MSE News: Mortgage blow as building society hikes SVR

sarahbennett

MarkyMarkD wrote: »

- Even if it were enforceable to have an exceptional circumstances clause so vaguely defined, it would be unacceptable to define (after the fact) in such a way as to cover "base rate persistently below expectations" and "margin between base rate and savings rates persistently below expectations" because both of those are exceptional factors affecting exactly the substance of the guarantee.

You've almost got it, yes, it is circular, but no, persistence is not a part of Skipton's argument, they are not saying (long after the event I should add) they are in exceptional circumtances when a base rate of 2.7% or below persists, they are defining that amount of base rate (for any period) to be exceptional circumstances. Similarly, the margin being below expectations has no persistance qualifier at all, they are simply here defining the amount of margin they consider to qualify as exceptional circumstances...

sarahbennett

MarkyMarkD wrote: »

An exceptional circumstance is any circumstances which could not be predicted with any degree of likelihood.

If a base rate of 2.7% or below could not be predicted with any likelihood, why was it common industry practice (and still is I believe) to put a floor on base rate trackers at the point at which any guarantee might fail (this could also have a persistancy qualifier, eg., if that point is reached and persists over X months, but more usually, it would simply be a base rate, e.g., 2%). I'd argue this practice of attaching floors to loan agreements and ceilings to saver agreements suggests these are indeed circumstances which could be predicted with a high degree of likelihood, after all, other lenders predicted them to the extent, at least, that they protected themselves from this specific eventuality.

In the context of floors and ceilings being common practice, I'd have thought that if I were buying a mortgage with a guarantee but a floor that this floor would be stated when I took out my agreement, rather than created, by a board decision many years later....

sarahbennett

MarkyMarkD wrote: »

But your consistent belief that an exceptional circumstances clause cannot cover the circumstances of the clause is not so logical, and I am certain that there will be case law against you on that.

The only case law on exceptional circumstances in borrower lender agreements that I've found (Barca vs Mears 2004) is that exceptional circumstances cannot cover a party's ability to afford or honour the agreement, nor can it cover a variation in the circumstances of the clause "no matter how severe" but instead, must refer to a different type of circumstance altogether. If you don't mind me saying, and I don't mean it rudely, your certainty here seems a tad ill informed...

sarahbennett

MarkyMarkD wrote: »

because both of those are exceptional factors affecting exactly the substance of the guarantee.

In fact, only one of these, reaching an interest rate of 2.7% or below affects the nature of the agreement (floorless base rate tracker) and substance of guarantee (base rates), hence is circular. The financial circumstances of the lender is not the substance of the guarantee, but following Barca vs Mears, it'd be unprecedented for this to result in Skipton's lawful invocation of the exceptional circumstances clause.

MarkyMarkD wrote: »

An exceptional circumstance is any circumstances which could not be predicted with any degree of likelihood.

Not quite. One consumer reading of this clause as phrased in the Skipton contract was its reservation of a general right to vary its interest rate "only in exceptional circumstances" by which she took to mean, only for those customers "the exceptional circumstances" who do not have a guarantee. As the guarantee was repeated throughout the contract and the exceptional circumstances clause was on the fourth page of the agreement's legal detail and not the KFI, she thought it must have referred to the reservation of a general right superfluous to the agreement and in no way affecting the guarantee, a bit like reading "this does not affect your statutory rights" on a bar of chocolate. There are various other readings, as you might imagine.

Skipton claims it has the right to decide what circumstances are exceptional even though it drafted the agreement whereas in this context the interpretation most favourable to the consumer is expected to prevail. And, I should add, it failed to reserve that right.

Lets turn to the drafting of exceptional circumstances in financial law more generally, specifically the reservation of a right by a drafter to determine at their discretion any exceptional circumstances. I will not go into the technicalities in too much detail other than to cite an example.

IMF under Articles of Agreement of the International Monetary Fund, Article XIV - Transitional Arrangements - Restrictions on Payments and Transfers:

"The Fund may, if it deems such action necessary in exceptional circumstances, make representations to any member that conditions are favorable for the withdrawal of any particular restriction, or for the general abandonment of restrictions, inconsistent with the provisions of any other article of this Agreement.
(a) applies at any time after the entry into force of the Fund Agreement and (b) gives to the Fund the power to determine what is meant by "in exceptional circumstances."


Skipton has no such qualification in its clause. The right is expressed to remove the SVR ceiling at any time (as in "a" above), but not in any circumstance, indeed "only in exceptional circumstances" Nor is there even wording to suggest that it has any rights of discretion whatever such as "if it deems such action necessary" or any other wording conferring on it the right to determine what is meant by exceptional circumstances. Nor is the right explicitly stated as in "b" above.

Let me elaborate: There are some circumstances, that I'd definitely have regarded as exceptional and would have considered it reasonable for the clause to be invoked if a letter fell on my door detailing such a circumstance. In the event of a disagreement, I'd expect my interpretation to prevail in accordance with unfair contracts legislation, as the Skipton had drafted the clause with no input from me. If Skipton had wanted to reserve the right to define what was meant by exceptional circumstances, their lawyers should have put in a clause similar to clause b of the IMF example. The IMF lawyers (who are by no means idiots) considered it necessary to assert that right both in the preamble "if it deems such action necessary" and in clause "b". However, even with such a right explicitly asserted, the broadness of it and unilateral application may well domestically at least have the effect of turning it into a catch-all get out clause that may not be enforceable in practice.

MarkyMarkD wrote: »

The only point worth debating is whether a widely drawn "exceptional circumstances" clause is enforceable at all - irrespective of the interpretation placed on the clause by one of the parties at a later date.

I've tried to expound in some depth in these posts why I feel that in this case this is not the only point worth debating. Though it is certainly worth debating.

MarkyMarkD wrote: »

I would predict that the chances of losing on (a) but winning on (b) are rather slimmer than the chances of winning on (a) alone.

Possibly, I don't know. I think both arguments hold merit. There are other issues related to the success of any action. For a start I'd imagine they'll seek to outspend us, which means taking the case all the way to the Lords, as in Equitable Life...

(Note about Key Facts Illustration: On reviewing papers of various customers with slightly different agreements including from Amber and Scarborough as well as Skipton at various points, so far I have not read it on a KFI - Note to all affected SVR customers - please contact me if you have a KFI with this clause in it)

The_Dentist

How is everyone getting along with their individual complaints to Skipton?

I have had a first written response from customer relations which I have replied to in writing. Skipton specifically asked me to clarify a point etc. I have received no response to my follow up letter.

It is difficult to know what tactics will be employed. I suspect they will send a "deadlock" letter close to the eight week maximum period allowed for the internal complaint to become an external one. I suspect that time is their friend but not mine.

I do have a Skipton mortgage and therefore I have to accept that I cannot be fully objective in considering the events which have occured. I have however calmed down substantially from the shock of the initial letter from the Society which was of course received completely out of the blue. I have read relatively widely and been aided by all positive and negative posts in this forum. I have come to the conclusion that the letter and leaflet which I received is either (a) the most inept and ridiculous correspondence I have ever received from a regulated institution or (b) the cleverest.

(a) as anyone giving any serious thought to it would realise that it breaches several parts of the FSA handbook in the way in which it communicates and that the contents are "ropey".

(b) based on game theory and a numbers game of how many people the Skipton would require to settle with (as described in detail in earlier posts by others)

The_Dentist

Sarah's run down of the legals has been quite comprehensive and I do not have much to add. However I am an anorak and I have spent the last few weeks ploughing through every issue of Omdudsman News ever published. Page 4 of Ombudsman News November/December 2005 Issue 50 is useful:-
“terms that do not form part of the contract
To be enforceable under the contract, a term must first be properly incorporated into it. We sometimes find that firms try to add terms after the contract has been finalised, or to infer terms that could not reasonably be inferred from what the contract says. It may be that, with hindsight, a firm wishes it had included a particular term. But unless that term was properly incorporated into the contract we will not apply it.”

The_Dentist

Can anyone who works for the Skipton let us know what the staff mortgage deal is? I presume that staff get a special deal which is better than that which is available to the general public. I would imagine that the SVR Cap guarantee revocation is just as annoying for staff as it is for the rest of us.

Are staff affected by this move or do they have special terms?

Dan_1976

The society I worked for had a staff mortgage. It only applied to the amount borrowed on the staff members salary and it was not better than the public products. It was subject to harsher underwriting but the fees and service was a little better.

If you were the smaller earning for example you may only be able to borrow a small amount on the better rate, although it was rarely that good. I know that banks offered good deals many moons ago, not sure now.

Although I dont think they are really up for debate, you get perks when you work for shops etc.

I would guess that the terms would be the same.

The_Dentist

I don't know much about English Contract Law. Does anyone know where I can get my hands on (what I am led to believe is the seminal work, Chitty on Contract), for free or close to it. I am damned if I am paying an advocate to sit in a law library and read it at a daily rate of £5,000 a day.

I have always enjoyed the "in" joke amongst advocates of referring to party litigants as "party lunatics". Think i may join the asylum!

sarahbennett

Where are MarkyMarkD's rebuttals?!