The Financial Services and Pensions Ombudsman (FSPO) last week published 25 Legally Binding Decisions, which were issued between January 2019 and January 2020 regarding tracker mortgage interest rates. In short, of the 25 complaints in respect of which Legally Binding Decisions were published, 17 complaints were not upheld, 6 complaints were substantially or partially upheld, and 2 complaints were fully upheld.

In his commentary, the FSPO attributed the high proportion of complaints which were not upheld, to some complainants having: "unrealistic expectations" and believing "that their desire to have a tracker interest rate provides a basis for requiring their bank to grant them one". The FSPO noted that it is likely to be the case that "a large number of complaints relating to tracker interest rates on mortgage loans will not be upheld."

Certain claims without merit

The FSPO provided some insight into the merits of complaints which were not upheld, including a list of arguments which have been made unsuccessfully in support of complainants' claims that they are entitled to a tracker mortgage.

The scope of these unsuccessful claims covers a wide spectrum, including:

  • arguments based on perceived unfairness or sharp practice on the part of a bank (such as "the bank never told me that they were withdrawing tracker interest rates from the market generally. If the bank had told me it was doing this, I would have asked for a tracker interest rate at the time.")
  • arguments based on a perceived entitlement on the part of the complainant to a tracker interest rate, despite having no contractual entitlement to a tracker interest rate (such as "I would like to have had a tracker mortgage rate on my mortgage but I was never offered one", "My twin was given a tracker interest rate mortgage" or "We have a constitutional right to a tracker interest rate mortgage").

It will be some comfort to financial service providers that the FSPO has shown no willingness to engage with complaints made on such grounds and indeed, has highlighted the unrealistic nature of such complaints. The FSPO has said that he hopes the publication of these tracker mortgage decisions will be of assistance to consumers, their advocates and financial service providers in resolving tracker related disputes at the earliest possible opportunity. Financial service providers will hope that these comments garner sufficient public attention to discourage the continued pursuit of vexatious claims.

Complaints upheld

The 2 complaints which were fully upheld involved complaints where the banks in question had restored the complainants' correct tracker rate from the correct date and at the correct rate. However, the complainants were dissatisfied with the level of compensation due to the degree of personal hardship suffered by them. In both cases, the FSPO found that the level of compensation was insufficient and directed compensation of €52,500 in respect of one complaint and €4,500 in respect of the other. The FSPO directed increased compensation of €45,000 in one further 'substantially upheld' complaint.

No new grounds for a tracker rate entitlement

While the prospect of re-visiting complaints which have already been addressed and in respect of which compensation has already been paid may be of concern to financial service providers, nonetheless the general trend is not one of finding entirely new grounds on which complainants are entitled to tracker interest rates.

Instances where the FSPO substantially upheld complaints included a case where the complainants' loan acceptance documentation did not contain a condition indicating that a tracker rate would be available but which made one reference to the mortgage as a "tracker mortgage" - which was a typographical error. While the FSPO found that the typographical error was not capable of changing the fact that the rate on offer was clearly a fixed rate and the complainants were not entitled to have a tracker interest rate on their mortgage, he did find that the documents given to the complainants were confusing. Hence the FSPO found that the bank did not act with due skill, care and diligence in its dealings with the complainants. As a result the FSPO partially upheld the complaint and directed the bank to pay €2,500 in compensation to the complainants.

In a separate complaint which was partially upheld, the FSPO found that the complainants were not entitled to a tracker interest rate on their mortgage. However, the FSPO was not satisfied that the bank was aware of its obligations under the CBI's Consumer Protection Code (CPC). In that case, the FSPO directed that the bank review and change its practice in relation to maintaining customer records in order to ensure compliance with the CPC.

Direction for bank to ensure application of a tracker interest rate to a loan which had already been sold

In one decision, the FSPO directed a bank to "come to an arrangement with the purchaser of the [complainants'] loan … to the effect that the tracker interest rate … be applied" until the maturity of the loan in accordance with the original terms and conditions. The FSPO also made directions for the bank to repay overpaid interest to the complainant and compensation in the sum of €2,500 for the loss, expense and inconvenience suffered by the complainants.

In this case, the FSPO had found that the meanings of the terms "standard variable rate" and "tracker variable rate" were not clearly differentiated from one another in the complainants' loan documentation. The complainants has thus concluded that a tracker interest rate would apply at the end of a given fixed rate period.

In addition to the directions issued to the bank, the FSPO also noted that he would refer the matter to the Central Bank of Ireland "for any action it may deem necessary" in relation to the bank's contention that it did not have an obligation to inform the complainants that they could lose their tracker interest rate.