How one man took on his bank and won.
Not everyone mistreated by the banks over tracker mortgages came out of it badly. Karl Deeter met one of the lucky ones.
I recently had a conversation with a tracker loser/winner. John (not his real name) received nearly €90,000 in compensation from the tracker redress scheme. His story is just one of the many untold ones in the recent debacle – but as you’ll see, it doesn’t always end badly.
Here’s the back story: John bought a buy-to-let property at the height of the boom. It was, and still would be (had he not surrendered it) in negative equity. At the time it was sold, it was more than €160,000 in the red. That with another €40,000 of arrears comes to nearly €200,000 that he still owes the bank.
In 2012, he came off a fixed rate, expecting to revert to his cheap tracker. He was informed that instead he’d be going on a variable rate that was closer to 6pc, a rate that he considered extortionate, that was why he strategically defaulted at that point.
The repayments being asked for by the bank were €1,500 and the rent was €700. He was still on ‘interest only’ but disagreed with the bank charging a rate nearly six times above what he thought was the correct rate.
His view was that if the bank wanted to play hardball with him, then he’d return the favour in kind. So he accepted the rent and paid the bank nothing. This went on for years. I asked him if he thought this was morally correct.
He told me: “I used it to pay for my family home and cover local property tax so to me it wasn’t really a choice, and when it comes to ‘fair’, just look at how banks treated people, they don’t know what fair means, they hold zero moral authority so f**k them.”
Arrears were building and building, the bank was in regular contact. John went into arrears for more than 12 months then they told him they wanted a voluntary sale. By ‘voluntary’, the bank meant he had to sell the property or get repossessed.
John’s standard financial statement (the document all banks use to assess a case) showed that he couldn’t afford the property and all parties were satisfied at that point to go through with the sale, but it’s important to realise that this was all based on the bank charging the wrong rate.
There was a hiccup, the buyer wanted the tenant out but John had spoken to the tenant when this was happening and given him a fixed-term lease which meant neither the bank nor John had any power to make the tenant leave.
This led to a substantial delay and during that time the arrears still built up. He didn’t even get to deal with the bank, instead it diverted him to a UK-based company that oversaw the process.
John believes at that point, the bank had stopped caring about the arrears because they wanted the sale so a further delay didn’t matter to them, but it mattered to him because he believed he’d still have to figure out how to pay it all back some day.
Eventually the sale went through, the property selling for a song just two years ago. He was glad the property sold, in his view “it was more stress than it was worth, the day that property sold, far from upset, I was delighted”.
Fast forward to the summer of 2015 and he gets a call telling him he may have been mistreated by the bank. “Initially when I got the call I was on holidays and thought they were chasing me for the arrears and shortfall, but it was about this compensation scheme, it was totally unexpected.” This was followed by a formal letter stating the same.
The process went as follows: a staff member from the bank paid him a personal visit and made him an instant cash offer of €45,000 which was made up of €25,000 for the loss of the property and €20,000 for the mischarging costs. They emphasised that it didn’t affect his right to further appeal.
Naturally he accepted this because it didn’t affect his right to appeal. He questioned what would happen with the shortfall because he felt all along that the property would have been sustainable had he been given the correct rate.
This is an important point, had the bank given him interest only on the tracker instead of interest only on a jacked-up variable rate, his repayments would have been more like €250 per month instead of €1,500 – the core problem all along was the €1,250 difference that charging the wrong rate was creating.
This eventually became part of his appeal which went as follows…
He was invited to a large accountancy firm and there was an expensive accountant and three expensive lawyers present (he figured they must have been pricey because he googled one of their names and saw they were a high-powered litigator and former head of the Law Society).
This made up the independent panel. John explained his case and they came up with a new additional sum that he was due. In this process, it came to light that they were basing their assumptions on a tracker which was ECB plus 3pc, this was a farce as such a rate never existed, it was a way to minimise the level of damage that was calculated.
John based his appeal on the basis that 3pc was still artificially high given it should have been 1pc and to this day that question remains unanswered. A solution he proposed was that they could keep their compensation, “just write off the shortfall that wouldn’t have existed had you not charged me the wrong rate”. The bank declined this.
“There was a lot of back and forth, but eventually the panel rewarded me €50,000,” John says.
He got this payment and his total compensation was €90,000. He bought a new car, made some home improvements and banked the rest.
He still gets letters from the bank with a statement showing the shortfall balance, but the interest rate is zero and nobody calls to ask for a penny of payment.
He doesn’t know how the bank accounts for this, nor does he care. John believes that he has come out of this OK, all things considered. “It was a buy-to-let property after all.” His only concern was that the bad credit rating might affect his business.
It didn’t, and he is doing just fine by his own account. He feels bad for people who lost homes – they are facing a world of difference to what he faced. Ultimately the way he sees it is that, “I came out of this with €90,000 and a €200,000 loan I will never repay”.
If you have been affected by the tracker mortgage scandal and would like some assistance then please don’t hesitate to get in contact with Fin at email@example.com or phone Dublin 01 6854458 Cork 021 4204122 Galway 091 782181.