Ulster Bank has lost its High Court appeals against findings that two borrowers were entitled to tracker mortgage refunds and compensation.
Ms Justice Marguerite Bolger on Thursday dismissed the appeal against two decisions made by the Financial Services and Pensions Ombudsman (FSPO), which the lender said could affect thousands of its customers.
The bank failed to convince the court that the ombudsman fell into “serious and significant” error in his decisions.
The judge was satisfied she could uphold the FSPO’s decision on the basis that the bank’s conduct was contrary to its contractual and consumer protection obligations.
The two borrowers were excluded from redress in an industry-wide examination overseen by the Central Bank between late 2015 and mid-2019.
Tracker interest rates
The bank initially appealed over the ombudsman’s binding decisions that customers in three cases had an “enduring contractual entitlement” to tracker interest rates (which are tied to the European Central Bank’s (ECB) main interest rate) after periods on fixed-rate loans.
At the hearing of the High Court appeals last October, the judge was told the parties agreed one of the decisions being challenged would be set aside, with the ombudsman to consider the matter afresh. However, orders were on hold in relation to that to allow Ms Justice Bolger’s ruling to inform directions accompanying the remittal.
The appeals before the court focused primarily on one of the three cases.
This case involved two borrowers who took out a mortgage in April 2004 that initially had a one-year reduced interest rate, before reverting to Ulster Bank’s so-called home loan rate, its standard variable product.
They signed a so-called flexible mortgage transfer form in 2006, entitling them to move on to a tracker loan. They subsequently applied in May 2007, as ECB rates were rising, to fix their interest rates until August 2010.
The relating loan documents said the bank may offer to extend the fixed period at the end of the fixed term or offer “alternative available products”. However, if these were not accepted, the contract stated, the borrowers would automatically revert to the bank’s home loan rate.
When the fixed rate period came to an end, the borrowers sought to revert to their previous tracker rate, but the bank refused as it stopped offering that rate to new customer since 2008.
'Alternative products'
In her ruling on Thursday, the judge said a “significant factor” of the ombudsman’s analysis of the loan contract was the bank’s original commitment to offering the borrowers “alternative available products” at the end of the fixed rate period.
The bank never explained that the tracker rate they were on might not be available when their fixed rates came to an end, she said.
The FSPO, represented in court by Eileen Barrington SC and Francis Kieran BL, was entitled to decide that the borrowers’ contractual entitlement to the tracker rate continued at their election, the judge said.
Whatever interest rate the borrowers were entitled to must come from the contract they entered with the bank, she said, noting there was no rescission of the contract when the clients switched to other interest rates.
While Ulster Bank described the move to the fixed rate as “revised terms of a given loan facility”, the judge said the borrowers never entered into a new agreement that set aside their previous contractual rights to revert to a tracker rate.
She noted it was not for the court to consider if it would have reached a different decision on the evidence before the FSPO. She was only to look at whether there was a serious and significant error or series of errors in his findings, she said.
Ms Justice Bolger refused the bank’s appeals and affirmed the ombudsman’s decisions.
