PTSB Ombudsman ruling on what date to apply tracker mortgage from where borrower broke early from a fixed rate

[Brendan Burgess]

I had posted in another thread about this important decision. At that stage, I had just read the summary. Now having read the full text of the decision, it seems different to my understanding.

You can read the full decision here

https:/www.fspo.ie/decisions/documents/2019-0341.pdf (You have to copy and paste this link which will bring you straight to the PDF)

December 2004 - Lisa took out a tracker for 35 years ECB +1.25%
2007 She fixed for 4 years
2008 Broke out of fixed rate and put on SVR
(2011 Scheduled date for fixed rate to end )

This was a standard ptsb tracker redress case. Breaking out of the fixed rate early caused her to lose her right to a tracker. But because, ptsb did not advise her of this, they accepted that they would put her back on her tracker from 2011.

She claimed that she should have been put on the tracker from 2008 when she broke out of the fixed rate.

The Ombudsman ruled that if ptsb had advised her that she would have lost her tracker by fixing, that she would not have broken out early, and so the tracker should be applied from the scheduled expiry of the fixed rate in 2011.

Having regard to the language used in Special Condition H, I am of the view that Special Condition H is sufficiently clear, such that a prudent borrower would be aware that the “expiry” of a fixed interest rate, related to the “expiry” of the “certain period” for which the mortgage loan was fixed. It is clear that what was envisaged was the natural expiry of the “certain period” that the mortgage loan was fixed for.

Furthermore, in circumstances where, Special Condition H goes on to set out the rate that would be applied if there was no instructions from the Complainants, it could not be the case that the meaning of the word “expiry” contained in Special Condition H, could be interpreted as applying to circumstances where the fixed interest rate period was brought to an end by the Complainants seeking to break out of that fixed interest rate period.

With respect to the Complainants’ mortgage loan the “expiry” within the meaning of Special Condition H meant the expiry of the “certain” four year period which applied between 1 August 2007 and 31 July 2011.

 

[Brendan Burgess]

This decision is disappointing for ptsb customers who were entitled to the prevailing rate when the fixed rate ended.

I would have thought that they would have got the rate prevailing when they broke out of their fixed rate.

But this ruling would suggest that they will get the rate prevailing on the date the fixed rate was scheduled to end.

Brendan

 

[Hobnobs]

With the greatest respect to the Ombudsman (and he is doing Trojan work), I would have to disagree with this decision as it is at complete variance with the seminal High Court decision of Hogan J. on the tracker controversy in Irish Life & Permanent PLC (trading as Permanent TSB) v the Financial Services Ombudsman and various notice parties (i.e. the Thomas case) from 2012. It was an appeal by the Bank of a decision of the then Ombudsman and the case was exactly on point (and in relation to the same bank and the same clause of the mortgage agreement).

Hogan J. was in agreement with the finding of the then Ombudsman in the case that the clause in dispute (special condition 7 of the mortgage agreement) lacked clarity on the key issue of whether breaking a fixed rate affected the entitlement of the borrowers to a tracker rate. He was of the view that:-

“special condition 7 says nothing which would alert even a prudent borrower to the fact that he or she would not be entitled to a tracker mortgage at the end of the otherwise fixed period if the previously agreed rate had been broken”.

It was the bank’s position in the case that, in light of the fact the clause was phrased in terms of “on expiry of the fixed rate period”, the commitment to the tracker rate subsisted only for so long as the borrower did not “break” the fixed rate period. Hogan J. was not enamoured with this argument and held that:-

“this type of argument should really have no place in the construction of financial documents involving retail customers, even if – as the Bank contends, but the Healys deny – the customers are to be regarded as experienced investors and even if (as here) they have access to independent legal advice. Given the huge implications for the customer, if a key clause of this kind is to bear this sophisticated construction, it behoves the Bank to spell this out in plain language for the benefit of all customers, and not simply those who have either an amateur or professional interest in the niceties of the law relating to the construction of contracts who might otherwise be able to glean this vital piece of information unaided”.

I would definitely think this decision has scope for appeal. It would seem to fit neatly within the scope of the narrow grounds on which a decision of the FSPO can be appealed.

 

[Brendan Burgess]

Well spotted. I have often quoted that decision, but had forgotten the detail.

I have attached the decision for the benefit of those who are making a complaint on this to the Ombudsman.

The particular borrower did not appeal the decision to the High Court within 35 days, so they can't now appeal it.

However, there are other cases before the Ombudsman and they should make this point.

Brendan

 

[delsalmon]

If someone appeals this to the High Court using Hogan's decision, and is ruled on in favour of the customer, does that mean everyone in that ptsb cohort will be treated with the same outcome by the bank, even if they have already settled with the bank.