Dominic Coyleanswers readers' questions.
Q Last week, I received a letter from IIB Homeloans informing me that I was being charged an administration fee of €30 as I had changed my household insurance provider.
I shop around for home/ motor insurance and change to the most competitive supplier. However, with this new charge, any future quotes would have to be at least €30 cheaper to make it worth my while switching. This seems anti-competitive.
I fail to see why changing home insurance provider should incur a penalty, as the cover type remained unchanged and IIB's interest in my property is still covered as per my agreement with them.
When I drew down my mortgage, none of these extra charges were in place.
It seems grossly unfair that IIB are able to introduce a fee midway through a contract and I the customer am obliged to pay up.
I contacted them, pointing out that as I have another 10 years left on my mortgage, I could be paying an additional €300 over the term simply because I shop around for best value in home insurance.
When I threatened to move my business elsewhere, they agreed to waive the fee.
No other mortgage provider seems to penalise the customer for changing home insurance companies and I wonder is this newly introduced charge legal?
Ms C.P., Kildare
APersonally, I'd be inclined to leave IIB anyway. In the current straitened situation, they have a reliable customer midway through a mortgage with plenty of equity in the property and what do they do - alienate them for a measly €30. Things are certainly getting tighter for the banks in terms of sustaining levels of profitability but it probably cost as much in management time to think up this wheeze as IIB will receive through its implementation.
Is it anti-competitive? Absolutely. Especially as mortgage applicants often - for peace of mind or simplicity - take the home insurance option offered by the mortgage provider at the outset. In my experience, this is rarely the most competitive in the market.
You have behaved in exactly the way consumers are always being urged to. You have shopped around for value - and you have done that work, not IIB - and when confronted with a ridiculous charge, you have confronted the bank and ultimately threatened to take your business elsewhere in the absence of satisfaction.
Quite how the bank justifies the inevitable loss of goodwill would be interesting to note.
Is it legal? Probably, though that is difficult to say without seeing the precise terms of the mortgage contract. As you are discovering, these generally allow the bank to change terms at leisure to its own advantage while denying you the same latitude.
Where the bank might have more problems is in introducing new charges without notifying customers.
Q I opened a joint account with my wife in June 2002 in Irish Nationwide.
The balance at that time, €15,000, made us shareholders.
Our sole purpose was to avail of the expected windfall.
Alas, this is now on ice with the meltdown in financial shares and Irish Nationwide's heavy involvement in the construction sector.
Our balance is now €16,642. Could we withdraw €15,000 and still remain shareholders even though we would no longer have a fixed term deposit.
Is it once a shareholder, always a shareholder, as long as we don't close the account?
The funds would be much better in AIB or Bank of Ireland shares on yield and growth potential on a three-year basis.
Mr T.D., Monaghan
AYou are one of many Irish Nationwide members (not shareholders as yet) who has been left hanging on considerably longer than even Michael Fingleton thought possible for your windfall following any demutualisation of the society.
As you note, the collapse of the construction sector alongside the credit crunch has proven a toxic recipe for valuations of financial services companies and Mr Fingleton is on record as saying the society could not currently achieve what it would regard as a reasonable price on the open market.
It now seems unlikely that you will see any windfall this year and even the outlook for 2009 is uncertain.
In relation to membership, the rule is certainly once a member, always a member - provided that you continue to observe the rules in place at the time you opened the account.
That is significant, because one of the key conditions for membership at Irish Nationwide - apart from the type of account you hold - is the balance in it and that is determined by when you opened the account.
The society lists these thresholds on its website under the FAQ (Frequently Asked Questions) section, question 25. In relation to accounts such as yours opened between March 1st, 2002, and February 28th, 2003, the threshold is €15,000.
Basically, all other things being equal, this means you need to keep a minimum balance of €15,000 in your account in order to retain membership.
If you reduce the balance in the manner you outline in your letter, you will lose your membership.
While you can rejoin, of course, the threshold is now €20,000 and you need to be a member for two years in order to avail of any future windfall.
The clock on that will also start again if your current account is no longer eligible for membership.
If you need any further detail, you should contact the society in writing to: The Secretary, Irish Nationwide Building Society, Nationwide House, Grand Parade, Dublin 6.
