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In Stowe and another –v- FSO the High Court has recently upheld a decision of the Financial Services Ombudsman (“the FSO”) to refuse to uphold a complaint against EBS Limited (“EBS”) on the basis that the “conduct complained of” occurred outside the 6 year limitation period contained in section 57BX3(b) of the Central Bank Act 1942 (as amended) (“the Act”).
The facts of the case were that the Appellants entered into a mortgage agreement with EBS on 12 September 2006, that being the date the acceptance form in respect of the mortgage was signed. This was a fixed rate mortgage with the “applicable variable rate” to apply after the expiry of a five year period.
Despite the wording of the mortgage agreement, the Appellants believed that on the expiry of the fixed rate period, the loan would convert to a tracker mortgage as opposed to a traditional variable rate mortgage. This understanding was based on an alleged representation by the branch manager at Sutton EBS who the Appellants claimed defined “variable rate” to them as meaning “standard variable rate” which the Appellants claimed was defined as “a mortgage rate which can rise and fall in line with the interest rate changes set by the European Central Bank”. Essentially, the Appellants understood on the basis of this assertion that they were being sold a fixed rate mortgage for a term of 5 years which would then convert to a tracker mortgage. The exact date of this conversation was not provided but it can be assumed that the conversation occurred prior to the acceptance form being signed on 12 September 2006.
The Appellants received correspondence from the EBS on 22 April 2010 outlining that it intended to adopt a new policy in setting variable interest rates. This would lead to an increase in the Appellant’s top up mortgage which they had subsequently entered into in September 2007. The Appellants complained that this increase was at odds with the conversation they had previously had with the Sutton branch manager in 2006.
A complaint was made by the Appellants to the FSO by complaint form dated 26 July 2013.
The FSO, in considering the complaint, examined section 57BX(3)(b) of the Act which states that:
“A consumer is not entitled to make a complaint if the conduct complained of … occurred more than 6 years before the complaint is made”.
As the complaint was received by the FSO over 6 years after the alleged information was provided by the branch manager in Sutton, the FSO held that the conduct complained of could not be examined by its office.
The Appellants claimed that the breach in fact took place in April 2010 when they received correspondence from the EBS regarding the change to the calculation of their interest rate. It was contended that the representations made by the Sutton branch manager in 2006 did not constitute the “conduct complained of” as they were not the basis of the breach but rather ‘evidence’ of the “conduct complained of”. Twomey J. held that this was not the case and that the representations in this regard did constitute the “conduct complained of” as they went to the core of the complaint. It was noted that the Appellants stated in their initial written complaint that they wished to “make a formal complaint on the basis of EBS mis-selling us a mortgage”. Therefore, the Court found that the alleged mis-selling of the mortgage was the conduct complained of and therefore the representations went to the very heart of the complaint. It followed then that the Appellants were out of time to submit their complaint to the FSO.
The Appellants had argued that the representations made were evidence of the “conduct complained of” and/or a parol term of the mortgage agreement and therefore did not fall foul of the 6 year time limit. Twomey J. found such an interpretation of s. 57BX3(b) would fetter the clear intention of the legislature in limiting to 6 years the period during which the FSO is obliged to investigate complaints.
Twomey J. also noted that the Appellants had “a high threshold” to cross in seeking to set aside the FSO’s decision and that therefore it was important for consumers to realise that an appeal to the High Court from a finding of the FSO is not “a true second bite of the cherry” in the same way as a de novo appeal.
This case is a reminder of the strict interpretation of the 6 year limitation period in which to lodge a complaint with the FSO.
Please click here for the judgment.
Author: Aoife Stack