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Court upholds €1,000 award to KBC customer not personally notified of interest rate reduction on account

Bank said it had notified customers via advertisements

High Court upheld a €1,000 award to a customer who complained he was not notified about reductions in interest rate. Photograph: Bryan O'Brien

Fri May 5 2023 - 17:42

The High Court has upheld a €1,000 award to a KBC customer who complained he was not personally notified about reductions in the interest rate on his deposit account.

Mr Justice Anthony Barr was satisfied the Financial Services and Pensions Ombudsman (FSPO) was entitled to reach a finding that KBC Ireland plc breached the Consumer Protection Code and was entitled to award redress to the customer.

While he found in favour of KBC, against the FSPO finding that the bank had acted in breach of contract, he was satisfied that the overall decision of the FSPO was not spoiled by that error.

The court heard the redress recommended by the FSPO consisted of €1,000 compensation along with €75.47, which was the amount of the difference between the interest rate paid at different times and the initial interest rate of 0.3 per cent during the lifetime of the operation of the account.

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The customer had a Smart Access Deposit Account with KBC between April 2018 and June 2020.

He complained he was never informed of a number of reductions in the interest rate for funds he held in the account during the relevant period.

He said that while KBC was entitled, under the contract terms, to alter the rate of interest it would pay from time to time, the bank could only do so when it had given him notice 10 days in advance of the impending change. He claimed he never received personal notification in the form of an email, letter, text or pop up on his mobile banking app.

He said he first became aware of the reductions in the interest rate on May 30th, 2020.

KBC said the operation of the account was governed by a clause stating that it reserved the right at all time to vary interest rates by giving ten days notice by whatever means the bank, at its discretion, deemed appropriate.

The bank said it chose to provide notification of impending interest rate changes by way of advertisement in two national daily newspapers and on its website.

It was not obliged, under the terms of the contract, to provide personal or specific notification to the customer, it said.

In January 2022, the FSPO decided that, having regard to other clauses in the terms and conditions governing the account, and having regard to the wording of the clause itself, as well as the provisions of the Consumer Protection Code, KBC was obliged to provide specific notification to the customer rather than a general notification to the public at large.

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The FSPO also found that the conduct of KBC breached the provisions of the code and that such conduct was contrary to law, unreasonable and otherwise improper.

KBC appealed the decision to the High Court.

It argued, among other things, the FPSO decision was vitiated by a series of errors.

It argued that, having regard to terms in the contract in relation to fees and charges, it could determine at its sole discretion the method by which it would notify customers of fees and charges applicable to the account.

KBC also said the FSPO further erred in law in his construction of the contract, in having regard to the provisions of the Consumer Protection Code when interpreting the terms of the contract.

The FSPO has also erred in finding that the bank had been in breach of the terms of the code, it was claimed.

The FSPO denied there was any error of law. It was entitled, it argued, to have regard to the terms of the code which were mandatory on all regulated entities.

While KBC had attempted to call in aid the provisions of the code to bolster its argument that notification by newspaper advertisement was acceptable, the FSPO submitted they did not curtail the mandatory nature of the obligation in providing key information to a customer.

In his judgment, Mr Justice Barr held that KBC had not demonstrated that the FSPO’s decision was vitiated by a serious and significant error or a series of such errors.

He dismissed the appeal.

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