Hundreds of buy-to-let borrowers could still take legal action against the Bank of Ireland, despite the financial regulator concluding that the bank was legally entitled to increase the rate on its lifetime tracker mortgages.
Lawyer Justin Selig, at Landlord Action, was speaking after the Treasury Select Committee published a letter sent to its chairman, Andrew Tyrie, from the boss of the Financial Conduct Authority.
The letter, from Martin Wheatley, was dated May 20, but released only this week.
Selig said that the FCA had come to its conclusions “based on information provided to it by the bank, some of which is not correct in the case of the borrowers represented by this firm”.
Landlord Action has been contacted by some 300 borrowers, who found their mortgage costs had been hiked.
The letter from Wheatley said that the bank had assured the FCA “that it would only proceed with the increase where its ability to do so was clear from the documentation, and where the relevant clauses were included in both the mortgage contracts and mortgage offeer documentation.”
But Selig said that he had studied bank documentation given to the landlords who had contacted him. He said that while in most cases, there was mention of the bank’s ability to raise the rate, insufficient information had been provided as to what this meant or in what circumstances the bank could do this.
He also claimed that the general terms and conditions containing the clause were not provided with the offer letter, but with the mortgage deed after contracts had been exchanged on the property.
He alleged: “In some cases, our clients do not recall ever having received a copy of the relevant mortgage terms and conditions.”
Selig also queried why the FCA seemed satisfied that the Bank of Ireland had waived its requirement for an exit fee if borrowers chose to re-mortgage, thus complying with a requirement of the Unfair Terms in Consumer Contract Regulations.
Selis said: “In fact the bank still requires those who are remortgaging to pay an administrative fee. Further, the assumption is made that borrowers can actually re-mortgage. In fact, it is likely that in a large number of instances, borrowers would not be able to re-mortgage with another lender.”
The FCA has now been sent a letter by Landlord Action’s solicitor giving a detailed submission based on a test case. A response is expected from the FCA within the next few weeks.
Selig said Landlord Action is also waiting to hear from the Financial Ombudsman Service.
He said: “None of this rules out the ability of borrowers to take legal action in their own names against the bank.”
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