Loans Decision Reference 2021-0280

Case OutcomeUpheld
Subject MatterLoans
Date19 August 2021
Conducts Complained OfFees & charges applied
Finantial SectorBanking
Decision Ref:
Product / Service:
Conduct(s) complained of:
Fees & charges applied
Although the complaint is made jointly by the Complainants, the loan account the subject
of this complaint is in the sole name of the First Complainant. The First Complainant
restructured existing loan facilities pursuant to a Letter of Offer dated 23 June 2010. These
facilities were restructured again pursuant to a Letter of Offer dated 29 February 2012. The
First Complainant defaulted in his repayment obligations and surcharge interest was applied
to his loan account by the Provider. The Complainants dispute the Provider’s entitlement to
charge surcharge interest in respect of these facilities.
For the purpose of setting out the position of each party to this complaint, it is important to
note that the parties have separately indicated that the submissions made in the course of
a linked complaint, connected to the parties, apply equally to this complaint.
The Complainants’ Case
The Complainants state that the Provider applied a generic surcharge interest rate to the
First Complainant’s loan account totalling €1,677.72 including compounding. An Interest
Audit Finding dated 25 April 2018 prepared by the Complainants’ representative has also
been furnished. It is submitted that surcharge interest is not a true reflection of the cost to
the Provider nor was it negotiated. Therefore, as per the numerous legal cases on the issue
of surcharge interest, including a recent decision of the Court of Appeal, render this
provision unenforceable. The Provider is now refusing to refund the surcharge interest
despite legal precedent on the charging of this type of interest.
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In a letter dated 17 January 2019, the Complainants’ representative has referred to three
High Court decisions: ACC Bank plc v Friends First Managed Pensions Funds Limited [2012]
IEHC 435; AIB plc v Fahy [2014] IEHC 244; and Sheehan v Breccia [2016] IEHC 67, stating
that all three deal with the issue of surcharge interest. In an email dated 3 April 2019, the
decision of the High Court in Benray v Breccia (13 August, 2015) is also referred to.
In a letter dated 7 March 2019, the Complainants’ representative explains that it has sought
to identify whether the surcharge interest applied to the loan met three criteria, as set out
in the various judgments, stating:
1. The interest rate applied was not negotiated with the First Complainant;
2. The surcharge rate applied (9% per annum) was a generic rate contained in the terms
and conditions; and
3. The surcharge interest rate did not represent a genuine pre-estimate of loss arising
from default.
It is submitted that the Provider has failed to show the interest rate applied was a genuine
pre-estimate of probable loss, and that it was negotiated with the First Complainant and not
a generic rate. In a submission dated 4 November 2019, it is submitted that the rate applied
by the Provider is significantly higher than the surcharge rates considered by the courts in
several judgments and it well above the modest uplift allowable under Irish law.
In resolution of this complaint, the Complainants want a refund of the surcharge interest
(including compounding) applied to the loan and reimbursement for all professional costs
and expenses incurred in resolving this issue.
The Provider’s Case
The Provider wrote to this Office on 19 February 2019 requesting that it decline to
investigate the linked complaint pursuant to section 52(1)(f) of the Financial Services and
Pensions Ombudsman Act 2017 (the Act) on the basis that the subject matter was of such a
degree of complexity, the courts were a more appropriate forum to determine the dispute.
The Complainants’ representative disagreed with the Provider’s position on the matter as
outlined in its letter of 7 March 2018. On the basis of the Provider’s position that the
submissions made in respect of the linked complaint are to be taken as applicable to this
complaint, I consider the same objection to have been made in respect of this complaint.
By letter dated 27 March 2019, the Provider addressed the matters arising in this complaint
under three separate headings: (i) Accord and Satisfaction; (ii) Limitations Periods; and (iii)
Specific Issues Raised by the Complainant.

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