Couple challenges financial fund’s ‘unfair’ 8.5% mortgage interest rate

Vulture Fund

20 November 2023

A married couple has brought High Court proceedings claiming the financial fund that acquired their mortgage from a bank is now charging them an “unfair” 8.5 per cent interest rate.

The court heard the case brought by Darren Hennessy and Emer Barrett may have implications for thousands of other mortgage holders.

They have sued Pepper Finance Corporation Ireland DAC, which acquired their mortgage that was originally taken out with Permanent TSB over their home at Deanrock Estate, Togher, in Co Cork.

They claim Pepper, which is described in legal papers as a “vulture fund”, is charging them an unfair 8.5 per cent interest rate, when they would be paying just over 4.3 per cent if their loans had remained with PTSB.

They claim Pepper, as successor in title, remains bound to the same corresponding rates of interest as those currently offered by PTSB.

The couple took out a 35-year mortgage with PTSB in 2005 on their home. They made further borrowings in 2007 from PTSB to renovate the property.

These loans, which were sold by PTSB in 2019, had fixed interest rates for periods before a variable rate kicked in.

It is claimed that Pepper has justified its variable rate increases on market conditions including recent increases by the European Central Bank to address high inflation.

In their action the couple, who dispute Pepper’s justification, claims the rate they are being charged is “excessive” and “out of proportion with any legitimate rate they should be charged”.

They claim Pepper must abide by the terms of the loan agreements they entered into with PTSB.

The rate, they allege, is being “driven exclusively” by Pepper’s desire to obtain “the maximum amount it can extract from its consumer base with a view to making a profit”.

The couple represented by John Kennedy SC, Peter McKenna and solicitor Eugene Carley, are seeking various orders and declarations from the court.

These include a declaration that the mortgage interest rate they are currently being charged is out of all proportion to any legitimate rate allowed under the loan contract and that Pepper has been unjustly enriched at the couple’s expense.

They also seek orders compelling Pepper to charge them the corresponding interest rate that PTSB would be charging them.

They also want the court to declare that Pepper charging them an interest rate on their mortgage that is higher than the corresponding rate being charged by PTSB is unlawful and in breach of European Union regulations on consumer contracts.

They further seek orders for damages for alleged breaches of contract, statutory duty and of codes of contact guaranteed in the 2013 Central Bank Supervision and Enforcement Act.

Mr Kennedy told the court the proceedings “may have a bearing on hundreds, if not thousands, of other mortgages”. The couple has kept up with all of their scheduled mortgage repayments.

However, he said, there was some urgency to the application as the increase in the interest rates, which amounts to them having to pay an extra €7,400 per year, was causing them difficulties.

Counsel said their action is based on decisions made by the Irish and the UK supreme courts.

They claim that by exercising their discretion to increase the interest rates Pepper has failed in its duty, known the ‘Braganza duty’ to the couple.

This duty, which gets its name from English case law, is where contractual discretion must be exercised reasonably and in good faith, and not arbitrarily or capriciously.

The action came before Mr Justice Mark Sanfey on Tuesday when the couple, on an ex-parte basis, asked the court for permission to serve short notice of a motion where the plaintiffs seek to have a timetable put in place for the exchange of legal documents in the dispute.

The judge adjourned the case to a date later this month.

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