This blog item is aimed at those individuals who are battling the banks through the Irish Courts in an attempt to obtain justice. You all use different tacks and you all come across clear breaches of law and clear injustices on specific points of law. Your frustrations mount as you reference Statute and precedents; you know you are right but ignored by the system. As a result you see the Irish Judiciary as the enemy. This note is an attempt to explain why the Judiciary behave in what would appear to be an unsympathetic and disproportionate manner towards the consumer.
I genuinely believe that some of you are looking for justice in the wrong place. Please read to the end as I think I know where it can be found or, at worse, will give you an extra line in your defence.
Recently, I’ve been reading about the plight of the modern referee in professional rugby. This is a game that professionalised in the mid-nineties yet holds dear, its rules, sense of fair play and the amateur game underpinning it. World Rugby continually reappraises the laws of the game to ensure that parents will want their children to play, without the fear of head traumas. Of course, I am aware that they need to take actions now to avoid future legal actions for damages from retired players.
In this modern game attempting to attract an audience, the referees are reporting that they are under more and more pressure to “keep the game going” and reduce the amount of stoppage time. One top class ref reported that, when a breakdown occurs such as a ruck, he might see three or four possible infringements of the law but he is only interested in those offences that give a clear and significant advantage to a team, in all other cases he needs to keep the show on the road or he won’t get the next gig.
That’s what the judiciary do when it comes to matters of contract law. The bankers first defence will always be the loan contract. Treating the contract with the greatest of respect is the equivalent of keep the game going. The contract is sacrosanct and no matter how many infringements around or emanating from the contract there are, it does not matter. The bankers consumer loan has already been challenged in the “Unfair Contracts Arena” without much success. Among my favourite guidance from the Judiciary to Irish lay litigants are:
“So What!” and “You borrowed the money, you need to pay it back!”
Even if the contract cannot be found, it will be implied under certain circumstances.
We need to put your engagements with the LAW in context. If the loan contract is the nuclear option, all other defences are akin to the bow and arrow. In my opinion, this is why you are not being listened to and your valid arguments fall on deaf ears. However, I do believe that some members of the Judiciary smell a rat and use proportionality to push things down the road.
My question to you “what wrong has been done against you?”. Did you borrow the money, did your circumstances subsequently change, and now you are simply fighting to survive – stay in your home. I’m sorry but you will struggle to challenge the validity of the loan contract. The loan contract will win out if Ireland is not to become the legal outlier of OECD countries. This is so important as Foreign Direct Investments assess the legal structure of a country before investing.
However, you need to ask yourself, did the bank act in an improper way when granting you the loan facilities? In other words, did the bank follow the rules when lending you the money? What rules I hear you ask? The financial services consumer market is heavily regulated and has a set of principles and rules known as codes. The codes must be followed by the licensed lender as part of the contract to participate in this consumer market.
The Central Bank issued its first code of conduct with respect to financial services, “The Code of Practice for Credit Institutions”, in 2001. This Code marked an important modification of the principle of caveat emptor (let the buyer beware) by the express requirement that financial services firms act
“with due skill, care and diligence in its dealings with consumers” and “In particular, it must not recklessly, negligently or deliberately mislead a consumer as to the perceived advantages or disadvantages of any banking service provided;” and “makes adequate disclosure of relevant material information……..”
Furthermore, the Courts have recognised:
“The laissez-faire rules which might apply in the case of the borrowing and lending on the international capital markets cannot be applied in exactly the same way in the case of the domestic mortgage market, given that these are matters which gravely affect the long term welfare of most members of the general public. The very fact that the Office of the Financial Services Ombudsman was established by the Oireachtas is itself living testimony of this.”
In the home loans that I have reviewed, and I have reviewed thousands, the codes, in my opinion were not followed at origination prior to 2009. This is known as mis-selling, which results in an unsuitable product being sold to a consumer and is against the (soft) law. If you believe you have a case of mis-selling, then you do have a forum for justice and it is not the Courts, it is the Financial Services and Pensions Ombudsman (FSPO) Act of 2017. The Judiciary recognise this forum for what it is – Justice Niamh Hyland on 19 February 2021 [Danske V FSPO]:
“50. But the argument made (by Danske) fails to recognise the import of the jurisdiction being exercised by the Ombudsman under s.60(2)(b) and (g), as discussed earlier in this decision. In principle, a financial service provider may have acted entirely in accordance with law and still be found to have acted unreasonably or improperly. “
“It may have no black letter duty under statute or “soft” law obligation under a regulatory standard to give unambiguous information as to the loss of the tracker mortgage and the inability to return to a tracker rate under the new mortgage but may be still be found to have acted unreasonably and improperly in not doing so.”
More importantly with emphasis that the contract is still valid:
“A customer may be bound by their contract with the bank but nonetheless may obtain redress which amounts in substance to a setting aside of those contract terms. As noted in the introduction to this judgment, the mere absence of a breach of law does not immunise a financial services provider from a finding of unreasonable and improper conduct under s. 60(2)(b) and (g) by the regulator. The statutory scheme and the case law referred to above makes this clear.”
If this FSPO case, awarding compensation to a consumer, appealed to the High Court by the lender, had gone through the Court process in the first instance, the consumer would have lost. There is no tort of reckless lending but there is a case for “improper” conduct or misconduct in the world of consumer banking.
The FSPO is the forum that some readers need to look to but there are problems – I call them Irish problems but they are solvable and they are as follows:
- The Ombudsman is a Irish public servant and behaves as such;
- The Ombudsman has no banking conduct experience;
- Their processes are not automated so they are very slow;
- They do not employ precedent so they are very slow;
- They are understaffed and not trained so they are very slow;
- Did I mention that they were very slow;
- Awards of redress/compensation up to €500,000;
- They can only look back to 2002;
- Prior to Baynes V FSPO [2022], it has been near to impossible to take a case where the wrong occurred more than six years previous to the date of complaint.
You’ve been warned, but can I say that it is worth the effort but please make sure you are a consumer and thankfully, “consumer” is widely defined.
Why does no one use this forum? Simple answer, our trusted solicitors hate it for some of the reasons above, there’s no award of legal fees if they win, so bottom line is it’s not profitable for the Legal Profession to pursue this line for their clients.
Secondly, you need to understand banking, the codes, the internal guidance and what conduct is expected by the regulated institutions. Outside of banking, you will not find many real bankers, knowledgeable and honest, who will assist the ordinary consumer in proving misconduct.
Thirdly, the banks and their powerful lobby groups spin concepts of “Moral Hazard”, “Strategic Defaulters”, “Can pay, won’t pay”. Insidious attempts to set neighbour against neighbour. They have convinced Government that a healthy banking industry is key to a successful economy. They have even gone as far as to set up the “Irish Banking Culture Board”, staffed and funded by the very same “Group Think” that is the banking community. This Board and its purpose is endorsed and supported by the Government to self-regulate their “Ethics”. This would be funny if it was not so insidious. Certain banks may even write off debts of famous sports people to propagate a positive message into the community – we back brave! Count on us! Respected individuals who see no harm in making statements that they believe you need to repay your loans. It’s another lobby expense, just a little more insidious! We have no way of knowing if any politically sensitive persons have received favourable treatment from the banks or the vultures.
All this distraction is to ensure that you, the lay litigant, the struggling debtor, do not look in the right place.
In conclusion, on this part anyway, if you file your complaint to the FSPO, then please ask the judge/registrar, in the common law process you might find yourself in, to grant a stay on any action until the FSPO has fully investigated. Did I mention that they are very slow.
Now part 2, the one significant exception to my advice on seeking consumer justice through the FSPO, is the injustice that our “licensed consumer facing mortgage lending financial institutions” were permitted to sell loans to a bunch of high return private equity bankers. Loans secured on family homes. If you raise that with the FSPO, they will rightly say “that matter is more appropriate for the Courts” and they are right, as this sale, in my humble opinion, is Maintenance and Champerty, a common law from c. 1630 still on Irish books.
I feel so strong on this, that I want to take a Court case but no, stop, I can’t, because I need another party to fund the case and, yes, you’ve got it, that’s Maintenance and Champerty.
Ireland did not repeal or amend this ancient statute when our statute books were cleaned up in 2007. I have my theories as to why is was kept on the books but that’s for another day. Read Persona V Irish Government, read Osus V HSBC, and you will see that Maintenance and Champerty is alive and well in Ireland. So it is what it is, as the solicitors say, so my question is:
“If a loan, in default, is sold to a third party, who had no prior interest in the matter, and the right to litigate against the defaulted party also travelled, then surely that is Maintenance? The sale price as a percentage of the loan is the value passed to “maintain” the case against the consumer.”
“If Maintenance above is proved, then presumably, where the purchaser obtains the right to litigate for the full value of the loan, rather than a fee, then surely that is Champerty?”
“Are the sales of family home loans a matter for public policy?”
Selling loans is a vital part of a healthy banking system and should never be stopped. I have no issue with the sale or transfer of performing loans but not those in default. Once in default, they become a “claim to litigate”. If a purchaser of these claims wants to cure, restructure, etc. and offers write downs, etc. and all the flexibility that a functioning bank can offer, then I have no issue.
I do have an issue when someone buys a claim to litigate, and uses that claim to extract as much cash out of the borrower that they can get their hands on without any cure, restructure, certainty or fair deal. Below is an extract from a renowned Rating Agency’s comments on a debt servicer’s management of Irish distressed family home loans:
“Changes to interest-only to restructure loans is typically not used as a permanent restructuring solution and tend to be used temporary. Typically, the servicers would prioritize part-and-part repayment when there is enough affordability to bring down the LTV ratio by the end of the life of the mortgage loan. Borrowers’ affordability is assessed going into retirement age and the ability of the borrower to pay the balance of the loan through a repayment vehicle, including but not limited to a pension lump sum, the sale of assets, or assistance from next of kin.”
Could not have put it better myself. Clearly no intention to cure and give certainty to the borrowers on their home, even in retirement. Is this even proportional. They achieve this with the threat of possession orders. Possession orders that they rarely enforce as they have achieved their objective of extracting maximum amount of cash from the debtor.
I like to end on a positive, in that I might obtain my funding for the Court case, as Maintenance and Champerty is happening every day when Irish solicitors offer “No Foal No Fee”. The solicitors are “Maintaining” the case, it’s just not so obvious, but the solicitors and barristers are not a direct party to the action. In Atlas (Planning Judicial Review) which involved a property developer claiming that a Residents Association’s Judicial Review had been funded by persons not affected by the development, the Court rejected the claim of Maintenance and Champerty levelled at the Residents on the basis that all participants, i.e. funders/donors of the Judicial Review costs, had some interest in the action, a community interest. So some hope emerging that a community impacted by the issue might just be able to get the case going on behalf of all those sold out of the banking system.
The Author.
Ben Hoey and Quartech, trading as misselling.ie operate as a commercial concern that assists consumers make compensation claims to the FSPO for mis-selling . We do not offer legal advice but we know plenty about banking and misconduct.