EBS denies mis-selling claims by company that operated branches

A financial services company has claimed before the High Court its agreement to operate three branches of the Educational Building Society (EBS) was terminated because it refused to engage in mis-selling of financial products.

The claims, which EBS denies, were made on behalf of Betty Martin Financial Services Ltd (BMFS) which for many years has operated EBS branches in Athlone, Lucan and Longford under a tied branch agency agreement.

BMFS has brought proceedings over EBS’s decision to terminate their agreement which, the court heard, will result in another financial services entity taking over the operation of the EBS branches next month.

BMFS, represented by Declan McGrath SC and Keith Farry, claims the purported termination is invalid, done for no good reason, will result in the collapse of its business, impact negatively on its and damage its directors reputations.

BMFS also claims it was informed agreements would only be terminated by EBS in cases of gross misconduct.

Agreement

In proceedings before Mr Justice John Jordan, BMFS wants injunctions preventing EBS DAC terminating the agency agreement pending the full hearing of the dispute.

EBS, represented by Ciaran Lewis SC and Mark Dunne, denies BMFS’ claims and says it is entitled to terminate the agreement. It also claims the complaints of alleged mis-selling were only made by BMFS after EBS decided in 2017 to terminate the agreement.

In a sworn statement, BMFS director Declan Martin, whose late mother Betty set up the company during the 1980s, said the firm started having difficulties from 2010 onwards with EBS regional manager Tim Gleeson.

He said Mr Gleeson, who denies the claims, asked BMFS to "undertake commercial activities that were unprofessional, unethical and against Central Bank Rules and guidelines".

He said Mr Gleeson pressurised BMFS to get customers to answer a Central Bank approved questionnaire to new or potential customers which was designed to ensure customers are put into the correct products, guided by their risk appropriateness and appetite.

Customers who achieve a low score on the questionnaire are categorised as low risk and should only invest in deposit accounts, a product which a bank makes little or no profit from.

Customers with a higher score, indicating a greater risk appetite and understanding of the risks of investing, are allowed open other accounts and invest in more risky products which EBS would get increased earnings from, Mr Martin said.

Products

He said BMFS refused to sell high-risk products to unsuitable customers and a termination notice was served on BMFS in May 2017 for no reason. The notice was served because he would not bow to demands to mis-sell products, he said.

He said he had disclosed his concerns concerning Mr Gleeson to EBS managing director Des Fitzgerald who withdrew the termination notice and directed the matter be investigated. An investigation by EBS' parent AIB had found in February last that Mr Martin's allegations were not substantiated.

Mr Martin says the investigation was not done in accordance with fair procedures and the outcome was predetermined.

He also says he has been in contact with other agents and former agents of EBS who said their evidence is consistent with what happened to BMFS and the problem is “systemic” within EBS tied agency.

Following the investigation, another termination notice was issued by EBS to BMFS which is unlawful on grounds including it was done without a bona fide commercial reason, he said.

Mr Gleeson, in his affidavit, rejected all of Mr Martin’s “untoward allegations” against him and said he never encouraged the mis-selling of financial products to customers.

In a replying affidavit, Des Fitzgerald of EBS said Mr Martin’s allegations are without foundation and Mr Martin made no complaints about alleged mis-selling until after the 2017 termination notice was issued.

The agreement with BMFS was lawfully terminated, he said.

He said an independent investigation of Mr Martin’s claims had concluded there was no evidence to support the mis-selling allegations.

Mr Martin’s complaints were “taken seriously” by him and were “fully considered” by the investigation team, he added.

The application should be dismissed on the grounds of abuse of process and delay, he also argued.

The hearing continues.