Ulster Bank Refund for Interest Overcharge on commercial mortgages May 2019

Bronte

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Much to my surprise I've received a letter from Ulster Bank with a refund cheque. Has any other poster had this experience. My 'mortgage' is unusual. It's actually a type of loan to purchase an investment property. I went looking for a mortgage and the bank decided to do it this way as it was much easier they told me than my having a normal investment mortgage. How it works is they loan me the money. Let's say 100K. And I pay a 'margin' plus the prevailing interest rate (called cost of funds). It's cheaper than normal investment mortgages. In the early years they sent me an annual statement, and this showed the 100K, and it reducing with capital and interest as though it were a normal bank account overdraft. With a fluctuation in interest rate every two weeks. I also was able to 'fix' the rate, which I'm now on currently. Then they didn't send me that overdraft type bank statement. Nothing for a year or two. But more recently (due to some new banking rule I believe) they just sent me a one page document with the amount owing at the beginning of the year, the monthly repayment and balance left.
 

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RedOnion

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Yes, there were lots of these re commercial loans.

They added a 'cost of liquidity' on top of the index rate, but as part of tracker examination discovered not all contracts allowed it. Yours must have had old wording.

There's another thread on it somewhere.
 

Bronte

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We can go with commercial loan. You can't get them anymore. I've never met anyone else who had one.

I've never heard the term 'cost of liquidity' ever in relation to my loan.

This has zero to do with Trackers.
 

RedOnion

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Well, it has everything to do with trackers.

You're loan rate 'tracks' a market rate, most probably EURIBOR?

As such, it fell within the definition of CBI examination, although not a 'tracker' as normally meant by the definition.

I've never heard the term 'cost of liquidity' ever in relation to my loan
That's probably why you're getting the refund!
 

Bronte

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OK I get what you mean by it tracks a rate.

FIXING THE RATE

Here is an email when I fixed a few years ago:


I refer to our telephone conversations yesterday and to-day.


As discussed, I confirm that, on the basis that your loan (the subject of facility letter dated XXXX 201X), is being repaid in line with the terms and conditions pertaining to it, then the margin of X.X% per annum (over this Bank's Cost of Funds) will remain in place for the duration of the loan.

Once we have received the signed facility letter from you, my colleague xxxxx, will be in contact with you to progress the fixing of the interest rate.
 

Bronte

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You are a darling RedOnion. That's clearly my case. I'm pre 2006. The inital 'offer' was just a normal simple bank letter. 'prepared to provide facilities as detailed hereunder...." Then the amount, the Interest rate, term, amount, and Prime 4 (no idea what that means, do you?). And then a while after that I asked the bank by letter to transfer the funds to my solicitor to purchase (bank must have told me to do that). Then I got another offer letter, but this said my margin on it. (it's less than 2%) Security was 'first legal charge over X property'

It was also worded, transfer of €X from 'loan account' to 'reserve account'. It was all pretty simple.
 
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Bronte

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I got a bank statement then with Loan Account written on it, but it looked just like a normal bank statement really. Except there was an extra sheet with interest rate fluctations every two weeks. They only sent me them from 2010 until I fixed. Not prior. It was an issue as I needed to know how much interest I had paid, for rental income tax purposes. So they gave me a statement of interest, not the same though as I got for the normal mortgages.

In 2010 the interest rate reached a high of 1.15%, a low of .65% (another poster on here asked about cost of funds before, that's why I'm typing that).
In 2011 low was 1.15%, high was 1.7%
2012 1.4% V 1.6%
2013 1.22% V 1.43%
2014 was 1.05%, then I fixed.

That's how much it cost me PLUS my margin. I pay less than 3% in total.

2012

A banker telephoned me and told me I'd been overcharged. They gave me back a 5 figure sum into the loan account. I never really understood it. Meant to double check when the mortgage ends.

2014/2015 or thereabouts

I then fixed my loan. So now I only get a one page document.
 

Bronte

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From the article:

- I don't recall a 2012 letter about cost of funds definition changing (I keep everything)
- Is my loan sold on by Ulster bank?
- It was more difficult to fix my rate than it ever was originally back pre 2006 to get the initial funds. The bank had to telephone both myself and my husband, on two phone calls at the same time to 'fix' the funds or something.
- In the last few years they do some kind of 'annual review ' on us. Asked me our outstanding loans, income, tax on rental, by email. No idea what transpires at these meetings, I just reply by email.
 

Bronte

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Fixing the Rate

It was Capital Markets Business Planning & Operations team who telephoned us. They sent us a) fixed rate loan repayment schedule, Client advisory note, Early redemption worked example, guide to Business account fees.

Prior to that I got a letter saying the following Loan has been sanctioned to you. I wonder is that a new loan compared to the orignal one. I've no idea really. They mentioned 'restructuring the existing facility'. And replacing that loan on a X year fixed rate.

Interestingly my fix is up in the next 12 months, but before the end of the repayments. I wonder what happens next. Will they then create a new loan for me.
 

RedOnion

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It was more difficult to fix my rate than it ever was originally back pre 2006 to get the initial funds
SME protection. The banks got in trouble over mis-selling derivatives in the past, so you have to go through hoops to fix.

It's possible that UB needed to transfer you loan to a new account on their system. I'm not familiar with their particular systems (but am with others).
 

Bronte

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I'm having problems with AAM due to the migration, so my posts aren't as clear as I'd like. I'll fix them all when BB has everything sorted.

I'm not an SME though, just a small time landlord. Personally neither I nor my husband understand the refund letter to us.
 

RedOnion

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You're covered under SME protection codes, regardless of whether you're an SME or not.

I'll reply properly from a PC later.
 

RedOnion

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@Bronte

Here's a full history of Cost of Funds, with the rate you were charged, and the rate you should have been charged. Unfortunately they've removed the pre 2012 definition, and I can't find my files at the moment to explain the change exactly. https://digital.ulsterbank.ie/business/accounts-and-services/business-lending/business-loan/historic-cost-of-funds.html

Re SME piece, the technical term for you is "smaller enterprise" :)
"a natural or legal person or group of natural or legal persons, but not an incorporated body with an annual turnover in excess of €3 million in the previous financial year, acting within their business, trade or profession (for the avoidance of doubt a group of persons includes partnerships and other unincorporated bodies such as clubs, charities and trusts, not consisting entirely of bodies corporate) or "

So, when you borrow in your business capacity, you're protected by SME Code of Conduct: https://www.centralbank.ie/docs/default-source/regulation/consumer-protection/other-codes-of-conduct/37-gns-4-2-7-consolidation-3.pdf?sfvrsn=9

The overcharging topic was discussed at one of the Finance Committee meetings last June - ther might be more background if you've patience to read through it: https://www.oireachtas.ie/en/debates/debate/joint_committee_on_finance_public_expenditure_and_reform_and_taoiseach/2018-06-19/3/
 

RedOnion

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In the last few years they do some kind of 'annual review ' on us. Asked me our outstanding loans, income, tax on rental, by email. No idea what transpires at these meetings, I just reply by email.
Interestingly, this is covered by Section 9 of the SME code of conduct I linked above. I'm more familiar with the consumer protection code, so learned something new today!

"(2) A regulated entity shall, on an annual basis, offer a borrower the option of a meeting which shall, at a minimum, include a credit review. "
 

Bronte

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Interestingly, this is covered by Section 9 of the SME code of conduct I linked above. I'm more familiar with the consumer protection code, so learned something new today!

"(2) A regulated entity shall, on an annual basis, offer a borrower the option of a meeting which shall, at a minimum, include a credit review. "
These annual reviews were not done the first few years.

I’m a bit confused though. Me and my husband are not an enterprise or entity.

And I haven’t had a meeting with a banker since before 2005 as regards loans/mortgages in Ireland. My understandIng was the bank have a meeting at which the banker who asked for my up to date details presents that at this meeting. It was a mere formality, presumably because I’m a performing loan.
 

Bronte

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Oireachtas committee

I just glanced at it, the guy mentioned there is the one who signed the letter to me. Eddie Cullen.

Very interesting.

- I seem to be part of the 20% of complicated cases that brought me into 2019
- also mention of Overdraft. That’s exactly how my bank statements looked, like an overdraft
- says the recalculation was very complex.
- said the sent letters in 2012, I don’t recall that
- says they put it up in newspaper ads, I wouldn’t have seen them either as I’m abroad
- would I even have realised those ads applied to my product. I’d like to see those ads.


Now would I have grounds for undoing my fixed rate, because it was based on a false (higher) rate?
 
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Bronte

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Cost of Funds.

so you’ve posted the correct rate, plus the modified rate. The modified rate doesn’t apply to me, because I’m pre 2006. I’ll check my rates against what you’ve posted tomorrow. Thanks for all your links.

I see the cost seems to be .2% more.

What I can’t figure out is why I got a refund at all. Nor how they calculated it.
 
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