Complainant

Respondent

Parties

George  McLoughlin

Permanent Tsb

Representatives

 Paul Hutchinson B.L.

Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under Section 21 Equal Status Act, 2000

CA-00043248-001

25/03/2021

The complainant sought funding for the purchase of a house and says the basis on which it was denied to him was discriminatory on the age ground.

At the time of his mandatory retirement at age 65 in 2017, the complainant decided to ‘downsize’ to a more suitable property and he found one in January 2021 which met all his requirements as to location, condition, price etc.

The Estate Agent dealing with the sale of this property advised that the vendors wanted a quick sale and would only accept offers from “cash-buyers” or buyers with prior loan approval.

The complainant approached his bank, Permanent TSB, around January 12th, 2021 seeking approval for a loan of up to €275,000 to be repaid with appropriate charges and interest on the sale of his existing home.

The loan/mortgage applied for represented approximately 50% of the value of his current home which is mortgage-free and about 60% of the likely price of the property he wished to purchase, the balance to be met from savings.

After some communication and correspondence with Permanent TSB, the loan application was refused on the basis that, at 69, he was too old to be considered for any loan exceeding €75K irrespective of any assets provided as security. 

He viewed PTSB’s decision in this regard as unfair treatment on grounds of age and notified the bank of this in his telephone conversations with them at that time.

When no corrective action was taken by PTSB, he forwarded Form ES1 to them on February 4th, 2021 notifying them of his intention to seek redress under the Equal Status Acts 2000-2005.

Permanent TSB’s reply dated February 24th, 2021 claimed that the refusal of the loan application was unconnected with his retirement status or age, but it offered no explanation for their refusal beyond their statement that “the bank is unable to facilitate a mortgage application at this time as it is outside our lending criteria.” 

That letter suggested that the bank might review whether they could provide a bridging loan. However, when he followed up, it transpired that, because the bank would not approve any such arrangement in advance of a prospective purchase, he would still not have the loan approval necessary to bid on the property he wished to purchase.

In his discussions with PTSB he had been informed that their lending policies in this regard had been decided by the Central Bank and that PTSB had no discretion in the matter. However, when he followed up on this with the Central Bank, their letter of March 4th, 2021 stated that individual lenders are free to set their own lending policies within the parameters of the legal and regulatory framework set out by the Central Bank.

The Central Bank’s Mortgage Credit Regulations oblige creditors “to assess the creditworthiness of consumers before concluding a credit agreement” and states that such assessment “must be based on information which is necessary, sufficient and proportionate including the consumer’s income and expenses and other financial and economic circumstances”.

Part 6 (“Creditworthiness Assessment”) of Statutory Instrument 142 of 2016 – European Union (Consumer Mortgage Credit Agreements) Regulations 2016 states that such assessment “shall take appropriate account of factors relevant to verifying the prospect of the consumer being able to meet his or her obligations under the credit agreement.”

Given that the only relevant regulatory requirement imposed by the Central Bank on PTSB is that they verify that loan applicants can meet their obligations under the credit agreement, it follows that, where applicants can provide adequate guarantees that the loan amount sought will be fully repaid ‘either from future income or from the disposal of assets’the lender has satisfied the Central Bank’s regulations in this regard.

At the time of the loan application, the value of the family home and savings was at least twice the maximum amount we needed to borrow.

There was therefore no appreciable risk for the lender or, insofar as there might be a theoretical risk, it was lower than that which applied in any conventional 20 or 30-year mortgage that the bank routinely approves.

The complainant’s savings and assets were “sufficient and proportionate” to the loan amount sought and there was no reasonable reason why the loan application should have been refused. There was no engagement by Permanent TSB as to proposals to repay any loan and the application was refused solely and exclusively on the basis of age.

Prior to pursuing this complaint, the complainant re-applied for mortgage/loan facilities to PTSB and attended a meeting at their O’Connell Street, Limerick office to discuss this application on January 7th, 2021. That application was also turned down on the basis of age and employment status.

When he explained that he was pursuing the bank’s previous refusal under the Equal Status Acts, the PTSB official dealing with his application once again stated that their policy in this regard was determined by the Central Bank of Ireland.

The complainant believes that any “justification” that Permanent TSB has to date offered to explain this discriminatory practice cannot be justified by any legitimate aim in circumstances where the loan amount being sought is more than 250% guaranteed and there is, in consequence, zero risk to the bank.

He also believes that Permanent TSB’s refusal of the loan application constitutes direct and/or indirect discrimination contrary to the Equal Status Act 2000 in that it effectively prevents him making necessary decisions on matters vital to his financial wellbeing and ability to provide for his and his family’s welfare and education entirely on the basis of his age and/or on the basis of his employment status which, in turn, has been determined by his age.

Permanent TSB has, effectively, excluded the complainant from financial services that are readily available to the population generally and has, thereby, significantly diminished his dignity, independence and autonomy as a person.

It is necessary to distinguish between the various applications referred to by the complainant; the Personal Loan application, the Bridging Loan and Mortgage conversations.

In relation to the complainant’s Personal Loan Application, during the February 2nd, 2021 telephone conversation, the complainant outlined that he was seeking a loan to purchase a house.

The Bank’s agent explained that the purpose of a Personal Loan is not to finance the purchase of a house but rather for other purposes and the maximum amount being €75,000. In order to obtain the financing that the complainant was seeking, in or around €275,000, he would have to apply for either a Mortgage or Bridging Loan.

On the basis of the above, the complainant was agreeable to withdrawing the Personal Loan application and therefore, not discriminated against by virtue of his age as this was the sole, formal loan application actually made by the Complainant.

During the Complainant’ conversation with the Bank on February 26th, 2021, the terms of under which the Bank considered applications for Bridging Loans, on an exception or case by case basis, were explained to the Complainant.

The parameters of the Bank’s credit policy for loans of this nature were not acceptable to the complainant and he did not proceed with any formal application.

On that basis, the complainant was not denied or refused a Bridging Loan as he did not wish to pursue it, and, in any event, the key issue was the fact that the complainant’s loan requirements were simply outside of the parameters of what the Bank’s then credit policy would ever permit for reasons unrelated to his age or retirement status.

To reiterate, the complainant sought to obtain a loan of €275,000, purchase a property with this loan and, once completed, sell his current property in order to repay the loan, which constitutes a Bridging Loan.

The Bank did not offer Bridging Loans as a standard product at the time and does not do so now, even under the current iteration of the Bank’s credit policy dated December 2021.

During the complainant’s same conversation with the Bank on February 26th, 2021, the Bank’s mortgage affordability criteria were also explained to him.

The Branch Lead noted that, based on the complainant’s employment status, financial income and maturity period of the mortgage relative to his age, and based on his experience, he would not be successful in an application for a fixed term mortgage product. The complainant did not proceed to make any such application for a mortgage product.

In the circumstances, the complainant was not denied credit due to his age per se but rather, based on a preliminary review of the available information, he was provided with loan application advice.

It was explained to him that it was likely that he would be unabletosatisfy the Bank’s credit policy insofar as it related toaffordabilityassessmentsformortgageproducts,including that,ataminimum,hispensionwould not equate to the necessary repayments instalments for such a mortgage product.

It should be noted that the minimum term of a mortgage product offered by the Bank is 5 years, which does not appear to match the purpose for which the complainant was seeking credit at all (explained, in his own words in the within WRC Complaint as being “to cover any period there might have been between the two transactions”, i.e. the purchase of the house the complainant wished to purchase and the sale of his existing house).

Based on the above tests, the Branch Lead was able to ascertain, on a preliminary review of the complainant’s circumstances, that he would not meet the requirements of the Bank’s then Credit Policy for a mortgage product based on his personal circumstances.

It should be noted that the complainant did not formally apply for a mortgage which, in any event, would not appear to be suitable for the short-term purpose which the complainant required.

As the correspondence with the Bank in February 2021 shows, the complainant was seeking to obtain credit within a 1-week period in order to quickly purchase a house. Given the timeframes involved, it would not have been possible on a practical basis to meet the complainant’s needs as the application process would extend far beyond 1 week (typically taking, on average, 4 months).

As to whether the bank’s requirements in relation to the final stage of the process, the following submission was made.

As indicated above, in addition to the commercial considerations which a lender is entitled to consider when formulating credit policy, the Bank is subject to a suite of binding, regulatory obligations which are relevant in the context of the within complaint (and which were submitted in detail to the hearing) but which require an assessment of affordability to ascertain the personal consumer’s likely ability to repay the debt, over the duration of the agreement…”

Section 5.9 and 5.1 of the CPC 2012 specifically mandate that, within the affordability assessment, the following information must be considered (emphasis added): “…Personal circumstances including, where relevant: i) age, ii) health, iii) knowledge and experience of financial products, iv) dependents, v) employment status, vi) known future changes to his/her circumstances”;

Section 5.9(b) of the CPC 2012 requires an affordability assessment to include (with emphasis added): “in the case of all mortgage products provided to personal consumers, the results of a test on the personal consumer’s ability to repay the instalments, over the duration of the agreement, on the basis of a 2% interest rate increase, at a minimum, above the interest rate offered to the personal consumer. This test does not apply to mortgages where the interest rate is fixed for a period of five years or more.”

Pursuant to Section 5.13 of the CPC 2012: “A regulated entity must take account of the result of the affordability assessment when deciding whether a personal consumer is likely to be able to repay the debt for that amount and duration in the manner required under the credit agreement.”

The CPC 2012 is a code issued by the CBI which is binding upon regulated entities pursuant to the provisions of Section 117(1) of the Central Bank Act 1989, which provides that the CBI “…may, after consultation with the Minister, from time to time draw up, amend or revoke, in relation to any class or classes of licence holders or other persons supervised by [the CBI] under this or any other enactment, one or more than one code of practice concerning dealings with any class or classes of persons and every such code shall be observed by the licence holders, or other persons so supervised, to whom they relate”;

The bank is open to a statutory cause of action in damages where it fails to comply with its obligations under financial services legislation.

The facts of the matter are set out above and while the essential narrative of the sequence of events is not in dispute there are important differences in how each party has represented various events in that sequence.

These were fully ventilated in the course of the hearing.

Starting at the beginning, it is not the case as claimed by the complainant that he applied for a loan on January 12th, 2021. Whatever inquiries he may have made they did not add up to a loan application, and there was no application until February 1st, some weeks later.

That application was for a personal loan of €275,000 which was actually, and unsurprisingly to fund the purchase of the house, which was the complainant’s objective all along.

The complainant was denied that loan on the basis that the bank did not advance sums by way of personal loan in excess of €75,000, and that in any event a personal loan could not be used to find the purchase of a house.

He withdrew the application for the personal loan.

Thus far no cause of complaint under the Act has been made out.

Then some weeks later, following further engagement with the bank, the issue of bridging finance arose.

It appears that when the terms on which any bridging loan might be offered became clear he decided not to pursue it and therefore there was no refusal of any application at that stage either, as no formal application had been made.

The complainant was admittedly told that even had he done so he would not have been successful based on the bank’s specific criteria. These included his employment status, income, including pension and the maturity period of the mortgage; specifically, that a mortgage had a minimum term of five years, which was not what the complainant wanted or needed.

Counsel for the respondent remarked that the main problem that faced the complainant was that the bank did not actually have a specific product that was suitable to his needs, rather than any issue of discrimination and there is considerable merit in this analysis.

The question as to whether any of the criteria referred to above could be said to be discriminatory was addressed in the respondent’s submission and it relied in particular its legal obligations under the Consumer Protection Code, 2012 which were fully set out in of the respondent submission.

These in particular related to the ‘affordability’ principle underlying the assessment of an applicant for finance.

This is a concept related to a person’s income rather than to the value of their assets, and while the complainant might have met a differently formulated test based on the latter that is not the test universally now applied within the financial services sector as set out in the respondent submission, and as required by the Consumer Protection Code, 2012.

The complainant’s approach to the bank was almost entirely based on negotiation a transaction where he would be able to repay any loan once his own home had been sold.

Where a person could meet repayments-based income (including pension) for example, and regardless of their age that seems in principle (i.e. subject to meeting the other eligibility criteria) capable of bringing them within the affordability guidelines.

It is easy to understand the complainant’s frustration as his attempts to source finance for an important reorganisation of his affairs fell between a number of stools.

In any event, having regard to the facts of the case as set out above I find that the criteria applied by the bank were on foot of its regulatory obligations and ant reference to age was proportionate and justified.

There was no prima facie case and the complaint fails.

For the reasons set out above I do not uphold Complaint CA-00043248-001.

Equal status, age discrimination.