Bank of Ireland increase differential on tracker rates

Paul this is most interesting. And your expertise in this could be very useful. BOI set out a number of criteria in the mortgage offer letters outlining the reasons why they can increase the differential. Now in my letter of complaint to them I asked them to justify and validate those reasons thus providing an auditable rationale for the increase. They refused stating the information was "commercially sensitive" Certainly some of it may well be contained in this report. When I am back in the office I will cut and paste an extract from my letter asking them to justify each and every reason for the increase. I am hoping that they may well have shot themselves in the foot on this.

Reply to the comment left by "Gary Nock" at "02/11/2013 - 10:41":

I totally agree Gary and I alerted Justin Selig to Paul's post as soon as I read it.

This could be an angle to re-approach MP's and the FCA with.

I know the BoI Class action may appear to have stalled and that West Brom is racing ahead but I can assure you that work is still goin on in the background. For example, we now have a QC reviewing all correspondence between Justin and the FCA and BoI's QC;s respose to the FCA.

The momentum of the west Brom case is a massive learning curve for us too. When we do invite BoI affatced borrowers to recommence funding and campaigning we may well have a proven template and action plan to offer them, e.g. letters to MP's and many of the other things on the West Brom Class action "To-Do" list.

I am also pleased to confirm that the west Brom exposure has also flushed out a further 60 BoI affected borrowers who have completed the Class Expression of Interest Form 🙂
.

Reply to the comment left by "Mark Alexander" at "02/11/2013 - 11:18":

Paul / Mark - an extract from my complaint letter asking them to justify and validate the differential increase.

The clause they have used on my mortgage increase is:

"After the guarantee period,( or after the promotional period if the promotional period goes beyond 31 October 2006), we may change the differential under this paragraph at any time by giving you 30 days written notice. We may increase the differential under this paragraph if one or more of the conditions exist as specified in 4(10) of our Mortgage Conditions 2002"

The Mortgage Conditions 2002, state:

The conditions allowing increase in the differential if:

1. Because interest rates are rising;
(Interest rates are at a record low - how can this be a valid reason? You are offering mortgages at 2.74% through the Post Office)

2. Because we wish to increase the amount we receive from borrowers in order to maintain a prudent level of profitability or reserves;

(Please provide us with the additional amount this increase will have on borrowing receipts, and how this will lead to a maintenance of a prudent level of profitability or reserves, in actual sums and as a percentage of your total reserves, and how this falls within the definition of prudent)

3. Because we wish to respond to the actions of our competitors

(Many of your competitors are reducing rates due to the Funding For Lending Initiative- please explain why and how this condition may be valid)

4. Because it is costing us more to administer borrowers accounts;
(Please specify the increase in borrowers administration costs if this is one of the reasons)

5. Because we believe that general economic factors have increased the risk of shortfalls on borrowers accounts, or on accounts on the same types as yours, and we wish to increase the amount received to protect us against that risk;

(The banking crisis has been with us since 2008. Conditions have improved since that time. What has occurred recently which would validate the first part of this condition? In relation to the second part, has the risk on BTL loans statistically increased as a percentage of total defaults, and how will more than doubling the interest rate on these accounts protect from that risk when it is more likely to push borrowers into default?)

6. Because we wish to retain existing borrowers or attract new borrowers;
(How does more than doubling the interest rate retain existing borrowers, or attract new ones?)

7. Because of any change in taxation which affects our profit from our ordinary activities

(Please specify which tax change(s) may have validated this particular condition)

8. Because we need to reflect a change in the law, or in any code of practice which applies to us, or a decision or recommendation by a court, ombudsman or regulator;

(If this is a validated condition, please specify which law, code of practice, or a decision or recommendation by a court, ombudsman or regulator has lead to a doubling of your interest rate).

The use of these conditions places Bank of Ireland in a position where it has used an "unfair term" within the meaning of the UTCCR. However, it was not within the Mortgage Offer itself . This did not give us as consumers sufficient opportunity to check these conditions prior to signature.

As you are relying on these conditions please evidence the circumstances in which you "believe" they are being fulfilled in order to justify the implementation of the differential change"

And the answer I got was "It is commercially sensitive" but what they really meant is "Oh **** someone is asking us difficult questions which we cannot answer so we will fob them off"

I am tempted to go to the Small Claims Court and put this to a Judge to see if they will answer to him - but best to wait for Justin's advice on this!!

Reply to the comment left by "Gary Nock" at "02/11/2013 - 11:47":

A few quick observations.
1. The cost of funding to all lenders is increasing. That's fact. Post Office is a joint venture (so separate entity) and benefits from the fact that not encumbered with historic legacy issues. Also can use FLS for new business.
2. All financial institutions are having to progressively increase capital reserves.
3. Funding for lending can only be used for new business not to fund existing.
4. FCA levies have increased significantly since 2008. (The bail out of the Icelandic bank deposits has to be paid for).
5. Will take a few years for the pre 2008 easy credit years to wash out and through. Your suggestion that BTL borrowers will default when interest rates are historically low (even with an enforced increase), allies to this view.
7. Bank Levy (introduced in 2011)
8. See point 2.

Reply to the comment left by "Colin Childs" at "02/11/2013 - 15:04":

Colin this is probably a similar argument that BOI will use. But these are generalisations and not specifics. Generalisations in a criminal or civil court get ripped to pieces by good barristers. To show they have the grounds for a differential increase they will have to show that the reasons are satisfied. A glib" well our funding costs have increased" is not enough. They will at some point have to come up with hard facts and figures to prove it. And if they will not then they cannot evidence it and the increase

Sorry phone went down. Last sentence should read "and the increase should not be allowed"

I think it's pretty important you have an early strategy discussion with counsel, so that you can properly assess the BofI's weak spot. I say this because before they announced the increase they would have assessed the legal and pr position, and felt pretty confident they could get away with this. Arguing on their strong points is pointless and a waste of your money.

Go to counsel with more work done on the accounts side. I say this because at the moment you are a one track pony, if you lose the ' it's illegal argument' you have no backstop. And you need one, especially as the FCA have declined to step in.

The point over the unfairness of the increase is very real in BofI's case. They are quite a simple bank, not nearly as complicated as the others. They have only a few asset classes, a few funding lines, a few product groups and don't get involve
d in some of the more esoteric banking sectors others do, they only operate in 2 countries- here and the ROI. They also have reported their results in a way that helps your case.

Make use of these things.

Reply to the comment left by "Gary Nock" at "02/11/2013 - 15:19":

Of course they are generalisations. I was merely responding to your apparent lack of knowledge.

Reply to the comment left by "Colin Childs" at "03/11/2013 - 00:08":

The last refuge of an individual who cannot accept with an open mind the points and opinions of others and respond to them with good grace is personal attack.

Sad really.

Reply to the comment left by "Colin Childs" at "02/11/2013 - 15:04":

Colin, your response to these points are all too 'high level'. You need to spend a good many hours crawling through the accounts of the Bank of Ireland - and if you do you will see that the two points that the Bank of Ireland put forward as the reason for increasing the differential - yes, in their letters to borrowers they only stated 2 of the 6 reasons contained in the mortgage conditions - can be fought using their own figures. If you don't have the skills to do a more detailed review, then get an accountant with investigation experience to do so. I've just spent about half a dozen hours doing such a review and I'm confident I can kick the increase into the long grass. That's to say the negativity in your response is not borne out by easily provable or ascertainable facts. Get in to the detail man!