop in the way that it did after the financial crisis. Banks certainly didn't - otherwise they would have stopped offering trackers much, much earlier.

The notion that any bank official consciously decided at any time in 2006 that they would consciously lure borrowers off trackers seems wholly fanciful to me. It simply flies in the face of logic.

I appreciate that you feel aggrieved that you signed a contract back in 2006 that turned out to be a poor financial decision with the benefit of hindsight. However it doesn't necessarily follow that there was any deception, misrepresentation or bad faith on the part of your counterpart. You just made, what turned out to be, a bad decision.

Such is life.
 

PJDCol

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134
Yes totally agree with that. Everyone makes bad financial decisions in their life. Sure buying the house at the price I paid was bad financial decision.

The issue here is quite simple. I signed a loan offer that for the life of the loan that I would be on a variable rate that would not go 1.25% above the ECB rate. The word "tracker" is not used once in the loan offer.

When I signed the fixed rate document I was not advised or told I would be losing this "variable rate" (i.e. the tracker rate). I was not advised in clear detail that I would moving to a different form of "variable rate" (standard). Is this not a clear example as to why the Central Bank updated their Consumer Protection Code. All these new regulations have been brought in for a reason. I am not saying the bank misled me on purpose but to me there was recklessness and lack of information for a customer - a principal of the Central Code is that it "makes full disclosure of all relevant material information, including all charges, in a way that seeks to inform the customer".

Even now in the last few months I have contacted them 4 times for more information and they have not returned with anything, even a phonecall. I am at this stage just waiting on the Central Bank report.

This may lead no where and I am fine if a court or the Central Bank say I should have looked into it more - which I didn't.
 

Sarenco

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Fair enough but that's obviously a quite a different argument.

I struggle, frankly, to believe that any reasonably observant and prudent borrower would have interpreted the reference in the revised loan documentation to a "variable rate" as meaning "a variable rate that is capped at the same margin over the same reference rate as set out in the original loan agreement".

I certainly don't think any Court would accept that interpretation but perhaps the Central Bank will take a different view.

Time will tell.
 
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