DEC-S2016-016

EQUAL STATUS ACTS

DECISION NO. DEC-S2016-016

PARTIES

David Cooke and Michelle Strauss

AND

Bank of Ireland

(Represented by Elizabeth Donovan, BL)

File reference: ET-155075-ES-15 & ET-155394-ES-15)

Date of issue: 3 March 2016

Introduction:

1.1 The complaints relate to claims of discrimination on grounds of race referred by the complainants to the Equality Tribunal on the 9th September 2015. The respondent is a retail bank, engaged in the business of advancing mortgages.

1.2 On the 14th December 2015, in accordance with his powers under section 75 of the Equal Status Acts, the Director General of the Workplace Relations Commission delegated the case to me, Kevin Baneham, an Equality Officer, for investigation, hearing and decision and for the exercise of other relevant functions of the Director General under section 25 of the Acts, on which date my investigation commenced. In accordance with section 25(1) and as part of my investigation I proceeded to a hearing on the 17th December 2015. The complainants represented themselves. The respondent was represented by counsel, instructed by in-house solicitors and three witnesses attended to give evidence.

1.3 This decision is issued by me following the establishment of the Workplace Relations Commission on the 1st October 2015, as an Adjudication Officer who was an Equality Officer prior to the 1st October 2015, in accordance with section 83(3) of the Workplace Relations Act, 2015.

2. Summary of the complainant’s case

2.1 The complainants outline that the respondent bank discriminated against them on grounds of race, and more specifically nationality, in how it treated their applications for a mortgage. They indicate that they were given less favourable treatment when the respondent declined to take account of rental income they obtained from a dwelling let in the United Kingdom in assessing their eligibility for a mortgage. As well as the complaint form, the complainants made four submissions prior to the hearing and also made additional submissions that followed the hearing, including in reply to a post-hearing submission of the respondent.

2.2 The complainants outlined that during the course of the 2014, they made an enquiry to a named online platform of the respondent, later making an application online. Separately, they also later sought to make an application to the respondent via a branch and did not then know of the relationship between the respondent and the named online platform. On the 19th January 2015, one complainant had a brief telephone conversation with a representative of the respondent, who indicated that their mortgage application could not be progressed as they had not been resident in Ireland for 12 months. During this time, the complainants moved to Ireland, commencing a tenancy on the 20th March 2015.

2.3 The complainants approached a retail outlet of the respondent and liaised with an adviser. They said that he was very helpful. Once they submitted their mortgage application, the mortgage adviser informed them that they did not have sufficient net disposal income. This arose because the rental income from the UK property could not be taken into account in assessing affordability. In an email on the 11th February 2015, the mortgage adviser indicated that it would be helpful if they had a banking history of six months with the respondent; the complainants said that this was a “back-door” residency requirement. The complainants lodged a formal complaint with the respondent and received an email dated the 4th March 2015 in reply. This stated the following criteria were factored into the decision to decline the application: they were new to the Bank of Ireland Group, one complainant was not then working, the property in the UK had a mortgage and the respondent could not accept UK rental income and lack of affordability due to this. The complainants said that the same reasons were provided when they later formally complained of this decision to the respondent.

2.4 In legal submissions, the complainants outlined that the respondent had a policy that mortgage applicants must be existing customers. While the proper assessment of credit was a legitimate aim, the measure adopted must be both appropriate and necessary. The respondent’s policy regarding applicants being existing customers went beyond what was appropriate and necessary to achieve this aim. In respect of the assessment of UK rental income, the complainants outlined that the respondent should have asked for the rental accounts for the last six months, in the same way as they would for an Irish rental. This would have given the respondent the necessary information to assess credit risk. The complainants stated that the respondent could only avail of a defence provided by section 5(2)(d) of the Acts if they provided credit information that demonstrated that they were entitled to rely on the defence. They said that they were required by Equality Tribunal procedures to submit separate complaints and that the matter related to mortgage applications made in both their names. This was a complaint pursued under both section 5 and 6 of the Equal Status Acts and that they were entitled to pursue EU Treaty rights before the Equality Tribunal.

2.5 In cross-examination, one complainant said that he had dealt exclusively with the respondent and its online platform and had opened a current account with the respondent. It was put to this complainant that the bank official who had telephoned him after his application to the online platform had raised the ongoing reliance on an overdraft. He said that this was a structured overdraft, like a credit card, and could not remember whether she had raised this issue. It was put to the complainant that this bank official suggested maintaining an account for 12 months in order to show the capacity not to rely on an overdraft. It was put to the complainant that the email of the 11th February 2015 refers to the repayment capacity as marginal and that six months would make a difference to his position. It was put to him that all their outgoings were from one salary; that they were in a state of flux on moving to Ireland and that this was not a matter of going from “Nat West to Lloyds”. The complainant said that another mortgage provider had been willing to approve their mortgage, taking account of the UK rental income.

2.6 In cross-examination of the second complainant, it was put to her that the respondent treated her favourably and with sympathy. The complainant said that the respondent had failed to adequately respond to their legitimate complaint under the Equal States Acts and that they had been marginalised in not being approved for a mortgage. She said that it was possible that they could have purchased a property by March 2015, when they had to rent instead, following the respondent’s decision not to approve their mortgage application. They had intended to purchase a property to allow them walk or cycle to work and they had the additional requirement of having a dog. This meant that they had to rent in a north County Dublin town and had to commute to Dublin city centre by train.

2.7 In closing submissions, the complainants argued that Doherty v. South Dublin County Council [2007] 2 I.R. 696 provided authority for the proposition that EU Treaty free movement rights fell within the jurisdiction of the Equality Tribunal. In respect of section 5(2)(d), the complainants outlined that this does not provide a defence to breaches of section 3 of the Acts and the respondent had to provide data to rely on such a defence. They outlined that it was common sense that non-Irish nationals were more likely than Irish nationals to own property overseas. They said that the report of the Comptroller and Auditor General deals with all types of properties, including residential, commercial and agricultural. In relation to overseas rental property, the complainants said that the exclusion of such rental income was not appropriate or necessary. The respondent had to establish that they had looked to alternative ways of achieving the aim of assessing credit risk. It was not sufficient to rely on anecdotal evidence and they did not take any steps to assess the strength of the overseas rental income. It was open for the respondent to take into account the overseas nature of the rental income as a factor in assessing credit risk, rather than excluding the income entirely. Moreover, it was inevitable that a residency requirement would impact more on non-Irish residents. The complainants outlined that the overdraft was not given as a reason for not progressing with the second enquiry and nor given as a reason provided in the letter of the 4th March 2015.

2.8 The complainants availed of the opportunity to respond to submissions made by the respondent after the hearing. They submit that non-Irish nationals are more likely to have property rented overseas than Irish nationals, so the policy of excluding foreign rented income places non-Irish nationals at a particular disadvantage. They rely on Ms A (on behalf of her daughter, B) v. A Secondary School [DEC-S2015-001] to submit that it is not for them to show that non-Irish nationals are at a particular disadvantage as they are intrinsically liable to be at such disadvantage. They challenge the probative value of the documentation submitted on behalf of the respondent, in particular to say that Irish nationals are more likely to have first purchased property in Ireland before acquiring an overseas property, and therefore would not be impacted by the exclusion of foreign rental income. Commenting on the evidence of the underwriter, they state that he would only have seen applications forwarded to his department and had not considered their application. The complainants respond to the submission of the respondent regarding their deposit, the overdraft facility and the role to be played by market knowledge.

2.9 In further correspondence, the complainants make reference to the outcome of other proceedings. The complainants also requested that the proceedings be re-opened as publicly available information of the respondent contradicts the evidence given at the hearing, in particular with regard to the overdraft facility and the issue of the deposit.

3. Summary of the respondent’s case:

3.1 The mortgage adviser who dealt with the complainants’ online application gave evidence. She outlined that following the submission of the online application, she spoke with one of the complainants by telephone on two occasions. In the first telephone call, she requested current account statements and in the second call, she raised concerns about the reliance on an overdraft. She said that her reference to 12 months related to increasing the likelihood of a successful application by maintaining a current account without relying on the overdraft. She suggested taking out a term loan to pay off the overdraft. She invited the complainant to submit any additional documentation and they also discussed his spouse’s employment prospects.

3.2 In cross-examination, the online mortgage adviser said that reliance on an overdraft should be temporary and such reliance reflected on the maintenance of the current account. She acknowledged that she had not asked whether the overdraft had been pre-approved. She said that a satisfactory credit profile could be established over a six-month period. She acknowledged that the savings held by the complainant were sufficient to pay off the overdraft. She did not forward the application to the respondent underwriters. She said that she had suggested to the complainant that he should maintain an account for 12 months without relying on the overdraft. She said that each case was based on its merits and that residency in this case was an issue, i.e. the fact that the complainant resided outside of the Republic of Ireland.

3.3 The mortgage adviser who dealt with the complainants’ in-branch application gave evidence. He met with one complainant in January 2015 when he opened a current account. The complainant mentioned seeking mortgage approval and had not identified a property. He outlined that the complainant did not have sufficient net disposal income due to the existence of a UK mortgage and the fact that the UK rental income could not be included in the assessment of his income. He said that the overdraft was not an issue for him as the complainant could address this. The issue of net disposable income was the main one for him. He also noted that they were new to the bank and that repayment capacity was marginal. It would also have been helpful if the second complainant had secured employment in Ireland. The mortgage adviser clarified that he did not submit the application to the underwriters for approval as he was concerned about the effect of a decline would have on their prospects of obtaining a mortgage in the future. He said that the main issue for him was the net disposable income and that the exclusion of foreign rental income applied to all nationalities.

3.4 In cross-examination, the mortgage adviser said that, had it been possible to include the UK rental income, he would have been more positive about the prospects of the application. He said that the overdraft was also a factor in assessing net disposable income. He said that the reference to a period of six months was to allow the complainants to build an application that was more likely to succeed with the underwriters. He said that the exclusion of the UK rental income had a significant impact on the application and said that having two incomes would have assisted viability. He said that the respondent was not in a position to assess the rental market in a jurisdiction outside of the Republic of Ireland, in particular the sustainability of the rental income relied on. It would not have made a difference if he had sought documentation relating to rental accounts from the UK property.

3.5 The underwriter gave evidence, stating that he dealt with applications for retail credit from branches as well as from the online platform. The same credit policy applied to applications received from both. He said that the operation of a current account in this case showed an ongoing reliance on an overdraft and that the prospective applicant had not been able to meet outgoings without relying on the overdraft. It was also significant that the savings in this case arose from the sale of a property as opposed to saved income. There was no comment in the credit policy in relation to residency, although it was a term that the mortgage applicant would take up occupation of the dwelling. It was an advantage if an applicant was established in Ireland and this might mitigate against other factors. It was a factor that an applicant could go abroad if the mortgage went into default. This case was unusual in that the complainants had sought to immediately buy a property on moving to Ireland. The underwriter outlined that the respondent does not record the nationality of mortgage customers and that in his experience overseas buyers tended to be Irish. He said that it was difficult to rely on overseas rental income as the respondent had no expertise in overseas rental markets. He said that by and large the respondent does not include overseas rental income in calculating the income of a mortgage applicant. In this case, there was no ability to sustain shocks or voids in relation to the rental income.

3.6 In cross-examination, it was put to the underwriter that the savings accruing from the sale of a property were equivalent to savings gained from income; the investment in property was a form of saving. The underwriter responded that they wished to see sustainability of income. The underwriter agreed that the respondent letter of the 4th March 2015 does not refer to the overdraft issue. He said that it was his anecdotal experience that most overseas buyers of property in Ireland were Irish. He said that the issue of residency forms part of building a proposal and to address other issues with an application, for example the operation of a current account. He said that an applicant’s residency provides comfort in an application and that any applicant who relocates within Ireland will also face this as a factor. He said that a person with ties overseas might be more likely to relocate in the event of default. He said that the respondent had a greater understanding of the rental market in Ireland as this is the market in which it operates. The respondent does not have the same knowledge or comfort of the rental market in London and the underwriter stated that the respondent tends not to take account of foreign rents. He outlined that he would consider the following matters in assessing rental income: how reliant was the applicant on this rental income and how sustainable was their position in the light of a shock. The solicitor for the respondent clarified that Bank of Ireland trading in the United Kingdom was a plc and a different entity to that operating in the Republic of Ireland.

3.7 The respondent said that the complainants had failed to establish a prima facie case of discrimination and the respondent denied that it had discriminated against the complainants. Their mortgage applications were not advanced on grounds of the complainants’ capacity to meet the mortgage obligations. The respondent had looked to where they were established as opposed to their nationality. The respondent outlined that it was necessary to consider who the appropriate comparator should be. In assessing whether mortgage applicants who had lived in Ireland for less than 12 months were more likely not to have Irish nationality, the respondent pointed to the evidence of the underwriter that many such applicants were returning Irish emigrants. It pointed to Census data that showed that 40% of UK nationals residing in Ireland rented, while this figure was higher for migrants living in Ireland of other nationalities. The respondent does not operate a minimum residency period for prospective mortgage applicants. In assessing credit risk, the respondent can require prospective applicants to become more established in Ireland but this is a factor in assessing credit risk. Making such a requirement is in pursuit of a legitimate aim (credit risk) and was appropriate and necessary. In relation to the overseas rental income, the respondent said that there was no evidence that non-Irish applicants were more likely to own such property than Irish applicants. The former category did not suffer any particular disadvantage. The respondent referred to the report of the Comptroller and Auditor General and Revenue data that showed that the ownership by Irish residents of overseas properties rose as inward migration fell. There were some 35,000 properties overseas owned by Irish residents. The respondent said that it was not under an obligation to develop an expertise on overseas rental markets and it had to take account of currency risks as well as local taxes and policy conditions. The issue here was not the nationality of the mortgage applicants, but the location of the property whose rental income the applicants relied on. In this case, the appropriate comparator was not Irish owners of Irish property, but Irish owners of foreign property. It has not been demonstrated that the complainants were treated differently to an Irish applicant in their position.

3.8 The parties made submissions following the hearing. The respondent availed of this opportunity and in submissions dated the 21st December 2015, it addressed the claims made. It denied that it operated a policy requiring mortgage applicants to be resident for 12 months before considering an application. The respondent outlined that there was no pre-condition requiring residency and that the complainants’ chances of success would improve if they could demonstrate repayment capacity over a six-month period. The respondent submits that the complainants have failed to establish a prima facie case of discrimination in that they cannot establish that they were at a particular disadvantage and it rejects the proposition that non-Irish nationals will more likely to apply for a mortgage within 12 months of residing in Ireland. It is submitted that even if the respondent operated a 12-month residency requirement, it would not put non-Irish nationals at a particular disadvantage. The respondent relies on section 5(2)(d) of the Equal Status Acts that provides that differences in the treatment of persons related to the assessment of risk where the treatment is reasonable having regard to relevant underwriting and commercial factors. While the respondent denies that it operated a 12-month residency requirement, any such requirement would be permitted under this provision.

3.9 Also in supplementary submissions, the respondent denied that the complainants had established a prima facie case of discrimination in relation to the treatment of foreign rental income in its assessment of credit risk. The policy considered the location of the property and was not related to the nationality of the owner of the property. The question to be answered in this case was whether the complainants, as non-Irish national owners of foreign property, were at a particular disadvantage to Irish owners of foreign property. The respondent outlines that it does not record the nationality of mortgage applicants. While there is a dearth of information regarding the ownership of overseas property by Irish nationals and those of other nationalities, the respondent refers to the Comptroller and Auditor General report of 2013 and states that its contents support the conclusion that the majority of owners of overseas property who are resident in Ireland are Irish nationals. In conclusion, the complainants have not established a prima facie case of discrimination. Should this be established, the respondent relies on section 5(2)(d) and it is reasonable to exclude overseas rental income where it does not have expertise in overseas markets and such rental income could be subject to factors such as currency fluctuations and local taxes. The respondent further relies on section 3(1)(c) of the Equal Status Acts, i.e. that this policy is an appropriate and necessary means of justifying a legitimate aim. Where a mortgage applicant is reliant on overseas income and where it is not in a position to assess the sustainability of the income, the respondent should err on the side of caution and exclude the source of income. In further correspondence, the respondent outlines that it cannot provide statistics regarding mortgage applicants by nationality as this is not recorded and points to the evidence of the underwriter as the best evidence available.

4. Findings and reasoning:

4.1 The complainants referred two complaints regarding discrimination on grounds of race. The first named complainant sought to submit two mortgage applications to the respondent, one via an online platform and a second via a retail branch. The second named complainant was included in the application as a spouse and was not named as an applicant. The mortgage applications were dealt with by different mortgage advisers and neither was forwarded to the underwriting section of the respondent for formal consideration. The branch mortgage adviser said that the second application was not formally submitted as a negative outcome might harm the complainants’ chance of later obtaining approval; this explanation was not challenged by the complainants. When neither mortgage application was successful, the complainants complained to the respondent, following which this referral is made. They outline that they were discriminated against by the respondent because of a 12-month residency rule applied by the bank and because of the exclusion of foreign rental income.

4.2 The respondent made available to the hearing the two mortgage advisers who dealt with the complainants. They gave evidence of their dealings with the complainants, outlining the reasons they did not progress the respective mortgage applications. An underwriter gave evidence of the factors generally considered in assessing mortgage applications and credit risk. The underwriter did not have any direct role with the two applications made by the complainants, as neither was formally submitted to the respondent. The respondent did not submit written documentation regarding its retail credit policy. The respondent denies that it directly or indirectly discriminated against the complainants, and denies, as a matter of fact, that it operates any length-of-residency requirement.

4.3 Amongst other issues, the parties raised how the overdraft should be treated, whether the respondent operates a residency rule and how it treats rental income accrued outside of Ireland. The hearing heard evidence from the online mortgage adviser about her concerns regarding the overdraft. I believe, however, that the complainants are correct in their submission that this was not listed as a reason for refusal in the respondent’s letter of the 4th March 2015 and therefore cannot be now used to justify the bank’s position. Equally, this letter makes no reference to the complainants being newly arrived to Ireland, just that they are new to the bank. I find that the respondent does not operate a residency requirement as contended by the complainants and that the references to time were to allow the complainants to strengthen their application for a mortgage and to ensure its success. As submitted by the respondent, this is evidenced by the willingness of the respondent to consider their applications even though the complainants had not lived in Ireland for either six or 12 months.

4.4 The central issue in this case is the exclusion of the overseas rental income from assessing net disposable income (‘NDI’) of the complainants, in circumstances where the related mortgage outgoing was included in the assessment. The complainants said that they would have otherwise qualified for the mortgage and the retail mortgage adviser identified this as the weak point in the proposal. The respondent was emphatic in its legal submissions that it, as a matter of policy, excludes overseas rental income. The respondent did not supply a written document outlining its credit policy and instead relied on oral evidence from the two advisers and the underwriter. It classified the evidence of the underwriter as the “best evidence” in the context of whether mortgage applicants newly arrived in Ireland were more likely to be returning Irish emigrants rather than migrants of other nationalities. The underwriter’s evidence was that “by and large” the respondent did not take account overseas rental income in assessing NDI; he said that this was a factor that could be taken into account, given the other variables in the mortgage application. While the retail mortgage adviser was emphatic that overseas rental income could not be included in the assessment, the underwriter was not. The question that then arises is whether the decision of the respondent not to give consideration to the London rental income is a discriminatory act. The burden of proof provided by the Equal Status Acts is set out in Section 38A (1) which provides: "Where in any proceedings facts are established by or on behalf of a person from which it may be presumed that prohibited conduct has occurred in relation to him or her, it is for the respondent to prove the contrary." In "Equal Status Acts 2000-2011 - Discrimination in the Provision of Goods and Services", Judy Walsh outlines“[T]o summarise, the respondent need not to have been motivated by prejudice or have intended to treat someone less favourably because of their gender, ethnicity and so on. Furthermore, discrimination need not be the sole or even the principal factor behind the conduct complained of. It is enough that it is of a significant influence.” (p. 98)

4.5 Having assessed the oral and written evidence and submissions, I am satisfied that the complainants have demonstrated a prima facie case of discrimination in relation to the decision to completely rule out the complainants’ London rental income where the related mortgage obligation was taken into account. I find that the respondent would have been more likely to consider such income had the complainants been returning Irish migrants. In coming to this conclusion, I am struck by the evidence of the underwriter that such income could, in certain circumstances, be considered and it is not sufficient to point to other weaknesses in their application to justify the non-consideration of the London rental income. I am also struck by the unwillingness of the respondent to consider the documentation offered by the complainants regarding the rental income obtained in the London property, e.g. rent accounts. The complainants are correct in their submission that the respondent could have taken the fact that the property is overseas (i.e. outside of the Republic of Ireland) in the assessment of credit risk.

4.6 For the sake of clarity, I find that this is a matter of direct discrimination (and not indirect discrimination) and amounts to discrimination in the provision of goods and services as provided by section 5 of the Equal Status Acts. The respondent has not demonstrated that it is entitled to rely on section 5(2)(d) as it has not provided data or pointed to relevant underwriting or commercial factors and has not shown that the treatment was reasonable. For the sake of completeness, I find that the Equality Tribunal cannot invoke EU Treaty rights outside of the provisions of the Equal Status Acts. Doherty v. South Dublin County Council [2007] 2 I.R. 696 is not authority for this proposition and the limits of the Equality Tribunal’s jurisdiction were clearly outlined by Charleton J. in the Minister for Justice v. The Equality Tribunal [2009] IEHC 72.

4.7 In relation to loss, I do not believe that the complainants are correct that they are entitled to claim losses on the basis that they would otherwise have been able to buy a property in March 2015. They had not found a property they wished to buy and they faced the many hurdles associated with buying a home, many of which would be outside their control. In the circumstances of this case, I make an award of €950. This takes account of the courtesy given to the complainants by the respondent, in particular the mortgage retail adviser (as acknowledged by the complainants), as well as the inconvenience caused to the complainants.

5. Decision

5.1 In accordance with Section 25(4) of these Acts, I conclude this investigation and issue the following decision: that the complainants have established a prima facie case of direct discrimination on the ground of race and this has not been rebutted by the respondent.

5.2 Therefore, as per Section 27(1) (a) I order the respondent to pay to the complainants €950 in compensation for the effects of the prohibited conduct.

___________________

Kevin Baneham

Equality Officer / Adjudication Officer

3 March 2016