The Stowes had agreed to a fixed rate mortgage with the EBS in 2006. The Loan Offer stated that at the end of the five year fixed period their interest rate would revert to the ‘variable base’ which on that date was stated to be 4.25%. Despite this documentation the Stowes believed that, at the end of the fixed period, their new rate would strictly follow the European Central Bank rate, that is to say, a tracker rate. They alleged that their local branch manager told them that the term ‘variable rate’, meant “Standard Variable Rate” which at the time (September 2006) was defined by the EBS as “A mortgage rate which can rise and fall in line with the interest rate changes set by the European Central Bank (ECB)”.
The Stowes took out a top up mortgage from the EBS in 2007, which Loan Offer stated that, "EBS reserves the absolute right to increase or decrease the rate of interest at its discretion". Despite this, the Stowes were again of the view that this mortgage rate was also a tracker rate. They claimed that it was presented to them from inception on the basis of the “Standard Variable Rate”, which they understood to mean that it strictly followed ECB rates.
In April 2010 the Stowes received a letter from EBS where it indicated that it would no longer adjust the variable rate in line with the European Central Bank interest rate movements.
Decision of the FSO
The Stowes' complaint, which was submitted to the FSO in July 2013, was that the change to the variable rate was contrary to the explanation provided to them by the EBS branch manager in 2006.
In making its decision, the FSO considered Section 57BX(3)(b) of the Central Bank Act 1942, which provides 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”. It held that as the alleged representation was made more than 6 years previously, the conduct complained of could not be examined by it.
The Stowes appealed the finding of the FSO to the High Court. They argued that the alleged representation was an oral term which was part of the written documents that made up the Mortgage Agreement and by excluding the alleged representation from his consideration of the complaint, the FSO was mixing up evidence of the breach of the agreement, with the breach itself. They argued that the representation was evidence and the breach, in fact, took place in April 2010 when they were advised that the basis for the calculation of their interest rate was to be changed. Therefore, their claim was that the representation in September 2006 was not the ‘conduct complained of’’ rather the breach in April 2010 was the ‘conduct complained of’ for the purposes of the Act.
Twomey J noted that the Stowes had "a high threshold" to cross in seeking to set aside the FSO’s decision and, in his considered view, they had not reached this threshold. He held that the FSO’s decision did not amount to, ‘a serious error’ by the FSO, sufficient to justify the setting aside of his decision.
Twomey J also held that the alleged representation was the "conduct complained of". He did not believe that it was correct to claim that the alleged representation was ‘evidence’ of the "conduct complained of" and therefore not caught by the six year time-limit. Such an interpretation would, in his view, circumvent one of its policy objectives of the Act, namely to limit to 6 years the period during which the FSO is obliged to investigate complaints. He noted that in April, 2010, the Stowes became aware that the alleged representation was false and that they would have been within time to complain at that stage.
Finally, Twomey J noted that consumers such as the Stowes need to be aware that in deciding whether to litigate or take their complaint to the FSO that they do not get a second bite of the cherry in appealing a decision of the FSO given the high threshold to be reached before the High Court will set aside a decision of the FSO.