Of the 364 legally binding decisions published by the FSPO in 2020, approximately 66% of these were rejected. The case summaries and studies included in the FSPO's recently published Digest of Legally Binding Decisions provide a useful insight into emerging trends.
While the FSPO has a broader jurisdiction than the courts to make decisions based on non-legal issues relating to the conduct of a financial service provider, as well as pure legal issues, the case summaries and studies suggest that this jurisdiction is exercised very carefully by the FSPO in dealing with consumer complaints.
Complaints relating to tracker mortgage interest rates, arising from the Central Bank's 'Tracker Mortgage Examination', continue to dominate the FSPO's workload. A significant number of tracker mortgage complaints determined in the latter part of 2020 were not upheld on the basis that the complainants concerned had, what the FSPO termed, "unrealistic expectations" and appeared to believe that their desire to have a tracker interest rate provided a basis for requiring their bank to grant them one. The FSPO emphasised that, for a person to have an entitlement to a particular tracker interest rate, there must be some contractual or other obligation on their bank entitling them to such a rate. Balanced against that, the FSPO also noted that it had upheld a number of tracker mortgage-related complaints where the complainants argued that the compensation offered to them was inadequate.
The digest summarises four tracker mortgage-related decisions, all of which evidence the FSPO's continuing focus on fairness and conduct:
Case Summary 1 – Upheld
The FSPO directed a bank to pay €20,000 compensation to the complainant in circumstances where the compensation already offered (€3,854) was found to be insufficient.
In upholding the complaint, the FSPO formed the view that the overcharging in question had caused the complainant significant additional hardship at a time when she was also seriously unwell and unable to work. The FSPO was "at a complete loss" as to how the bank, or "any reasonable person" could argue that the complainant had not evidenced any inconvenience. The FSPO found that the bank had demonstrated a total lack of compassion and a lack of awareness of the consequences of its actions.
Case Summary 2 – Partially Upheld
A bank was directed to pay €5,000 compensation (inclusive of the €3,000 already offered), where the FSPO found that compensation already offered was not sufficient.
In partially upholding the complaint, the FSPO noted that, while the original loan offer provided for a tracker interest rate of ECB + 0.75%, the complainants had not signed or accepted this offer and had instead accepted a loan offer with a two-year fixed interest rate. As part of its tracker mortgage redress programme, the bank had accepted that it did not tell the complainants that, by breaking the fixed rate period early, they would not be entitled to a tracker rate in the future. The FSPO agreed with the bank that the complainants were entitled to redress on the basis of the tracker rate that would have applied at the end of the two year fixed rate period (ECB + 3.25%) rather than the rate referred to in the loan offer that they had not signed (ECB + 0/75%), but directed the additional compensation in light of the bank's failure to properly investigate the complaint when it was first raised in 2011.
Case Summary 3 – Partially Upheld
A bank was directed to pay €15,000 in compensation to the complainants, where the FSPO found that the level of compensation already offered (€9,200) was not sufficient or reasonable. The FSPO's direction to the bank was based on its finding that the complainants were repeatedly denied the opportunity to make "informed financial decisions" as they did not have a full and accurate picture of the repayments due under their mortgage loan over a nine-year period.
The FSPO did not accept the complainants' argument that the overcharging had a serious negative impact on their ability to repay other debts. It did, however, concede that for a single income family with children, an overpayment of interest averaging €380 per month for a period of 105 months, was significant.
Case Summary 4 – Rejected
In rejecting the complaint, the FSPO found that the evidence did not support the complainant's submission that there had been an interest overcharge of €11,259 on the mortgage loan account. While the FSPO was critical of the bank's failure to explain its approach to redress more clearly to the complainant, it formed the view that the compensation and redress scheme offered by the bank was more than reasonable.
Referral of Complaints to the Central Bank of Ireland
The FSPO referred several complaints to the Central Bank for further consideration. Under the legislation regulating the conduct of the FSPO's investigation of complaints, the FSPO is obliged to report to the Central Bank (or the Pensions Authority, in the case of pension related issues) where it considers that there is a persistent pattern of complaints (whether or not they are upheld), a persistent pattern of facts or evidence arising from the complaints or any other matter of concern. Of the complaints highlighted in the digest, the FSPO referred three to the Central Bank:
- A case of inaccurate reporting to the Irish Credit Bureau which detrimentally impacted the relevant customer's credit rating;
- A case where an investment firm repeatedly failed to take account of warnings from a vulnerable customer that he was a compulsive gambler and wanted a lifetime ban placed on his account; (see below); and
- A case where a broker failed to explain fees and charges relating to a pension plan.
A referral by the FSPO to the Central Bank arising from a particular complaint may lead to wider consequences including the investigation of a specific financial service provider by the Central Bank or indeed, an industry or sector wide examination or investigation.
Other banking-related complaints included a complaint involving a couple with a buy-to-let (BTL) mortgage that was cross-secured on their family home. The couple fell into arrears and agreed to an assisted voluntary sale of the BTL property. However, the couple was later told that the bank was selling both the BTL property and their family home. Although the bank subsequently clarified that the family home had been included due to "human error", the FSPO concluded that the complainants had been subjected to an unacceptable level of inconvenience and stress owing to the inadequate service and misinformation provided to them by their bank and directed the bank to pay the couple €15,000 in compensation.
Insurance and Investment Firms
There were also a number of complaints relating to insurance and investment firms. In one case, an Irish investment firm was directed to pay a compulsive gambler compensation of €17,000 after it repeatedly failed to take account of his warnings that he had an addiction problem and his request that a lifetime ban be placed on his account. The FSPO said the investment firm had "failed abysmally" to meet its obligations as a regulated entity and that it had failed in its duty to the complainant as a vulnerable customer.
What's to come?
The FSPO is prioritising some of the hundreds of COVID-19-related complaints that it has received and will be publishing decisions on these in the first half of this year.
We expect these complaints to address a range of issues, including the approach of banks to credit arrangements and the approach of the insurance sector to travel, event and business interruption insurance. With the recent High Court decision on business interruption insurance in favour of policy holders, we expect the number of insurance-related COVID-19 complaints to rise.
By the end of Q1 2021, the FSPO will also publish his annual Overview of Complaints which will include a useful analysis of trends and patterns arising from the complaints dealt with during the course of 2020.
Thanks to Claire Lumsden, trainee, for her contribution to this article.
This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.