| (a) |
False or Misleading Statements
(i) |
The statement made by First National / Irish Life in their Mortgage Quotation, that: ‘Home-way Endowment premiums are invested in the Home-way mortgage fund’, is a false statement.
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| (ii) |
The statement in THE SCHEDULE, to the effect that 100% of premiums paid to Irish Life are allocated to the Homeway Mortgage Fund, is a false statement.
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These statements also constitute a means by which First National / Irish Life give a false or misleading indication of the charge for installation and servicing of the Endowment Mortgage Policy.
| For installation: |
the entirety of the first year’s premium payments are ‘creamed off ’.
|
| For servicing: |
a £2.00 per month Policy Fee charge is levied and, from the second year onwards, 4% of each year’s premium payments are ‘creamed off’, this, in addition to the  % per month management charge as stated in the Mortgage Quotation, and in addition to any ‘discretionary’ fund value controls imposed per Irish Life’s ‘rules and resolutions’.
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(See Section 2.4.1: False or Misleading Statements. See also Section 6.1: APR — The Statutory Yardstick.)
(b) |
Misleading Advertising
(i) |
The SUMMARY OF BENEFITS within the First National HOME MORTGAGES explanatory pamphlet gives an unbalanced, and therefore misleading, impression of both the Endowment Mortgage and the Repayment Mortgage. It therefore constitutes misleading advertising as defined in the Misleading Advertising Regulations.
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(See Section 2.4.2: Misleading Advertising.)
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(c) |
Supply of Services
First National, in the course of their business, both as a Mortgage Provider and as a tied Investment / Insurance agent for Irish Life, supply the service of ‘Giving Advice’ to their customers. This service of ‘Giving Advice’ is an intrinsic preliminary element of any Mortgage Contract, or any Life Assurance Contract. First National and, by extension, Irish Life (as their principal) were in breach of an implied term of their contract with my wife and I, in that they did not apply themselves with due skill, care and diligence to the supply of this service of ‘Giving Advice’.
| (i) |
They did not advise us that, with the Endowment Mortgage, the entirety of the first year’s premium payments were ‘creamed off’ by Irish Life.
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| (ii) |
They did not advise us that, with the Endowment Mortgage, 4% of each subsequent year’s premium payments were ‘creamed off’ by Irish Life.
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| (iii) |
They did not advise us that, in addition to the management charge of % per month stated in their Quotation, a £2.00 per month Policy Fee would also be charged.
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| (iv) |
They did not advise us that the Endowment Policy could not be encashed until it had been in force for two years.
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| (v) |
They did not advise us that, with the Endowment Mortgage, Loan Repayment was DEPENDENT on an Assumed Growth Rate being achieved (this being 7% p.a. net, in the case of the Endowment Mortgage chosen by my wife and I).
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| (vi) |
They did not advise us that, with the Endowment Mortgage, IF the assumed growth rate necessary to effect Loan Repayment was not achieved, THEN it would be necessary to increase premium payments to Irish Life.
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| (vii) |
They did not advise us that, with the Endowment Mortgage, in the event of an increase in premium payments being necessary, the entirety of the first year of that increase, and 4% of that increase in each subsequent year, would be ‘creamed off’ by Irish Life.
|
| (viii) |
They did not advise us that, with the Endowment Mortgage, the Projected Surplus was based on the necessary inclusion of Bonus.
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| (ix) |
They did not advise us that, with the Endowment Mortgage, the Early Repayment Term was based on the necessary inclusion of Bonus.
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| (x) |
They did not advise us that, with the Endowment Mortgage, based on an assumed net growth rate (this being 7% p.a. at the time my wife and I took out our Mortgage) being achieved, Loan Repayment was based on the necessary inclusion of Bonus.
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| (xi) |
They did not advise us that the term ‘% p.a.’ as used in their Mortgage Quotation had two different meanings: the 10.75% p.a. in the context of the assumed growth rate meant 10.75% APR, while the 11.85% p.a. in the context of the interest rate charged on the Mortgage Loan actually meant 12.749% APR.
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| (xii) |
They did not advise us that clauses within the compass of the Endowment Mortgage Contract (i.e. both in the policy Provisions, Privileges and Conditions, and in the ‘rules and resolutions’) gave the Life Assurance Company or the Company’s Actuary discretionary powers that could have a bearing on the value of the Endowment Policy.
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But, while First National’s failure to advise my wife and I on these various 'defects and risks of financial harm' pertaining to the Endowment Mortgage is clearly in breach of the implied term of our contract that requires that they provide the service of ‘Giving Advice’ with due skill, care and diligence, —— it must now be becoming evident (and it will become more and more so) that it is in their failure to advise us on the various attributes, and the absence of risk of financial harm, pertaining to the Repayment Mortgage that their breach of this Statutory implied term is most injurious.
(See Section 2.4.3: Supply of Services.)
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(d) |
Investment Business relating to Consumer Credit Transactions
In the context of Statutory Legislation Governing Investment Business Relating To Consumer Credit Transactions: THE UNITED KINGDOM POSITION ———————— the conduct of Irish Life and First National is such that they would clearly be in breach of the Principles applicable to the ‘conduct of business rules’ as defined in Schedule 8 of the U.K. Financial Services Act 1986.
On the matter of Standards ——
| (i) |
Both First National and Irish Life have ignored the precepts of integrity and fair dealing.
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| (ii) |
First National, both as an established Financial Adviser in their own right and as a tied agent of Irish Life, did not act with due skill, care and diligence in providing the service of ‘Giving Advice’.
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| (iii) |
Both First National and Irish Life have not subordinated their own interests to those of their clients (my wife and I).
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On the matter of Disclosure ——
| (i) |
First National did not disclose the existence of, or any information regarding, commission or other inducements received or receivable by them from Irish Life.
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| (ii) |
Most important of all, First National and Irish Life did not give my wife and I such information, as to the nature of the investment and the financial implications of the transaction, as would enable us to make an informed decision.
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Furthermore, the conduct of Irish Life and First National is such that they would be blatantly in contravention of specific provisions of the various Conduct of Business Rules as introduced by the Securities and Investments Board, LAUTRO and FIMBRA in accordance with the Principles defined in the Act.
Irish Life and First National would also be guilty of offences under Section 47 of the U.K. Financial Services Act 1986. The senior personnel within Irish Life and First National, who have condoned or colluded with the committing of those offences, would be equally guilty of those offences. (See the reasons cited below with respect to offences under the Larceny Act 1916.)
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In the context of Statutory Legislation Governing Investment Business Relating To Consumer Credit Transactions: THE IRISH POSITION ———————— First National, as an insurance / investment intermediary, were in contravention of the express requirements of the Code of Conduct for Insurance Intermediaries as issued under title of the Irish Insurance Act 1989.
| (i) |
They did not act with the utmost good faith.
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| (ii) |
They did not observe the legal requirements of Statute Law; nor did they observe the legal requirements of Common Law.
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| (iii) |
They did not ensure that we were given information as to the suitability, scope and limitations of the Endowment Mortgage Contract.
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| (iv) |
They did not ensure that the interests of my wife and I were paramount.
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| (v) |
They did not disclose any potential conflict of interest to my wife and I.
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Irish Life and First National are also guilty of offences under Section 32 of the Larceny Act 1916. (See Section 2.3.6: Fraud and the Conman —— U.K. Law and Irish Law.)
| (i) |
They have both, either knowingly or recklessly, made statements which are false or misleading.
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| (ii) |
Irish Life have dishonestly concealed material facts.
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| (iii) |
The non-disclosure by First National and Irish Life of the fact that the entirety of the first year’s, and 4% of each subsequent year’s, premium payments were ‘creamed off ’ by them, and of the fact that Loan Repayment, the Early Repayment Term and the Projected Surplus After Loan Repaid were dependent on the inclusion of Bonus from the beginning of the last five years of the policy term, constitutes conduct which created a false or misleading impression that the progression in value of the Endowment Policy was uniform over the policy term (i.e. it created a false or misleading impression as to the value of the investments in the policy throughout the policy term). This conduct by First National and Irish Life induced my wife and I to subscribe for the policy.
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The senior personnel, within Irish Life and First National, who have condoned or colluded with the committing of the above offences, are equally guilty of those offences.
(See Section 2.5 and Section 2.6: Statutory Legislation Governing Investment Business Relating To Consumer Credit Transactions.)
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Thus far, we have primarily focused on ‘What We HAVE NOT Been Told’ by the Financial Institutions (the First National Building Society and Irish Life Assurance) either prior to contract or at the time of contract.
It is largely the questionable legality of these covert and onerous elements of the Endowment Mortgage Contract that has provoked continual, though largely subjective, critical comment from the persistent few among Financial Journalists who have had the conviction to speak out.
There are two other highly significant factors relevant to choice of Mortgage Type that were not mentioned prior to or at the time of contract : the measure of the associated financial
Risk –––– and the measure of the
Reward for taking that Risk. These factors will be addressed, in detail, in
Chapter 7.
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BUT, it is in
their Pre–Contract Representations, it is in ‘What We HAVE Been Told’ by the Financial Institutions, that their financial expertise has been most deviously applied to deceive the borrower.
It is in their Pre–Contract Representations that we will see just how much the Financial Institutions, specifically the Management Personnel of the Financial Institutions and those colluding with them, are prepared to distort Truth to feed their own GREED.
But first we must acquire a knowledge of the fundamentals of Financial Analysis. We must acquire a knowledge of ‘How Money Works’.
