The High Court has sent a mortgage complaint involving Irish Life and Permanent plc back to the Financial Services Ombudsman for review, finding serious and significant errors in the Ombudsman’s decision to uphold the borrowers’ complaint.
Aileen Feeley and Declan Gallagher complained that, when they switched from a fixed mortgage rate to a variable rate in January 2009, the bank did not explain that they would lose a future contractual option to move to a rate linked to the European Central Bank (ECB) refinancing rate. The Ombudsman substantiated their complaint in February 2011. The bank appealed that finding.
The mortgage offer, issued in September 2007, provided for a €395,000 loan over 35 years, initially at a fixed rate of 5.45% for three years. After the fixed-rate period, the rate was capped at 1.10 percentage points above the ECB refinancing rate. In January 2009, the borrowers requested a switch from a fixed rate of 5.2% to a variable rate of 4.65%, which the bank confirmed in writing.
The borrowers said they had asked about the effect of the mortgage’s special condition and were not clearly told that switching would end the future rate option. The bank said its staff would have told them that breaking the fixed-rate contract ended the price promise. The borrowers’ written accounts also differed over whether the condition was discussed at all: an early complaint said they had been told it did not apply, while a later submission said no discussion took place.
The court held that the Ombudsman had not addressed this conflict in the evidence. It also found that the Ombudsman had incorrectly treated the bank and borrowers as being in a fiduciary relationship and had wrongly based a finding of misrepresentation by silence on that relationship. The court said the bank’s responsibilities should instead have been considered under the Consumer Protection Code in force in August 2006, the bank’s own rules and conduct requirements, and general consumer law.
The court noted that a 2012 Consumer Protection Code would introduce written warnings about the consequences of leaving a tracker rate and a cooling-off period. It said those later provisions could not be applied to this complaint and did not determine what the outcome would have been under the applicable standards.
This was a statutory appeal examining the Ombudsman’s decision-making process, not a fresh hearing of the complaint. The court did not decide whether the borrowers had been properly informed or whether their complaint should ultimately succeed. It remitted the February 2011 finding to the Ombudsman for review under section 57CM(2)(c).