Bank of Ireland increase differential on tracker rates

Reply to the comment left by "Ramus Wood" at "19/11/2014 - 10:46":

Exactly. The SVR is irrelevant, the affected mortgages were sold as trackers at a fixed differential over bank base rate and the t & cs reflect this. I am intrigued to know how the FOS and BOI believe any other interpretation of the contract can be sustained.

I have had my appeal letter. Says that only now will it be dealt with by an Ombudsman. Up until now I have been dealing with an "adjudicator". Mmmm.....bit if a misrepresentation or what?

Reply to the comment left by "Gary Nock" at "19/11/2014 - 17:06":

Try to get a face to face meeting with him, I bet the BoI have had one!
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I, too, have received a generic rejection letter from FOS despite the fact that I thought my case was watertight. The following is an edited version of my appeal which also explains why I think my case is so strong.

"Frankly, I'm dumbfounded that you could rule against me and I'm concerned that my lengthy supporting letter was not read properly or maybe was not understood. I'd like to reiterate more succinctly why BOI have no contractual right to increase the differential on my tracker mortgage.

I am absolutely convinced that my case is unusual in that there are NO clauses in my contract which even mention any justification for the increase.

In 2004 I remortgaged onto the Bristol and West (BaW) tracker mortgage in question. I was sent a mortgage offer and Residential Mortgage Conditions (RMC) 2001 (the current edition). The mortgage offer made one reference to the RMC (no mention of date) and I quote "We will only increase the differential under this paragraph if one or more of the reasons specified in condition 6.(f) of our RMC applies". Condition 6.(f) in RMC2001 is an irrelevant clause that talks about changes to the variable rate. There is NOTHING in these 2 documents that allows them to change the differential.

BOI's argument against me is that "I would have been sent RMC1997 with my mortgage offer". I was NOT sent RMC1997 (which had been OBSOLETE FOR 3 YEARS by the time of my 2004 mortgage offer), I was correctly sent RMC2001, the prevailing conditions ! BOI can't even back up such a claim since it was BaW that were running things back in 2004.

I hadn't even been sent RMC1997 when my discount mortgage with BaW began in 1999 so the first time I saw them was when BOI sent them to me in support of their argument in 2013. Although my 1999 mortgage offer is not really relevant here (because it was a discount mortgage and not a tracker), it is interesting that it too refers to RMC without any date but it does clarify that any reference to RMC means the edition PREVAILING at the time of the offer. Although not specifically stated in my 2004 offer, one would assume that this also applied in 2004 when the prevailing conditions were RMC2001.

The reason that BOI are desperate to make out that RMC1997 apply at the time of my 2004 mortgage is that the reference to condition 6.(f) in my offer only makes sense when read in conjunction with RMC1997 (and these clauses might justify an increase in the differential). Their second argument to try to validate the out-of-date RMC1997 is to claim that it's those conditions that are referred to in my 1999 Mortgage Deed but it's ridiculous to suggest that my contract with BOI is based on a document (the Mortgage Deed) that ISN'T EVEN MENTIONED in either of my mortgage offers from 2004 nor 1999 and was signed AFTER the 1999 mortgage offer was accepted. Besides, I know of at least one case where BOI are using the clauses in RMC2001 because the mortgage offer CORRECTLY refers to condition 6.(t) (rather than 6.(f) ) despite the fact that the Mortgage Deed in this case also refers to RMC1997. BOI can't have it both ways !

I know of (at least) three different types of mortgage offer :

1. The offer is sent with RMC2001 and refers to condition 6.(f) which is irrelevent (as in my case).

2. The offer is sent with RMC2001 and refers correctly to condition 6.(t).

3. The offer actually lists the relevant clauses verbatim.

Although this is only my opinion, I think what happened here was that in 2004, BaW sent me the prevailing RMC2001 but used an out-of-date mortgage offer and were unaware that it referred to the out-of-date RMC1997. Of course, none of this ambiguity would exist if all mortgage offers were of type 3 above with the important clauses actually quoted in the text of the offer rather than using the lazier method of referring to other documents (which periodically get updated).

Under contract law, "contra proferentem" applies. This exists to encourage the drafter to be as clear and explicit as possible and is often used to overturn contracts where the important clauses are "couched in small print" or where there are ambiguous contractual provisions. My case is even stronger ! There isn't even a single clause that talks about increasing the differential and it's entirely unreasonable that BOI are trying to bind me to conditions which were never provided.

I am extremely disappointed that an organisation like the FOS, who's job it is to protect the common man against wayward institutions, could possibly "rubber stamp" the actions of BOI and I'm confident that your decision will be discredited in a Court of Law. All I have from you is a generic letter that was presumably sent to everyone and I would like your final assessment to address the specific points I raised in my original letter and again here in this email. In particular, I am curious to know on what basis, in law, you can justify the BOI increase, given my situation as detailed above.

I would like to request a meeting at your offices. This is a complicated argument to express in written form but I'm sure I wouldn't need much of your time to demonstrate what I'm talking about, if we could meet face to face. Your assessment has already taken over one year so I would appreciate a swift decision since, if this appeal fails, I will want to take legal action as soon as possible."

After months of research, I really believe that the inconsistencies surrounding BOI's reference to different versions of the Residential Mortgage Conditions (RMC) are a serious weakness in their argument that we can exploit. One of the problems with this case is that many people have slightly different situations and I think we need to identify the different scenarios, each of which may need to be handled in a different way. I'm going to follow this post with another one asking to hear from people who fit into 2 different categories.

Following on from my previous post :

BOI seem to be trying to invoke the clauses in whichever edition of their Residential Mortgage Conditions (RMC) best helps their case. For example, in my situation, BOI are trying to hold me to the clauses in RMC1997, even though I'd never seen them before 2013 and they were out-of-date at the time of my 2004 mortgage offer anyway ! They claim that "I would have been sent them with my offer" which is not true (I was sent RMC2001) and they back this up by claiming that RMC1997 apply because they're the Conditions listed on my 1999 Mortgage Deed (even though there is no reference to my Mortgage Deed anywhere in my 1999 and 2004 mortgage offers).

I would like to hear from anyone whose mortgage offer refers to condition 6.(t) in RMC2001 but who has a Mortgage Deed which lists some other RMC (probably 1997). This would show that BOI are trying to apply different rules to different people in an attempt to have it whichever way suits them best. They can't invoke the out-of-date RMC listed in the Mortgage Deed in some cases and the current RMC in others !

I would also like to hear from anyone who was sent RMC2001 and a mortgage offer which refers to condition 6.(f) (which doesn't apply when read in conjunction with RMC2001, since it's an outdated reference to RMC1997). Currently, I know of 2 of us that are in this situation but there must be others. I think our case is particularly strong since there is nothing in the offer nor RMC which justifies the increase !

I'm sure you will all be delighted to hear that BOI's finances are now sufficiently rercovered to the stage that they have implemented a 3.7% pay rise for all staff and a further 5% Christmas bionus for all.

Mark we do not appear to have heard anything from Justin on this. As some of us have paid out £650 in fees will we be getting his view on this FOS farce please? I understand that as his clients it will not be reported on here as then those who have not paid will be getting the benefit, but there is the secure forum or our email addresses.

Reply to the comment left by "Gary Nock" at "21/11/2014 - 14:54":

Hi Gary

I will make sure Justin sees your comment.
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I had a new mortgage offer for part of my mortgage in 2009 which then said refer to Mortgage conditions 2003 not sure if that was correct procedure by BOI

I have sent a response to FOS adjudicator , helped by information given to me by the WHICH magazine who are still interested in this case.

I have had a response the adjudicator still does not agree with me and i have to reply by the 4 th December if its to go to the Ombundsman .

Below is a copy of my email

Dear Mr Ruffle
Further to your letter of the 14th October I do not agree with your decision and wish to pursue the complaint further.
In layman terms I disagree with your statements which merely shadow the BOI standard responses - the bank has in my opinion acted unfairly on several counts:
• It has not provided any financial evidence to its consumers for the need to increase the differential by the amount stated i.e. show me the balance sheets that dictated such a large increase of over 30 %.
• The contract is unfair due to lack of explanation of its terms and hidden small print and the “differential” statement is open ended.
• The Bank miss-sold products which it has clearly needed to withdraw from the market i.e. interest only mortgages and buy to let only to return to the market at a later date ( after stoking up its profits I might add). It has just returned to selling Buy to Lets via the post office JV and I note it intends to leave the UK market – leaving devastated UK consumers behind. In effect this is a foreign bank.
• Discriminates against loyal customers V new customers by offering preferential rates to new customers only.
• Entrapment – no alternatives offered to consumers - just letters to go elsewhere – mainly to worse deals because consumers have very little time to change in a badly affected mortgage market due to the banking crisis, and depleted mortgage choices due to the recession.
There has been a legal analysis of the contractual provisions and the primary concern is that the rate escalation provisions in the mortgage contracts constitute unfair terms in contravention of the Unfair Terms in Consumer Contracts Regulations 1999 . Financial bodies have already flagged the inherent risk of unfairness associated with contractual provisions that allow changes to tracker mortgage differentials.
As there is no defined amount the clause is open ended and the legal view is that closer consideration in the BOI case will reveal that the relevant terms are inherently unfair.
You have commented that Bank of Ireland relies upon the condition below as a valid reason for changing the differential ;
– because we wish to increase the amount we receive from borrowers in order to maintain a prudent level of profitability or reserves;
The next question is therefore whether the reason stipulated in the contract can be considered ‘valid’.
This reason has two components; one relating to profitability and one relating to reserves. It seems that neither component is a valid reason under the UTCCR to render it fair.
In relation to the profitability component, a reason associated with profitability is unlikely to be valid. FSA Guidance on Unfair Contract Terms (January 2012, para 3.7) states: “Examples of reasons that we are likely to consider not to be valid include: …solely to increase profit margins”.
In relation to the component relating to reserves, even if the wish is to maintain a prudent level of reserves is a valid reason for increasing an interest rate differential at face value , the Bank of Ireland has not demonstrated any such need in this case. Bank of Ireland has not informed its customers:
1. of the amount by which its reserves need to be increased in compliance with European regulation
2. over what period
3. why this has not already been achieved by a financially healthy bank – one so healthy that it won the PO JV contract.
Nor has Bank of Ireland demonstrated any link between its need to increase its reserves and the increase in the differential applied to its SVR or tracker mortgages. It has not informed customers:
1. what proportion of the increase in differential is attributable to a need for greater reserves (as opposed to the bank’s other stated reason, i.e. increasing costs)
2. how the increase in differential has been calculated to cover – and only cover – the required increase in reserves
3. the other options explored by Bank of Ireland for increasing its reserves and why these options were not feasible.
In order for it to be fair there is a requirement for transparency but as there is no transparency from BOI it is the case that it cannot be considered fair: I therefore dispute that the bank has “valid” reasons to increase the SVR and that the mortgage terms and conditions are unfair .
A price variation clause is particularly open to abuse, because consumers can have no reasonable certainty that the increases imposed on them actually match the net cost increases (Unfair Contract Terms Guidance – September 2008 – para 12.3).
The very fact that the condition places no obligation on the bank to demonstrate a connection between its needs and the increase in the differential is sufficient in itself to render the term unfair. The consumer is left with no way of testing the legitimacy, proportionality or necessity of the bank’s behaviour and, in essence, places increases in differential within the bank’s sole discretion.
I am very disappointed that these points have not been considered in your deliberations and completely refute that this Bank has acted fairly .
In view of the West Bromwich class action which has been given permission to go ahead and waiting for a court date to be set after the 17th November – it would be prudent to consider that legally BOI is also in breach under UTCCR. If the class action succeeds, West Bromwich would be forced to refund all overpayments as well as meeting court costs.
I therefore respectfully request that considerations are made to this unlawful rate increase. That the rate reverts to 2.99% on my base rate tracker and SVR for the duration of the mortgage subject to any BOE rate changes and that any overpayments sums which now amount to £ 9000 to be refunded to me or alternatively is to be re-credited as a lump sum payment to my mortgage account.