Ombudsman rejects couple’s ‘reckless lending’ claim on €2.4m loan used to buy seven properties

A couple who claimed they were recklessly loaned €2.4 million to buy six rental properties and a family home with a swimming pool during the Celtic Tiger have had their case rejected by the Financial Services and Pensions Ombudsman (FSPO).

The couple borrowed €2.4 million between 2006 and 2007, across seven mortgage accounts. At the time their combined salary was about €100,000, and the loans were all granted on an interest-only basis.

The mortgages were sanctioned through the loan provider’s staff business department, as the first complainant was a bank employee at the time.

Over the following decade, the couple and the bank agreed on restructurings and extensions to the terms of their mortgages, including multiple extensions of interest-only repayment periods, as the bank expressed concerns about the couple’s ability to make repayments.

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In a case recently brought to the FSPO, the couple accused the bank of “reckless lending” in offering them the loans, and said they were bullied into switching to capital and interest repayments in 2018, pushing them into arrears and adversely affecting their credit rating.

The couple submitted that their mortgage loans should be reinstated to interest-only repayments, with all money paid “under duress” since 2018 reimbursed to them.

In her decision on February 28th, Deputy Financial Services and Pensions Ombudsman MaryRose McGovern said that there is no tort of reckless lending in Ireland, and that “contract law assumes that those entering into an agreement intend that it should be legally enforceable”.

“It is clear that the complainants sought the facilities, were offered those facilities on certain terms, had the advice of a solicitor available to them, agreed to the terms of the borrowings, drew down the loans and spent the funds, and it falls on them to repay the money borrowed, in accordance with the terms of the loan agreements,” she said.

The ombudsman noted that the bank held numerous meetings with the couple and engaged with them to try to find a more long-term solution than repeatedly extending interest-only repayments.

She noted that the couple were “unwilling” to accept suggestions from the lender to downsize their 743sq m (8,000sq ft) family home with a swimming pool, or to dispose of their six rental properties, while the bank also expressed concerns in 2015 that the second complainant was seeking finance for a new car.

The ombudsman said that there was no sufficient evidence of bullying on the bank’s part, and the lender engaged with the couple “in a professional and courteous manner”.

Despite the “difficult position” of the couple which required restructuring of mortgage accounts, the ombudsman rejected their claim that they should be reinstated on interest-only payments, as the loan terms clearly set out that the interest-only period was for a fixed time only.

The loan provider did offer €2,500 as a gesture of goodwill to the couple, in light of some letters of sanction relating to the rental properties, which could not be obtained.