Can Citibank unilaterally increase SIBOR loan’s spread? (7) – Citibank engaged in unfair practise? Netizens' demolition of Citibank’s justification...

And more pointing out that Citibank is believed to have engaged in unfair practise against consumers:

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http://singaporelegaladvice.com/unfair-contract-terms-act-ucta-in-singapore/

Contractual liability – Section 3 of UCTA

In the case of a consumer dealing with a business entity, if the transaction is entered into using the latter’s standard form (for instance, when you sign up with a telco on their standard contract), section 3 applies. This section disallows the business from using its standard contractual terms to: 

• Exclude its own liability for breaches of terms;
• Excluding or limiting its own liability for breaches of terms, and
• Relying on a term to render a different kind of service from that which was reasonably expected of him, or not service at all,

unless the standard contractual term is reasonable. Once again, reasonableness rears its amorphous head!

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Is Citibank term/action "reasonably"? I believe that is also implicitly in the reply from MAS on this issue.

Citibank did not explain, just says the term in the contract. Is this term "unfair"?

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And more comments that point to loophole in Citibank’s argument they have right raise the loan spread unilaterally: 

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That was already mentioned in the news

"Mr Peng said all the terms and conditions have been carefully outlined and that interest-rate definitions are clearly stated.

He encouraged affected customers to contact the bank, adding that any decision they make regarding their loans will not be bound by any penalty or fees."

My 2cents:

There is a clause in the Citibank Main Contract.

"The Citibank Home Saver Terms and Conditions annexed hereto shall apply. In the event of any inconsistency between the terms herein and that set out in the Citibank Home Saver Terms and Conditions, the terms herein shall prevail."

What does that mean? it means The Main Contract will override the Annex if there is any inconsistency.

So Citibank cannot be relying on the catch-all clause in the T&C (the Annex) to change the spread because the Main Contract already specify the spread. Catch-all clause also no use if inconsistent with Main Contract.

Remember this: Main Contract will override the Annex if there is any inconsistency.

To change the spread, Citibank need to rely on the Main Contract, and not on the Annex.

The clause citibank are using is in 1(e) The minimum Effective Interest Rate shall be 0.80% pa. Interest rates are all subject to review and may be adjusted from time to time depending on prevailing market conditions. The Bank will not be giving advance notice to the Borrower for any changes in the interest rates.

Now there are 2 terms: "Interest rate" and "Effective Interest Rate" used in Clause 1(e)

Definition of "Effective Interest Rate" is 1 month SIBOR rate for the relevant Interest Period plus 0.65%

What then is the definition of interest rates?

The nearest definition comes to:

"The actual monthly payment shall be computed based on the Effective Interest Rate set out below and may vary depending on amongst other factors the prevailing interest rate, outstanding principal and remaining tenor of the Credit Facilities. The interest rate quoted to you is benchmarked against the Singapore Interbank Offered Rate ("SIBOR") and is accordingly subject to any fluctuations in SIBOR rate. Please note that the Bank is not required to give advance notice of the SIBOR rate which are applicable to the Term Loan."

Do you see how the the last sentences in Clause 1(e) and the above paragraph are similar.

Clause 1(e): The Bank will not be giving advance notice to the Borrower for any changes in the interest rates.

Above paragraph: Please note that the Bank is not required to give advance notice of the SIBOR rate which are applicable to the Term Loan.

Now do we have the definition of what is "Interest rate" ? 

The case to be made is that "interest rate" quoted in Clause 1(e) is that it is the 1 month SIBOR rate and NOT the spread.

so clause 1(e) can read as: 

1(e) The minimum Effective Interest Rate shall be 0.80% pa. Interest rates/(1month SIBOR rate) are all subject to review and may be adjusted from time to time depending on prevailing market conditions. The Bank will not be giving advance notice to the Borrower for any changes in the interest rates/(1month SIBOR rate).

If you demolish 1(e), there is less wriggle room for citibank to change spread.

Come to think of it, which is why perhaps they are relying on word games, like:

"Mr Peng Chun Hsien, Citibank Singapore's head of secured finance solutions, also stressed that the "current revision is only applicable to clients outside the lock-in period".

"Mr Peng told The Straits Times: "The word 'throughout' is a term the industry uses, and refers to the tenure and period that we are covering."

"Finance industry experts say reviewing spreads is standard bank practice, but in practice, changing the spread during the loan period is uncommon."

to AMK and the rest affected, 

1) please check with your friend's contract are similar to mine, i also have citibank letter of offer 

2) please ask your friend to ask the banker to point out which clause they are using to change spread. This is very important. Insist on finding out which clause. Take no shit for an answer.

3) remember, in any consistency, Main Contract overrides Annex (T&C) if there is such a clause in your friend's contract.

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again, there are 2 terms used "Effective interest rates" and "interest rates" used in contract.

"effective interest rates" is NOT EQUAL to "interest rates"!

from the para

"The actual monthly payment shall be computed based on the Effective Interest Rate set out below and may vary depending on amongst other factors the prevailing interest rate, outstanding principal and remaining tenor of the Credit Facilities. The interest rate quoted to you is benchmarked against the Singapore Interbank Offered Rate ("SIBOR") and is accordingly subject to any fluctuations in SIBOR rate. Please note that the Bank is not required to give advance notice of the SIBOR rate which are applicable to the Term Loan."

clause 1(d) already have formula for Effective Interest Rate

Effective Interest Rate = 1 month SIBOR rate for the relevant Interest Period plus 0.65%.

if they wanted to use clause 1(e) as basis for change:

it should have read as

1(e) The minimum Effective Interest Rate shall be 0.80% pa. Effective Interest rates are all subject to review and may be adjusted from time to time depending on prevailing market conditions. The Bank will not be giving advance notice to the Borrower for any changes in the Effective Interest Rates.

If the bank has used the above terms instead, then i think citibank has all the rights in the world. unfortunately it omits the word Effective.

What mortgagees are paying is the Effective Interest Rate, and not the Interest Rate. Dont mixed up the 2 terms.

and formulation of "effective interest rate" is in clause 1(d) (mentioned above)

once again, like a broken tape recorder, those affected please ask the bank(er) to point out which clause they invoke to change the spread.

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And more stinging comments again:

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The way I see it is that Citibank is playing with words, and is oppressively trying to mislead their clients into believing they have the right to raise the spread unilaterally. There is clear violation of CPFTA, yet CASE and MAS are both not doing anything!

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And finally the most important question to force Citibank to answer directly (which Citibank seems determined to be vague and beating around the bush without telling which clause they justify to hike the SIBOR loan’s spread):

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1) I don't believe Citibank has right to hike the spread. You may want Citibank to point out which clause in your Mortgage Loan Contract they uses to justify to hike the spread.

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And a latter update at the forum:

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an update on this story. 

to hopeful: according to my friend, yes, Citi insists that "interest rate subjected to change" is the one that allows them to change the spread. I dun know if he will use your argument to play with words with them. but he is already doing refinance now so he doesn't care much now.

He gave me the MAS email details. You all can write to MAS directly: consumers@mas.gov.sg, attention Chan Wei Sze who is the "case officer". (I did. This is public interest. )

to gavan: collective loan deal is not doable. each one has his own relationship and preference for a bank. these are not homogeneous "fungible" products. the real issue here should be to get MAS to "deal with" Citibank, for everybody's interest.

Btw I'm actually quite surprised no ST Forum articles on this subject appeared. I am sure many ppl wrote to Forum. If Today can publish, why not Straits Times ?

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It is a pity. Personally  i think citibank has a rather weak case (not that i am a legal eagle). since mortgagee is paying "effective interest rate" rather than "interest rate" and formula for "effective interest rate" is already well defined as 1 month SIBOR + 0.65%.

And what is 0.65%? Is it "Interest rate"? That is highly questionable.

as mentioned earlier, the only definition of "interest rate" in LOI is:

"The interest rate quoted to you is benchmarked against the Singapore Interbank Offered Rate ("SIBOR") and is accordingly subject to any fluctuations in SIBOR rate".

so 0.65% is not the "interest rate". 

SIBOR rate is the "interest rate" and are subject to change (ie subject to any fluctuations in SIBOR rate), not the 0.65%.

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if you look at what hopeful posted right above, Mr Peng's argument is weak, and is pushing the limits of interpretation. This is just despicable. 

look at the posted doc here http://forums.hardwarezone.com.sg/eat-drink-man-woman-16/breaking-banks-changing-terms-existing-property-loan-4984471.html, the "Thereafter" spread is clearly a fixed number.

If Citi insist he never meant to sell it as throughout spread, then Citi would have been doing a deliberate and intentional mis-selling in 2011. That sounds very illegal to me.

(It's a different matter if Citi said, "at the time we did intend to sell it as throughout, but today business change, and I INVOKE MY CATCHALL CLAUSE to rescind it". For that we are back to the real issue why banks are allowed to have such clauses.)

As hopeful pointed out, Citi clearly try not to say " under T&C I can change anyway", but instead say "the main contract already allows me to change, you never read your problem". never mind pushing the limit of word playing game.

hopeful, my friend is not as cynical as you think. he is not arguing with Citi anymore because he is afraid he would be blacklisted by the bank as he has other business with Citi. Since he can refinance out, he said just move on.

To me MAS is the party that should take on Citi. MAS has all the details, and MAS is not afraid of "offending" a bank on *consumer loans*. This is why I urge every one to write to MAS directly. No need to be a freerider as it is of no cost to you.

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The rule of the game is to get an OFFICIAL reply from Citibank (in black and white) on which clause they specifically use to change the spread (don't take verbal reply)!

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my friend got a letter by post telling him it is that clause ("interest rate subjected to change"). it's very official.

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As hopeful said, and I agreed, that fixed figure say "0.60%" cannot be the "interest rate" that they referred to that they can change, since SIBOR is the actual interest rate that can change, so if they insist that that particular clause refers to "0.60%" which they can change rather than SIBOR (which almost all of us will interpret as such), then it is obviously a very weak argument. A fixed spread is a fixed margin, their profit margin, it is not an "interest rate"! Citibank want to bullshit who???????

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