In Irish law, can a bank be sued for hiking house prices?

Imagine if some well-funded wannabe SCD home-owners were to sue a major Irish bank.

The goal would be to demonstrate that the bank (perhaps with the collusion of the ICB or the Government) was deliberately restricting house supply to the market.

The way to demonstrate this would be to show that the bank was going too easily on non-performing borrowers in the Dublin area; refusing to begin repossession proceedings even though the delinquent borrowers were more than 720 days behind on their payments.

The idea would be to force bankers up onto the stand and ask them to explain why the hell the bank wasn’t proceeding to repo and sell on the house, as a way to remedy the massive haemorrhage of money caused to the bank by the delinquent loan.

You might imagine that the banker would lie under oath, but that might not occur. The bank is legally barred from punishing an employee for failing to lie under oath. The damages that such an employee would win for attempting to suborn perjury would be lottery money, and the individual who pressured him to lie on the stand would be committing a major crime.

We already know that there are very large numbers of debtors more than 720 days behind. It would be easy to put a string of Nobel-prize winning economists on the stand to demonstrate that these large numbers are indeed probably affecting the price of houses.

Now here’s where my knowledge of the law is a bit hazy: what are the rights and responsibilities of an employee who believes and has indications that his employer is fiddling the market to manipulate prices upwards?

Does an employee with those suspicions have the right to come forward to make himself known to the party which is suing the bank? My instinct is to assume that he probably does. His contractual loyalty to his employer doesn’t extend to his lawyer requiring him to stay silent about what he knows about his employer’s illegal market manipulations. (I think).

What this means is (if I’m right about an employee’s right to come forward about what he reasonably believes to be improper illegal market-manipulating activity) that if a bank were to fire, demote or otherwise punish the employee for telling the truth, the employee would be able to sue the bank for big money.

On the face of it, this seems practical. All that’s needed are a few thousand pinster-minded people to donate a seven-figure sum to begin the lawsuits (I’m thinking seven or eight couples who are priced out of the Dublin market would be the test cases), and their lawyers would put out the call to bankers who know the details and have the documents on Dublin delinquent borrowers who are not being pursued.

Why the big money to back the lawsuit? Well, an Irish jury might be expected to find for the banks, regardless of any smoking gun evidence against them, but the next step would be to take it to Europe where they’d be more disposed to overturning it.

The mere prospect of banks being embarrassed in court, with juicy details of how specific, named delinquent borrowers are being coddled to screw the buyers, is enough to entice me, even if the lawsuit eventually fails because of a corrupt jury that wants to keep house prices high.

… the shareholders in the bank would probably sue if the bank was excessive in repossessions and thus damaging the share price. The banks would claim that they are acting in the best interests of their shareholders… the banks have no onus to ensuring that everyone that wants to live in SCD can do so.

If they are conspiring with others in the form of a cartel you may be able to instigate a case in terms of competition… (or lack of competition).

Well, in that case it would be wise for the people doing the suing to buy a share apiece in the bank being sued, so that the bank can’t cover themselves from that angle.

Minister Noonan’s comments about “we’ve gotten prices up, but we need a bit more” sound to me like the stuff of affidavits.

It seems to me that a bank shareholder who wants to buy a Dublin house at reasonable cost has a rock-solid case right to a damn good explanation for why a 2-year deadbeat hasn’t been repo’d when the bank is losing money hand over fist on that loan.

If the bank’s honest response is “that might make Dublin houses less expensive!” then the lawsuit’s won, right?

The case wouldn’t last five minutes. The banks are considered to have commercial discretion as to how they pursue debtors in arrears. All they would have to do in their defence is point to the cost, time and reputational risk associated with pursuing repossessions to their conclusion. In addition, given the Central Bank’s code of conduct on mortgage arrears, it’s regulatory policy for banks not to chase arrears aggressively. Look at the stink every time loans are sold to an institution not governed by the Code and those in arrears have to rely on “ordinary” contractual law protection.

What about bringing the government before the competition authorities in Europe for market manipulation? We’d have a great case. Michael Noonan repeated today/yesterday that he wants house prices to rise more.

That’s not the end of the matter.

The other side will produce banking experts from the UK, USA, Canada, Australia and New Zealand to say “cost, time and reputational risk are all factors in our countries too, but that’s not any kind of excuse for tolerating such extreme delinquency. In our countries, if someone goes two quarters without paying, that easily outweighs those concerns. In the event of continued non-payment, the repo happens, and eyebrows will raise if it doesn’t”.

Banking is an international business, with international norms.

We know that Ireland is the only place in the common law world where banks take the urine to this extreme.

Basically, the case would be that they’ve gone way beyond the fig leaf of “commercial discretion” and straight into the realm of market rigging.

If there is some commercial rationale for never repossessing anything, then why wouldn’t banks in other countries do the same? And we know they do not, and those experts will testify to that fact.

If it’s only done the Irish way in Ireland, by banks acting under instruction of one regulatory authority (which has already shown deep flaws), then it makes sense to look at the strong possibility that what’s going on is not permissible commerce, but market manipulation.

I don’t mean this to be insulting to you personally.

But, you are living in some deluded fantasy world if you think some “well heeled d4 wannabe” is going to peruse a case like this.

You have been watching a few too many reruns of a few good men If you think you are going to get bankers and international Nobel laurauetes battling it out on the stand?

And for what? Some mobile cause? End World hunger? End Child slavery?

No your gripe is that YOU are priced out of the desirable ( to you) parts of the dublin property market.

Presumably you want the cut off line for purchasing your dream house to be just around YOUR budget. The cut off when redrawn will mean people below your spending power will be excluded and it will be tough luck for them?

You cannot focus on one factor. In your case you claim banks are gaming the system. And they are. But if banks weren’t gaming the system then we would be in a totally different place. The country and the banks would be insolvent. Dublin property prices might then be at a comparable level to Poland for example. But your income, savings if they weren’t wiped out etc would be worth less also.

You’ll have to understand if I don’t rise to your silly baiting.

Everyone (except the kids of the very wealthy) who doesn’t own a Dublin house, yet has strong reasons for wanting to live there (their entire support network of relatives and friends being located there) is a victim of the status quo.

Singling it out to just one person is contemptible. Especially since you don’t even dispute the claim that the banks are engaging in crooked dealing.

You’re literally saying that because well-connected people are doing something bent, people should shrug their shoulders and accept it. That’s exactly the cynical mental disease that put Ireland into the Troika’s hands. We need that mindset to be gone.

If there’s a normal percentage of delinquent loans then you repossess to deter borrowers from taking the mickey. If half your loan book is up shit creek than you have to wait for an improvement as a simple matter of survival. We don’t have functioning banks, full stop. There’s nothing illegal about it (unless they are covering up de facto insolvency). The galling thing is that we paid a boatload of money on the pretext that we needed to get the banks working again.

By that rationale, any kind of pump-and-dump market manipulation is just fine.

Imagine a bank has lent massive amounts to speculators going long in pork bellies. Pork bellies fall.

The bank is supposed to let the speculators go to the wall and accept the loss, however large it may be. If the speculators bring down the bank, that’s just tough. Barings bank was wiped out in such a scenario.

But by your rationale, the bank can get away with just stringing out the broke speculators forever, instead of accepting the loss. They can pump up the price of pork bellies, forcing the pain onto the speculators who bet on the short side of the trade.

Thing is, that rationale you propose is not accepted as part of the rules in any other market. You lose, you lose. In the example above, schemes to bail out the losing speculators are considered an unlawful attack on the interests of the investors who were short on pork bellies, and the manipulators are punished when caught.

We’re on the short side of this trade. We have absolutely every right to expect and demand fairness.

The very basis of all law says that people who are short on property are equal to entities that are long on property. There was a case a few years ago where some Irish heating oil suppliers were fined heavily for rigging the market in oil. The Irish court system is not allowed to give special dispensation to businesses that rig the property market as opposed to the heating oil market.

Because they don’t operate in the Irish judicial and political environment.

Government and regulators aren’t subject to market manipulation legislation. They’re supposed to oversee, intervene in, interfere with and manipulate markets, for better or worse … that’s what they DO.

The authorities have chosen to prioritise those that can’t afford their houses over those that can’t afford to buy houses. The remedies for that are political, not litigious.

What laws are you breaking if you manipulate the property market? It’s not the stock exchange…

If I owned 70% of the houses in SCD and chose not to sell them, or sell them 1 by 1 or by other means chose not to precipitate their mass sale what law do I break?

By that stage it wont’ matter…

Are you saying competition law specifically excludes property dealers from the prohibition on price fixing to the buyer’s detriment?

Private property. You can do with it as you wish. The legal ownership of property is parallel to the financing of it.

When you buy a house it is put in your name. The bank has an interest noted on the deeds. But it’s your property. Your loans and debts are parallel to that and repossession only comes in at the very end of a legal process which can be very costly.

You can’t just zone in on one aspect of the housing market and simply say its all the banks fault. There are a hundred factors at play here. Populist nonsense about the banks controlling prices is only partly true.

What are they?

This is nonsense. What law requires the banks to repo?

It seems to me that this one does: … .html#sec4
(IANAL, of course)

It seems to me that there is a clear concerted practice amongst Irish banks to effect a near-total ban on repossessions. It’s beyond doubt that these near-total bans have as their intentional object and effect the artificial fixing of purchase prices above what they’d be in the absence of concerted price-fixing.

The statements of Irish Finance ministers serve as evidence that the State itself plays a role in the concerting of this particular practice: namely the suppression of the normal repossession process which in the rest of the world triggers semi-automatically after two or three missed payments. The mere fact of the state playing a role in an activity does not serve to render that activity legal.

You can take it to the EU commission ( competition dept ) if you wish.

I would not waste good money on hiring some fat windbag in the law library to bluster and spoof in front of Peter Kelly for a few days, I have far too much respect for Peter Kelly who has much better things to do with his time than listen to this ‘case’ . :slight_smile:

If you feel that the law of the land that I quoted directly allows wriggle room for price fixing in the property market, you might have chosen to make a legal analysis explaining the loophole that you feel the banks have.

I note you avoided doing that.

So far we have seen that you have a liking for snark, we have not seen an explanation of the loophole that allows for price fixing by banks when price fixing by other entities is, by law, “void and prohibited”.