KBC KBC: Tracker vs Variable Rate

R

rodger

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Like I said apart from the fixed rate there was only one rate mentioned in the entire contract

Ecb+1.1%

Why has Aib provisioned €190m?

Can you answer that question
 

Sarenco

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Sorry Rodger but you are now very obviously avoiding the question.

Again, what exactly did the terms of your fix says would happen at the end of the fixed rate period?

Did it say you would default to an unspecified variable rate or did it say you would default to a tracker rate?
 
R

rodger

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Like I said at the end of the fixed period there are two options

Fix again or

Return to variable (tracker)

Why would the bank treat their customers this way is beyond me.

But the central bank has recognised their behaviour. All banks are required to submit reviews by end of March.

And the central bank is due to issue a statement this month.

Like I said if not successful via central bank then next step the high court.
And then European court.

And yes Aib has admitted they have a potential liability of €190m
 

Sarenco

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Was the phrase "return to variable (tracker)" actually used or is that what you think the words mean?

If the contract actually does use that phrase, then you should instruct a solicitor to issue proceedings on your behalf as a matter of urgency. Don't wait - the statute of limitations will eventually bar any claims you may have - and don't rely on the Central Bank.

However, you need to be very clear about what your contract actually says - not what you want it to say.
 

Sarenco

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Also the central bank said tracker issues were not subject to 6 year limit
The Central Bank review can certainly look at issues that arose more than six years ago. However, the Central Bank cannot change the Statute of Limitations or the legislation governing the FSO.
 

todo

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Banks were using the term Variable Rate to describe both tracker and svr type loans. The definition of what a variable rate means should be in the fine print of the mortgage contract.

If the mortgage contract was amended, eg fixed for a number of years, and it stated that it returns to a variable rate at the end of the fixed term. Then if the term variable rate is defined in the amended documentation, that should stand, if not it should fall back to the definition in the original loan agreement.

All the banks need is a small gap and they will try to bring a jumbo jet out through it. Stick with it rodger, if the boot was on the other foot the bank would not let you go with it.
 

Sarenco

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I think that argument might have some legs if the wording says that at end of the fixed rate term a borrower would "revert" or "return" to (an undefined) variable rate, in the absence of an election on the part of a borrower to opt for another rate.

However, the precise wording used in the documentation is critical.
 

PJDCol

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Sarenco you keep going on about what is in the contracts is all that matters which I totally agree with. The terms of the contract however were 100% NOT clear is all people are saying.

Am I right in saying the banks are using the terms of the contracts to their advantage? Why wouldn't anyone look at the terms of a contract for their advantage even if one did make a bad financial decision - Consciously or not.

Again you are right the central bank and court might say, like the FSO has in many cases, that the person should have known that they were moving to a different type of variable rate. I don't see the point in trying to prove you are right at this point.
 

Sarenco

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Why wouldn't anyone look at the terms of a contract for their advantage even if one did make a bad financial decision - Consciously or not.
That’s exactly my point – if a term of the contract is genuinely ambiguous then it may well be possible to construct a convincing argument that it should be interpreted in a way that favours the borrower.

However, you have to look at what the contract actually says – not what you would like it to say. Words matter and the actual words used in the contract are absolutely key.

Incidentally, this cuts both ways. PTSB have found themselves in real difficulties because they adopted a “clever and sophisticated argument” (per the High Court) as to how their own fixed-term contracts should be interpreted. This is a polite way of saying that PTSB’s interpretation of their own contract was wholly untenable.

I fully understand that posters feel very strongly about this issue and that is completely understandable. However, emotional responses alone won’t actually advance anybody’s position. Whether I am right or wrong on any point is really irrelevant.
 

Leighlinboy

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Lets hope the central bank are showing as much interest in this as posters on this thread !
11th April already, is there a timeframe to review whats been fed back into them at the end of march,or will this run and run !?
 

notabene

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I had confirmation from the central bank yesterday that they expect the banks to make 'substantive' progress before the end of the year. They will release another public statement before the end of the month
 

peemac

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Its a couple of years since I posted here under an old name attached to an old email address, but I still look in now and then.

Poster Sarenco seems to be very much like the banks - it say x in the contract, therefore that is what applies. Nothing wrong in having that opoinion, but it flies in the face of fairness.

The KBC fixed rate contract sheet was horrendously unfair and ambiguous.

1 - It was one single sheet.
2 - It was attached to a general letter telling you about a rate rise and to "see the special fixed rates attached"
3 - You were given 6-8 working days to make your mind up, sign the form and get to back to them - otherwise the "special rates" would expire. In my case the expiry date was highlighted by a yellow highlighter! To expect someone to be able to get "indepedent legal advice in such a short time in middle of summer holiday season is bordering on ridiculous.
4 - One of their sticking points is they said "get indepednent legal advice" - even if you did, it would be unlikely that a solicitor would necessarily see anything wrong with the form from a legal point of view as main document stated variable rate as did the fixed rate document. A Financial advisor may have noticed, but even that is in question due to the wording of the main mortgage document and the fixed rate instruction.
5 - Head of KBC (IIB) at the time was in the media saying rates were going to continue to rise and that people should fix in now (Irish Times July 2006)
6 - At the time KBC only sold tracker mortages and fixed mortgages - no such thing as a "standard variable rate" was offered to anyone, hence anyone taking a mortgage at the time would not be expected to understand that a "standard variable rate" was a specific rate.
7 - The fixed rate sheet had in bold capitals the fixed rate terms on offer. Fix for ONE year, fix for TWO years, Fix for THREE years. In tiny print it said afterwards it would return to banks standard variable rate. In the Mortgage document, the "tracker" is referred to as a variable rate. Nowhere in any document or glossary of terms WHATSOEVER is standard avraiable rate" explained or mentioned as it simply was not something the bank offered publically at that time. "Standard" at the time was a tracker.

Considering the bank was selling to lay people and not professional finacial people, then under basic customer care, they had the responsibility to inform the customer that this would lead to a significant change for the entire term of the mortgage and it was NOT a One year / Two year or three year change as they made out in the document, but a 20 year, 25 year or 30 year change.

THAT is why the Central Bank finally acted and it is also why the central Bank brought in further changes to the code fo conduct to make the banks understand in very very plain english that they must inform the customer of ALL consequences in relation to any rate change.

Unfortunately the Ombiudsman is like Sarenco and looked only at the words and said tough luck, when in fact they should have looked at the behaviour and what market conditions prevailed at that time and what would "reasonably" be understood by the customer. The ombudsman failed miserably in their investigations, Thankfully the new CB head could see though this and has rightfully launched investigations and it will lead to restoration of trackers.

My guess is that if someone took a court case rather than ombudsman case, they would have been successful as the courts look at the "reasonableness" of a contract. problem is the amounts involved meant a high court action which would ahve cost 6 figures if lost - something no-one was gong to take the chance on. Something the bank knew too!

Whether there is additional compensation or not, that is debatable. But I for one would simply be happy with refund of excess charged (about 45k) and restoration of my 0.95% tracker.

Personally I have faith in Phillip Lane as he would not have been the banks first choice as CB head, nor second, nor third. One person said he would not even have got onto their list. That alone says plenty.
 
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Sarenco

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For the avoidance of doubt, the conduct of a bank is highly relevant if you are trying to advance an argument that you entered into a contract as a result of some deception, misrepresentation or duress on the part of a bank.

However, most posters appear to advancing a different argument based on their interpretation of the contractual terms.

Courts do not arbitrate on the "reasonableness" of contractual terms. They simply enforce contracts in accordance with their terms.

I don't want to labour the point but I really don't think it is tenable to maintain an argument that the parties intended any reference to a "standard variable rate" to refer to a tracker rate determined at an unspecified margin over an unspecified reference rate.

You are obviously free to take a different view.
 
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peemac

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For the avoidance of doubt, the conduct of a bank is highly relevant if you are trying to advance an argument that you entered into a contract as a result of some deception, misrepresentation or duress on the part of a bank.

However, most posters appear to advancing a different argument based on their interpretation of the contractual terms.

Courts do not arbitrate on the "reasonableness" of contractual terms. They simply enforce contracts in accordance with their terms.

I don't want to labour the point but I really don't think it is tenable to maintain an argument that the parties intended any reference to a "standard variable rate" to refer to a tracker rate determined at an unspecified margin over an unspecified reference rate.

You are obviously free to take a different view.
The courts in many cases also look at the wording and how that wording is written. Where wording or phrase has a specific meaning, that meaning should be described in some form of glossary. (it wasn't) The words "standard variable rate" in now known to refer to a specific rate that the bank offers, but this was not explained and the words were not capitalised. Hence my argument and other is it would be reasonable cosndidering that "standard variable rate" was not a phrase in popular use at that time (it was prior to 2003 and after 2008), that the person when signing the fixed rate intruction could assume that the rate would return to the standard variable rate of the mortgage agreement they had originally signed as such rate was described as a "variable rate" and was the standard variable rate offered by IIB/KBC at that time.

It is noteable that the CB now insist (since 2008) that the meaning of Standard Variable Rate is explained and the actual standard variable rate currently offered is detailed.

Furthermore, the central bank code of conduct from July 2006 stated that ALL appropriate rates offered by the bank must be offered to the customer. IIB did not offer a capped tracker which was available and which if they had the "interest of their customers", they would have offered. But they didn't.
 

Sarenco

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Would any reasonably observant borrower have thought that a "standard variable rate" actually meant a tracker rate back in 2006?

I wouldn't have thought so but surely the absence of any reference to a margin or a reference rate should have given the game away.
 

todo

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If the term "standard variable rate" was not defined in the contract, then that term is ambiguous and the benefit of that ambiguity should fall on behalf of the consumer.
 

Sarenco

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Two questions:-
  1. Do you believe that any reasonable person would really consider the term "standard variable rate" to be ambiguous?
  2. Even if you do assume that a contractual term is ambiguous, why do you think that one party to a contract should automatically benefit from that ambiguity?
 

todo

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Two questions:-
  1. Do you believe that any reasonable person would really consider the term "standard variable rate" to be ambiguous?
  2. Even if you do assume that a contractual term is ambiguous, why do you think that one party to a contract should automatically benefit from that ambiguity?
1. Absolutely, if its not defined in the contract what the term means. I really can't believe that a standard rate, would be a rate that one party has complete control of. A reasonable person would assume that a standard variable rate would be one which tracks an independent value, so that at least the contract is fair.

2. The consumer is normally not a lawyer, not financial advisor, does not have multiple similar contract with others. Whereas the banks have thousands of these contracts, full legal teams etc. If there are ambiguous terms in the contract then, why should the bank assume they can just take the benefit of that ambiguity like they are doing now.
 

Sarenco

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1. Fair enough. I wouldn't have thought that any reasonable person would have thought that phrase was ambiguous but we can obviously agree to disagree on this point. Ultimately, of course, it's what the Court thinks that matters.

2. Even if you do consider the phrase to be ambiguous, I don't see how you can read it to mean a tracker rate. What margin over what reference rate would apply in determining the rate? You can't read words into a contract that aren't there.
 
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