Ulster bank over charge - 4 times - on Business loan to purchase investment property

Did they charge you the right interest?

From reading your story, it appears that they applied the incorrect rate. I am surprised that you did not notice this at the time.

It would be very time consuming to go back over the last ten years and very expensive for a forensic accountant to check it out for you. And it is likely that they did it correctly. So you would be spending a lot of time and money for nothing.

I would say - sort out your tax affairs if you did not declare the refund and then move on with your life.

Brendan
 
Brendan Burgess said:
From reading your story, it appears that they applied the incorrect rate. I am surprised that you did not notice this at the time.
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To be fair, I don't know if anyone noticed. These were business loans, and UB refunded thousands of them.

Very few customers understood the rate, or would have known it was incorrect without understanding technical language in their contract. The customer had a margin over banks 'cost of funds'. UB changed how they calculated 'cost of funds' to include an extra element, but about 30% of their (older) loan agreements did not allow them to do so. To my knowledge, this was only identified during the tracker mortgage examination, although only a small percentage of these loans were secured on residential property.

The final refund was because the rate used in first refund was too precise, and should have been rounded as per contract.
 
Ah ok.

So Bronte would have been notified that the Cost of Funds is x% and would have had to accept their word for it. But in fact their Cost of Funds was lower than x% under the formula used in her mortgage agreement.

Brendan
 
Brendan Burgess said:
On the tax returns, you do not need to redo them.

Presumably in 2012, you your tax return was something like

Rental income €30,000
interest charged: 14,000
Less interest refunded by UB: 10,500
Net interest charged: 3,500
Rental profit 26,500

Likewise for 2019 and later refunds.

If you did not reduce the interest claimed by the refund, you should contact Revenue along the lines of - "I understood that this was a tracker refund and therefore that UB would sort out the tax. They are now saying that they won't. Accordingly, I have reduced the interest charged this year by €x".

Brendan
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I can't do that, it would mean I'd underpaid income tax. And If you do that there are penalties and interest.

Also that refund figure of €10500 is not for just one tax year. Plus the other refunds apply for different years as well. So all my returns are incorrect.
 
Brendan Burgess said:
Did they charge you the right interest?

From reading your story, it appears that they applied the incorrect rate. I am surprised that you did not notice this at the time.

It would be very time consuming to go back over the last ten years and very expensive for a forensic accountant to check it out for you. And it is likely that they did it correctly. So you would be spending a lot of time and money for nothing.

I would say - sort out your tax affairs if you did not declare the refund and then move on with your life.

Brendan
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All I knew what they were charging me the cost of funds plus my margin. I had no idea what the Cost of Funds were. I only realised what that was later, and honestly I couldn't figure it out. I was happy with the rate. Because I know the rates on the market. I assumed they were charging me correctly. I linked the historical cost of funds, I'm not so good as to think I could figure out massive calculations like that. Most of the time I was fixed so it seemed ok to me. Now I don't believe anything they calculate. And while you are surprised at me, are you not more surprised at how many times Ulster, along with their external auditors have got the figures wrong. I have no idea if they are correct now either.
 
Brendan Burgess said:
Ah ok.

So Bronte would have been notified that the Cost of Funds is x% and would have had to accept their word for it. But in fact their Cost of Funds was lower than x% under the formula used in her mortgage agreement.

Brendan
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The cost of funds seems to change every two weeks, on odd days. I have for some years that. (2010 - 2014) Plus now in the link I've the cost of funds going back to 2012. Their link does not go back to 2005. Not sure why. As RedOnion said, it would be impossible for me to understand it.

Contract - 2005

It's a 2 page document. To provide facilities. Interest rate 3.75% per annum variable. Prime 4, term 240, monthly amount. Review 1 year later (which didn't happen). That's what we signed. There is then a one page "Default Schedule". zero about cost of funds.

Later when I was asking them to pay for independent advice they sent me a copy of my files. And there was a new document to that. 'Summary of Terms and Condition" (ROI). That I'd never seen before. 4 Says interest is quarterly. But there is nothing about Cost of Funds. I only was aware of that later.

The interest clause is just that if variable it changes when the rate changes and that will be up in the branch.

My memory is that the Commercial manager said to me "Bronte this is way easier as I don't have to go via Dublin". And he was the one with the authority to sign it. Ulster have blacked out his signature on their copy - but I have it on my copy and I can see it was him as they left a tiny bit of his signature. They also deleted his name from that copy.

How I have always descripted this on here and elsewhere is that the Bank were trying to shovel money out as fast as possible, hence this 'ingenious' solution.

Fixed

In contract, take 2019 when I fixed, it's all way more formal, with a document called Loan Agreement. This is when cost of funds is mentioned. (the person who signed this, I have an original, that person's name is not typed on it). Loads of supporting docs as well.

One single two page document has a definition of Cost of Funds at point 1. Based on how Ulster Bank source money, which can vary from week to week. Described as a variable component of the interest rate.

2014 Fix was also way more formal than the original loan. It was called Restructuring. It was a fixed rate so I didn't care what they called it. But it was X rate plus my 1.6% so it was perfect for me. Their rate was actually fixed on the time/day of the phone call is what I understood. I had to deal with people in Dublin too, it was chalk and cheese to 2005.
 
RedOnion said:
Because they only made the change in 2012. Until then it was correct for everyone.
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They didn't tell me anything in 2012 though. But oddly that's the year the large overcharge came to light. So something triggered that with my Relationship Manager who telephoned me about it. He had been at a meeting, which makes sense now. Bet I wasn't the only one so. But I know I was odd, because these loans are not for Landlords like me. And I never met anyone else with one.

I'll go back on the other link to see what you said about 2012. This is giving me a headache.
 
Bronte said:
They didn't tell me anything in 2012 though.
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Because they didn't know about it in 2012.

You're mixing up completely different issues. The cost of funds was changed in 2012, but they discovered later they shouldn't have done that for you.

The refund you received in 2012 was a completely separate issue.
 
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