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Bank to fight couple in tracker mortgage ruling

A MORTGAGE lender is trying to overturn an order made by the financial watchdog directing it to put a couple back on a cheaper tracker mortgage for the remainder of their 35-year mortgage.

The Financial Services Ombudsman made the order against Irish Life and Permanent after finding the lender should have made it clear, in writing, to the couple they would lose their right to revert to a tracker mortgage if they opted out of their fixed rate term early.

The couple, who changed from their fixed rate term to a variable rate in January 2009 after one of them had become unemployed, had complained to the ombudsman that it was not clearly explained to them by the company, trading as Permanent TSB.

The bank yesterday appealed before Mr Justice Michael White in the High Court the ombudsman's decision from February 2011 as it argued there were 'significant errors' in the ombudsman's findings and it had erred in finding the bank was in a position of a 'fiduciary relationship' with its customer.

The couple had taken out a mortgage for €395,000 in 2007 with the interest rate fixed for the first three years and it was then to revert to a tracker rate following the ECB rates when the fixed term expired. In January 2009, they contacted the Permanent TSB Lucan branch to find out if there was an exit fee for the fixed rate mortgage. They were told there was 'no penalty' and the only rate available to them to switch to would be the variable rate of 4.65pc.

Promise

The couple, who did not tell the bank of their financial difficulties, went into the bank and switched rates.

The bank stated an assistant manager said switching from a fixed to a variable rate was 'very popular' at that time and he would clearly have told the couple that once they switched any 'price promise' regarding a tracker would be null and void.

Paul Gallagher, for the bank, said the ombudsman had erred in law in holding the bank was in a fiduciary position with the customer and was entitled under law 'to look after its own interest'. The bank said the complainants were advised the switch would bring their tracker to an end and a letter from the couple to the bank showed they were aware of it.

Paul Anthony McDermott, for the Financial Services Ombudsman, said the customers were clearly confused and had been placed in the position where there was "not a shred of writing to record the fact they are losing this right" to revert to a tracker.

He pointed out under the Consumer Protection Code -- coming into place in January 2012 -- the law will require banks to set out to customers that once they lose a tracker mortgage, switching to a different interest rate, they won't then be able to revert back to the tracker.

Mr McDermott said it was 'clearly' a problem and issue for people if it was being emphasised in the code. He said it is saying to banks you have to "put out a warning like on the side of a cigarette package".

"How can the bank say the ombudsman is getting it wrong when the law is changing to this?" he queried. The case was expected to continue.