KBC KBC: Tracker vs Variable Rate

Brendan Burgess

Founder
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The term "variable rate" could be ambiguous because tracker rates are variable rates.

I don't think that SVR could be interpreted as meaning a tracker rate.

It's important for people who are taking complaints to the FSO or the High Court to be realistic. If Sarenco or anyone else expresses an opinion that something is not ambiguous, it does not mean that they are taking the bank's side of the argument. Sarenco is doing a huge service to those of you who are making complaints by challenging aspects of your complaints. It allows you to formulate your complaint better. And it may save you the risk of a High Case.

Of course, there is very little cost in going to the FSO. So if your advisors say you have a very slight chance of winning, you may as well take the case anyway.
 

peemac

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639
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.
When you look at it through an experience eye, you can't see what a "normal lay person" sees.

Transform yourself into a 25-30 year old person in 2004/2005/2006/2007 who has only ever previously had a car loan, looks for a mortgage and EVERY bank is advertising variable rate mortgages at x% over ECB. The other product avaiable at the time is a fixed rate product. Go through the Irish Times archives and look at the adverts - fixed or variable based on ECB, or in IIB case a "Capped variable"

The words "standard variable" were simply not used either in advertising or in the paperwork. hence if that is then susequnetly used, the onus is on the bank to give a description of that.

Furthermore, on this issue, it is what the central bank considers "fair" that applies as that "fairness" to the customer is obligatory under the code of conduct.
 

peemac

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639
If Sarenco or anyone else expresses an opinion that something is not ambiguous, it does not mean that they are taking the bank's side of the argument. Sarenco is doing a huge service to those of you who are making complaints by challenging aspects of your complaints. It allows you to formulate your complaint better. And it may save you the risk of a High Case.
If its my post, I don't mean sarenco is taking the banks "side" but is taking the banks "view", which as you say is very good and appreciated by most and it is the way people should approach any argument before taking any costly action - understanding and knowing what arguments can be put forward by the opposing side is of huge benefit.

At the end of the day, most people, and including sarenco, understand that what KBC did was not fair. Legally, it would be 50/50 if it came before a court as it would depend on legal argument (best legal team wins). Thankfully it is the Central bank and they are very much looking at it from a fairness point of view and whether it was in the interest of the customer. It was blatantly unfair and not in the interest on the customer.

If however these were commercial transactions between banks and a professional business, then it would be far more in the banks favour.
 

Sarenco

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5,495
When you look at it through an experience eye, you can't see what a "normal lay person" sees.
Point taken. Although I would suggest that anybody that chose to fix while on a tracker was not entirely uninformed in these matters.

However, even if you accept your argument, what cap or margin should apply over what reference rate? 5% over 12-month EURIBOR? 0.5% over the ECB refi rate? Something else?

Is there anything in your contract that might suggest or imply that you would default back to the rate provided for in the original contract? Does it say you will default back or return to a particular rate or does it say you will default to a prevailing rate at the end of the fixed-rate term?

The precise wording of your contract is critically important if you are going to advance an argument based on the interpretation of your contract.
 

PJDCol

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134
We seem to repeating ourselves over and over here because the documentation is quite simple.

No there is nothing like that sort of detail in the fixed rate contract. It is a simple one page document and a simple one line saying:

"thereafter reverting to the companies standard variable rate".

All the rest of the details in the terms of the fixed rate document are about the breakage costs, even giving examples, saying if a customer decides

And again the original loan offer is quite simple but it explains in detail what the variable rate is:

"The interest rate applicable to the loan identified on page 1 of the letter of offer is a variable interest rate and may vary upwards or downwards. The interest rate shall be no more then xx% above the prevailing ECB for the term of the loan".

Its a simple as this! There is no more details on any other type of rates or explaining other form of rates.

Yes it up to the court or Central Bank about if its ambiguous so lets see because the bank won't answer me.
 

odonovanpm

Registered User
Messages
10
We seem to repeating ourselves over and over here because the documentation is quite simple.

No there is nothing like that sort of detail in the fixed rate contract. It is a simple one page document and a simple one line saying:

"thereafter reverting to the companies standard variable rate".

All the rest of the details in the terms of the fixed rate document are about the breakage costs, even giving examples, saying if a customer decides

And again the original loan offer is quite simple but it explains in detail what the variable rate is:

"The interest rate applicable to the loan identified on page 1 of the letter of offer is a variable interest rate and may vary upwards or downwards. The interest rate shall be no more then xx% above the prevailing ECB for the term of the loan".

Its a simple as this! There is no more details on any other type of rates or explaining other form of rates.

Yes it up to the court or Central Bank about if its ambiguous so lets see because the bank won't answer me.
It should also be noted that the ECB margin on the loan offer is buried in small print in the middle of the document. The margin is not specified on the main/front page. Likewise, the mortgage product that I purchased was called FLEXI RESLET VARIABLE (i.e. no mention of tracker).

I know time will tell, but in all honesty KBC do not have leg to stand on in terms of the central bank review. This may also be true in a court of law given the precedents set in PTSB, AIB cases etc.
 

Sarenco

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5,495
Its a simple as this! There is no more details on any other type of rates or explaining other form of rates.
Thanks - it's helpful to see the exact wording.

It seems odd that the language uses the word "companies" (as opposed to the "company's") standard variable rate and this might actually help to advance an argument that the drafting was imprecise and ambiguous.

The use of the word "revert" (as opposed to "default") might also be helpful to your argument. If you weren't on a standard variable rate before you fixed, how could you "revert" to that rate?

By extension, you might even argue that, in this context, the word "standard" should be construed as simply referring to the "standard" cap over the ECB refi rate on variable rate mortgages offered by KBC at the time that you fixed.

It also seems odd that the original loan agreement used the phrase "the prevailing ECB" as this phrase actually makes no sense. Is this referring to an ECB policy rate and, if so, which one? The ECB has three different policy rates.

I certainly wouldn't take it for granted that KBC got their drafting right - PTSB certainly didn't.
 

Sarenco

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5,495
Thankfully it is the Central bank and they are very much looking at it from a fairness point of view and whether it was in the interest of the customer. It was blatantly unfair and not in the interest on the customer.
I think it's important to understand that the stated purpose of the Central Bank review is not to evaluate the "fairness" of any particular mortgage contract(s).

The objective of the Central Bank review is to identify any cases where:
  • a customer's contractual rights under the terms of their mortgage agreements were not fully honoured; and/or
  • a lender did not fully comply with the various requirements and standards regarding disclosure and transparency for the customer.
Now you might well be able to successfully argue that KBC failed to comply with the applicable disclosure requirements at the time that you fixed but that's not quite the same thing as saying that your contract should be interpreted having regard for some concept of "fairness".
 

PJDCol

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134
Its the ECB Main Refinancing Operations Minimum Bid Rate (REFI rate)

That fact that the word "revert" is used is an excellent point.
 

peemac

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639
I think it's important to understand that the stated purpose of the Central Bank review is not to evaluate the "fairness" of any particular mortgage contract(s).

The objective of the Central Bank review is to identify any cases where:
  • a customer's contractual rights under the terms of their mortgage agreements were not fully honoured; and/or
  • a lender did not fully comply with the various requirements and standards regarding disclosure and transparency for the customer.
Now you might well be able to successfully argue that KBC failed to comply with the applicable disclosure requirements at the time that you fixed but that's not quite the same thing as saying that your contract should be interpreted having regard for some concept of "fairness".
Under CB code of conduct, fairness comes into play in that the bank must have the interest of the customer and be clear as to what is being signed and that ALL available rates are offered.

So whilst I am using the word fairness, the CB is simply saying that it looks like the banks did not behave in a way that they should have under the code of conduct which forms part of the banking regulation they signed up for.

as for exact wording "Fixed rate repayments from 1st spet 2006 for the term as indicated above thereafter reverting to the company's standard variable rate"

"Fixed until 1st august 2007 at 4.59% (4.33% Typical APR)"


No details of what the standard variable rate was at the time or any expanation of such.
 
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Sarenco

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What does "spet" mean?;)

I think an argument based around the meaning of the word "reverting" might gain some traction if you were seeking to argue that you should have been returned to the capped variable rate as described in your original loan offer at the end of the fixed term. I wouldn't be overly confident that the argument would prevail but I do think it's a tenable argument. Mind you, any claim would almost certainly be statute barred at this stage so this is probably all academic.

The Central Bank's consumer protection remit certainly revolves around their concept of "fairness". The problem is that you can't actually ground any legal action against anybody on the basis of the Central Bank's Code or, save in very limited circumstances, cite the provisions of the Code as a defence in any proceedings taken against you.

Technically, the Central Bank can't actually intervene in any contractual dispute. They can, of course, express their expectations as to what steps should be taken by any regulated financial services provider and can seek to sanction a provider if they do not meet those expectations.
 

PJDCol

Frequent Poster
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134
Yes and for me the "variable rate" was described in detail in the loan offers as:

"The interest rate applicable to the loan identified on page 1 of the letter of offer is a variable interest rate and may vary upwards or downwards. The interest rate shall be no more then xx% above....."

I suppose at end of day we can give opinions all we want. People have already failed with this at the FSO who disagreed with this so lets see what happens. I'm not getting excited about it though!
 

Sligolive

Frequent Poster
Messages
58
While I am KBC customer negatively impacted by the banks refusal to revert my account to its status pre fixed period and sometimes find Sarenco,s views hard to accept, I agree that his comments are quite insightful.

I think it should be noted that there was a case for a consumer to understand from the KBC fixed rate instruction form and the mortgage agreement as quoted in Coleman,s extract above that......
A....the variable rate would revert to SVR and more importantly
B....the rate will be no greater than xxx above ....
which is effect a tracker rate.
 
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Sarenco

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5,495
Hi Slgolive

I really don't think that I have any more insight than anybody else on this issue but I appreciate the sentiment.

Stepping away from the detail, here's the way I see the bigger picture:

The reality is that most of these issues initially arose a sufficiently long time ago that court actions and/or FSO complaints are probably not an option, in most cases, because of the relevant time barring legislative provisions. So the Central Bank review is likely to be the "last chance saloon" for most aggrieved borrowers in these circumstances.

The Central Bank has (quite rightly) taken a right beating in the court of public opinion in recent years. In my opinion, they desperately want a "win" from a PR perspective.

So, i think you probably have a sympathetic "judge". There are a finite number of borrowers in this position so resolving this issue should be manageable - it won't break any of the banks involved.

But the Central Bank still needs to justify any position it adopts. Their decisions still need to be based on reasoned arguments.

Joining the dots between A and B in your example is really the key to this. Appealing to notions of fairness alone won't get you there.
 

Sligolive

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58
Agreed Sarenco.

One wonders if the CBI delayed their investigation into the tracker issue for so many years with a view to giving the banks time to get appropriately capitalised and to scale the size of the risk to the banks. It is curious that it has taken our CBI so long to progress matters and it would appear that the banks were being prioritised for protection with disadvantaged consumers picking up the tab during the turbulent period. In some respects it is too little too late regarding the recent CBI initiatives to instruct the banks to review their tracker mortgage "errors". The emotional and financial implications from these bank errors is just enormous and is magnified by the delays.How many hours of our time do we waste thinking about this nonsense? How many euro has been diverted away from helping us live our lives and invest in our children.....such opportunities cannot be recreated.
 

peemac

Frequent Poster
Messages
639
Agreed Sarenco.

One wonders if the CBI delayed their investigation into the tracker issue for so many years with a view to giving the banks time to get appropriately capitalised and to scale the size of the risk to the banks. It is curious that it has taken our CBI so long to progress matters and it would appear that the banks were being prioritised for protection with disadvantaged consumers picking up the tab during the turbulent period. In some respects it is too little too late regarding the recent CBI initiatives to instruct the banks to review their tracker mortgage "errors". The emotional and financial implications from these bank errors is just enormous and is magnified by the delays.How many hours of our time do we waste thinking about this nonsense? How many euro has been diverted away from helping us live our lives and invest in our children.....such opportunities cannot be recreated.
Nope - The CB has a new governor who has taken a different view to the previous governor who seemed to think that a member fo the public should know all about banking terminology and banks can simply put "get independent legal advice" to absolve them from their responsibility of fairness to their customers.

Phillip lane the new governor had obviously been watch this for a while as it was one of the first issues he tackled and gave the bank no room to wriggle out of it.


BTW - different posters have given different text of "standard variable rate". In the fixed rate document it was written "the company's standard variable rate" not "the compnay's Standard Variable Rate" or "the company's SVR". the fact that the words were not capitised meant that the lay person would not see that it was a specific rate.

Funny in the main mortgage document, it also states that the offer is variable interest rate and may go up / down. The rate will be no more than 0.95% (or whatever you agreed) above the prevailing European Central Bank Main Refinancing Operations Mininimun Bid Rate ("REFI rate") for the term of the loan. At the end of the paragraph it says that is the REFI rate is unavailable the rate applicable will be the prevailing "Home Loan Varable Rate" (capitised)

No mention ANYWHERE of "company's standard varable rate" - if the document had stated revert to "Home Loan Variable rate", then KBC would have a leg to stand on. But ambiguous terms, not described anywhere and not being the name of an actual rate in the public domain, well, I just can't see how it can stand up.
 

PJDCol

Frequent Poster
Messages
134
I personally am not holding my breath on this despite people's hope that something might happen. I can see some legal experts dragging this out for a very long time and somehow it might just all go away!
 

PJDCol

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134
Has there been any comment from KBC on this issue in any shape of form ?
Nothing from what I can see.

But from my own personal experience for an update, I rang them a few times recently and I mentioned the CB investigation, etc but I was told every time I would be getting a call back. Anyone I spoke to hadn't even heard of it.

I also sent them a letter last year for information and no response.

All I have from KBC on this topic is the response of my complaint a couple of years ago where they told me I was:

1. Clearly notified of the terms
2. They were clear and concise
3. Terms were clearly outlined
 
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