Ulster Bank wins tracker mortgage appeal

Ulster Bank has won a key appeal against a High Court ruling that confirmed a decision by the financial ombudsman in a pair of cases involving tracker mortgage customers.

The Court of Appeal overturned the lower court's findings that the Financial Services and Pensions Ombudsman was correct in awarding refunds and compensation to the borrowers because of how they were handled by the bank.

The case related to borrowers who switched to fixed rates on their mortgages and were refused tracker rates when they wanted to revert back.

It had potential implications for around 5,300 other mortgage holders who had similar circumstances.

It also had significant financial implications for the departing Ulster Bank which had previously warned it "may have a materially adverse impact" on it.

Responding to the judgment this afternoon, Ulster Bank said it notes the outcome.

"We will now take some time to review it in detail and reflect on the next steps," it said.

The FSPO said it does not comment on any individual decisions.

The two borrowers brought cases to the FSPO after they failed to be included in the tracker mortgage examination – an industry wide probe by the Central Bank into 40,000 cases of mishandling and overcharging of tracker customers across the banks.

After the FSPO issued its decisions upholding the complaints, Ulster Bank appealed the ruling to the High Court.

In June of last year the court found against the bank, saying it could find no evidence of any error or any significant error of law by the FSPO.

The judge said the Ombudsman’s decision to uphold the complaints was valid and the bank’s conduct was contrary to its contractual obligations and its obligations under the Consumer Protection Code.

But in its ruling today, the three judge Court of Appeal found an analysis of the mortgage contractual documentation in one of the complaints was incorrect, that those borrowers identified no contractual entitlement to return to a rate of interest which they had agreed to move from and that it was a similar situation in the other case.

The court also said in its judgement that the FSPO was incorrect when he held that in the case of complainant "B" the conduct of the bank was "contrary to law".

"The High Court ought to have carried out its own analysis of the contractual documents and did not owe the Ombudsman any deference in this regard," it said.

Regarding the Ombudsman’s finding that the conduct of the bank was "otherwise improper" the court found that the FSPO conclusion that the complainants in both cases were unaware or did not understand or did not have it explained to them that by moving from a tracker rate to another interest rate they would lose the tracker, made "no sense".

It also said that it found it difficult to see how the Ombudsman could reach the conclusion that the complainants, "essentially, did not know what they were doing."

The court set aside the direction of the Ombudsman that the bank pay overpaid interest and compensation to the complainants.

It also directed that the issue be remitted to the Ombudsman for consideration following an oral hearing.