Key Post Success! After 7 months fighting, AIB agrees to reduce break fee to what it should have been!

[_ripped_off]

This is a very important issue so I asked ripped off to summarise her story so that other customers of AIB can learn from it.
I have copied her account into this Key Post to highlight it.
You can read how the story developed in this thread.
AIB break fee not in line with other banks?

Brendan

In Feb 2019, I had an AIB mortgage of €350k – half SVR, half fixed.

The half fixed was : €175k at 3.8% with 3 years to go

Ulster Bank had a fixed rate of 2.3% for two years, so I worked out my savings as follows

€175k @ 1.5% = €2,600 a year for three years = €7,800. I don’t know what the rate would be after two years, but there was also a 2.6% rate.

€175k @1.2% = €2,100 a year for three years = €6,300

The variable half was at 3.15% - so the saving would be €175k @ 0.55% €962 per year for 3 years or about another €3,000

Total savings €9,300

8th February
AIB quoted a break fee of €2,600 which I could not afford.

Later, I googled and found the issue being discussed in this thread on Askaboutmoney
It may be much cheaper than you think to break out of a fixed rate early...

Red Onion calculated the correct break fee at €1,300.

15 April
I applied again, and was told that the Break Fee had risen to €4,700 (Due to the reduction in the AIB fixed rates). Red said it should have been about €2,000.

I requested a breakdown of the calculation

10 May
AIB sent me a breakdown – the calculation was based on the difference in their new lower fixed rate and the rate at which I fixed originally and a discount for Net Present Value of up front collection of the mortgage.

16 May
sent a formal complaint to AIB. Red assisted me with the wording of the complaint.

25 June
received a long letter from AIB saying that their calculations are correct - however, offered us the original break fee of €2,636.04

2 July
replied to AIB that they did not address the EU Mortgage Credit Directive: “(2) A creditor shall be entitled to fair and objective compensation, where justified, for possible costs directly linked to the early repayment, but shall not impose a sanction on the consumer, and any such compensation shall not exceed the financial loss of the creditor.” Also told AIB that we were complaining to the ombudsman.

2 July
Opened the complaint with the ombudsman

4 July
Gave instruction to AIB to debit the break fee offered of €2636.04 under protest..

Started the switching process with Ulster Bank.

12 July
AIB debited the breakage fee.

15 July (I discovered later)
AIB changed the way that they calculate break fees and now do the calculation I was claiming as well. They give the customer the lower of the two break fees.

They didn't notify anyone of this change.

30 July
I notice the change on the website and reopen the complaint with AIB cc’ing same information to the ombudsman.

16 September
AIB have agreed to recalculate the break fee as of at €952 and have refunded the difference together with a goodwill gesture of €150

They say that they are doing this "as at my original request date in February because of “the proximity of the date I paid the break charge (12th July) and the date they changed the policy (15th July)”.

17 September
AIB phone us to know if we will accept the above offer. We respond in writing that we will accept the refund on the break fee but we are now requesting that they refund the interest savings lost by us delaying the switching process by 5 months (circa €1250).

 

[Brendan Burgess]

Ripped Off

Well done! It is appalling that you had to work so hard and so tenaciously to get this.

They changed their calculation methodology in July without telling anyone.
They have offered you the original figure without admitting liability.


This is a complicated issue and the vast majority of those being overcharged like this by AIB would have no idea that they are being overcharged. And if they do know they would not have the resources and time to pursue to its conclusion.

AIB exploits this. Has anything changed in the banks?

I had not realised how long this particular campaign has been going on.

Banks under fire for charging huge fees for breaking out of fixed rates

Banks have been accused of breaching EU regulations by quoting massive fees for mortgage holders who want to break out of a fixed rate to get a cheaper one.

www.independent.ie

Brendan

 

[Brendan Burgess]

If you have already paid or if you have been quoted a break fee by AIB, you should challenge it

This is the second case I have come across of AIB settling a case in full but only after it has been referred to the Ombudsman. They do not want the Ombudsman to publish a finding on this issue.

If you complain, they will make it as hard as possible for you. They will deny that they are doing anything wrong. The fact that they changed the way the calculation methodology in July is irrelevant they say. But if you persist and complain to the Ombudsman, they will seek to settle it.

If, like Ripped Off, you were discouraged from switching because of the wrong break fee, you should insist on getting
1) the correct break fee
2) A refund of the excess interest you have paid since you were first quoted the wrong fee.

Had Ripped Off been quoted the correct fee back in February, she would have broken out of her fixed rate and switched to Ulster Bank.

So she should demand the excess interest she has paid - on both the fixed part and the SVR part - of her mortgage. I estimate that is a further €1,500.

Brendan

 

[Brendan Burgess]

If you have a fixed rate mortgage with AIB

Check if there is a better fixed or variable rate available from AIB or some other lender to which you would switch if the break fee was lower.

Get a quote for a break fee.
Ask them how it is calculated.
Maybe post the details here to see if it's calculated correctly.

Brendan

 

[_ripped_off]

I’m still in a bit of a rage over the fact that they won’t admit liability so when I feel calmer I’ll think about whether it’s now worth it to keep going and try to get that admission out of them!

 

[NoRegretsCoyote]

It depends how badly you need the funds.

If it was me I would reject the offer if could afford it.


If the Ombudsman makes a ruling in your favour it would do a lot of good to other AIB customers.

As Brendan says, AIB really, really don't want the Ombudsman to come down in a customer's favour on this one.

 

[Bronte]

I’m still in a bit of a rage over the fact that they won’t admit liability so when I feel calmer I’ll think about whether it’s now worth it to keep going and try to get that admission out of them!

Well done you. Amazing, but unsurprising story. Here is a reason for you to continue. For others. Already you (and others) who have gone via the Ombudsman have made the following happen

a) you got them to change the way the calculation works
b) you got compensation, by the way I think for this stress €150 is ridiculous, how much would they charge on an hourly basis for all the paperword involved in you going to this level of investigation and bother. Banks need to be hit with higher levels of compensation that truly reflect the inconvenience and stress to the borrowers
c) you've received back interest
d) you've highlighted to others what banks are capable of
e) just like poster Red Onion helped you, your story will help others to keep going in their own battles
f) others will now start their own cases

Now just think about all of that and take a pat on the back.

 

[Bronte]

15 April
I requested a breakdown of the calculation

25 June
received a long letter from AIB saying that their calculations are correct -

In relation to these two points.

A) My Ulster bank which has overcharged me three times on the same account said they had sent me a breakdown of their calculations but they hadn't. I have now received it. Instead of an actual breakdown of my own three miscalculations I've instead been sent a brocuhre:

Business Lending Interest Rate Review.

It is 12 pages long, unreadable, and is a 'guide' in their words... 'an illustrative example of the calculation .. on a simplified basis.

B) When I queried the second overpayment, in discussions, the bank noticed that this 2nd re-calculation was incorrect, and as part of my complaint was I wanted someone independed to be paid by them to do the calcuations as it was the 2nd time, they assured me in writing that their calculations were correct, their words 'robust'. And yet here were they now after sending me that letter telling me they would need to reculate my interest return and compensation.

Separately they are throwing in another €500 as compensation in relation to the 1st reculation as at that time I was so mystified by the overcharging I didn't even ask for any. That was a 5 figure sum of overcharge.

 

[RedOnion]

I had not realised how long this particular campaign has been going on.

Yes, this has been a long running one. On this specific case, it's taken 7 months to get to this stage, but we've been discussing this issue since July 2017.

In the 2 years I've helped 2 people take cases as far as FSPO, but without much traction. This centres on interpretation of a technical point of law, that is not easily understood.

@Brendan Burgess deserves great credit for continuously bringing this to the attention of people like Charlie Weston, Michael McGrath TD who in turn brought this to the Central Banks attention and challenged AIB on it, and Pearse Doherty TD who has raised the issue a number of times.

Earlier this year AIB changed their calculation to align with what I always said it should have been. I'd like to think the continued work of Brendan and myself brought about that change, although it might be coincidental.

And thanks to @_ripped_off for trusting our guidance in pursuing this thus far. I'm frustrated from the process, and it's not even my money that's involved, so I can only imagine how difficult the process has been for her and her husband.

 

[Bronte]

And thanks to @_ripped_off for trusting our guidance in pursuing this thus far. I'm frustrated from the process, and it's not even my money that's involved, so I can only imagine how difficult the process has been for her and her husband.

There is no doubt in my mind that the process is designed to be frustrating. Having taken an Ombudsman case myself in the past I can fully agree with the frustration. But dealing with the banks beforehand was even worse. They have a whole department just to drive you insane. I have a file now two inches thick for my current refund that I am determined to tackle in order to take a new case to the Ombudsman.

It is my view that ordinary customers should have help in dealing with the paperwork in these cases. Someone like your goodself should be available. The banks have entire departments and legal teams at their disposal.

And totally agree with you as regards Charlie in the Indo, McGrath in the Dail and Burgess on AAM etc.

 

[_ripped_off]

Yes, this has been a long running one. On this specific case, it's taken 7 months to get to this stage, but we've been discussing this issue since July 2017.

In the 2 years I've helped 2 people take cases as far as FSPO, but without much traction. This centres on interpretation of a technical point of law, that is not easily understood.

@Brendan Burgess deserves great credit for continuously bringing this to the attention of people like Charlie Weston, and Michael McGrath TD who in turn brought this to the Central Banks attention.

Earlier this year AIB changed their calculation to align with what I always said it should have been. I'd like to think the continued work of Brendan and myself brought about that change, although it might be coincidental.

And thanks to @_ripped_off for trusting our guidance in pursuing this thus far. I'm frustrated from the process, and it's not even my money that's involved, so I can only imagine how difficult the process has been for her and her husband.

If it centers on a technical point of the law is one fighting a losing battle then without legal assistance?

 

[_ripped_off]

There is no doubt in my mind that the process is designed to be frustrating. Having taken an Ombudsman case myself in the past I can fully agree with the frustration. But dealing with the banks beforehand was even worse. They have a whole department just to drive you insane. I have a file now two inches thick for my current refund that I am determined to tackle in order to take a new case to the Ombudsman.

It is my view that ordinary customers should have help in dealing with the paperwork in these cases. Someone like your goodself should be available. The banks have entire departments and legal teams at their disposal.

And totally agree with you as regards Charlie in the Indo, McGrath in the Dail and Burgess on AAM etc.

Yes the banks are hugely frustrating to deal with. Not to mind the person dealing with our complaint refused to speak to me last week on the phone when their self imposed deadline of 9th September passed and I rang to look for an update. Yet same person felt it was ok to ring us looking for a response to their letter 24 hours after we received it.
I’ve also spent a small fortune in postage stamps over the last few months!

 

[_ripped_off]

Just to provide an update in this thread. We are not accepting the decision just yet from AIB. My husband is fairly fed up with the situation now and would like the matter closed.
I am buying some more time by requesting a worked calculation of exactly how they calculated the revised breakage fee.
For all the people at their disposal they are completely inept at being able to provide calculations they have done.

 

[RedOnion]

If it centers on a technical point of the law is one fighting a losing battle then without legal assistance?

Not at all. You've got this far without it. Very few legal professionals would understand the issue as well as you do now. My point was more in relation to how Brendan has been able to explain this clearly to journalists and politicians - I think the fact it's such an obscure point has made it difficult to gain traction.

AIB followed their T&C's to the letter, but the belief is those T&C's weren't compliant with updated legislation.

Most people would have been brushed off early in the process, but you followed through. You've highlighted to AIB, and the FSPO, the specific section of the mortgage credit directive that you believe they were in breach of. You've set out the basis of your claim in straight forward language, and it's all factually based without getting caught up in emotion.

I don't believe FSPO have ever ruled on this specific issue, so it won't be something that just gets picked up and resolved. But this is what the FSPO are there for, so that you don't need legal representation.

Red.

 

[_ripped_off]

Thanks Red. The specific part of the mortgage credit directive regarding the calculated financial loss to the lender seems so straightforward I am baffled as to how it’s become so complex and difficult for AIB to follow in the first place.
I suppose we won the battle but the war is not over yet!

 

[RedOnion]

Charlie has followed up on this again in today's Indo:

AIB forced to ditch 'high breakage fees' after accusations

AIB has been forced into an embarrassing climbdown amid accusations it was overcharging mortgage holders who want to break out of a fixed rate to get a better deal.

m.independent.ie

Note: "But despite this, the bank has insisted it was not in breach of EU regulations on the matter."

 

[Brendan Burgess]

Hi Red and Ripped Off

What a great article and summary!

Ripped Off - take a bow for your persistence.

Red it's nice to be acknowledged, even it is anonymous!

But the bank quoted her a break fee as high as €4,700 at one point. An expert on Askaboutmoney.com calculated that the break fee should be a fraction of this. Following a complaint to the Financial Services Ombudsman, the bank came back with a much lower break fee of €952.

Brendan

 

[Bronte]

That newspaper article is fantastic. Hopefully it means more people will take cases.

I'll add another one to the list

g) Ripped off is now famous, with a newspaper article about how she beat the bank

 

[_ripped_off]

Thanks I just spotted all this now. And as you said Brendan I really hope other AIB customers follow up on this if they were quoted high breakage fees!

 

[Brendan Burgess]

Adam Maguire interviewed Colin Hunt on Morning Ireland this morning to talk about Green Bonds. At the end of the interview, he asked him about the breakage fees.

I attach the clip. And here is the transcript

Maguire: Yesterday, the Irish Independent reported on changes to your breakage fees following accusations that you were overcharging. Why did it take until July to apply EU rules that were brought in back in 2016.

Hunt: We keep these matters under constant review and we always ensure that we are fully compliant with rules and regulations.

Maguire: But it took three years to bring in rules that were in place since 2016. If they are constantly under review, surely it should have been quicker than that?

Hunt: We introduced the changes as soon as it was practicable

Maguire: Will people who were charged under the old calculations be given refunds based on the new rules?

Hunt: We will be in touch with our customers on all those matters in the near future

Maguire: So people can wait for you to contact them or do they need to file a complaint?

Hunt: No, we will be in touch with customers.