Penalties for breaking 1 year fixed deposits

mac321

Going back to the original question ...

I've got 3 fixed rate deals on the go.

2 do not allow any withdrawal/closure at all.
Therefore, the question of penalty charges doesn't come into play as the money has to stay in for the full term.

The other fixed rate account I've got has a 90 day interest penalty for closure.

I'm surprised that a 60 day penalty is seen as poor.
It's actually the lightest penalty I've seen.

I'd be interested to know if anyone has come across a fixed rate account (paying a decent rate) that has better penalty terms.

eeja

mac321 wrote: »

Going back to the original question ...

I've got 3 fixed rate deals on the go.

2 do not allow any withdrawal/closure at all.
Therefore, the question of penalty charges doesn't come into play as the money has to stay in for the full term.

The other fixed rate account I've got has a 90 day interest penalty for closure.

I'm surprised that a 60 day penalty is seen as poor.
It's actually the lightest penalty I've seen.

I'd be interested to know if anyone has come across a fixed rate account (paying a decent rate) that has better penalty terms.

The answer is that the law stipulates only the courts ie the law can impose fines on people . That is what all the halabaloo about the penalties charged by the banks was all about and why the banks lost their case under the Unfair Contract Terms Act. Think about it...could you charge your neighbour a fixed penalty for stepping on his lawn to retrieve your football ? A charge if levied has to be reasonable . That is why if you break your fixed term deposit you are generally only liable to compensate for the loss the bank has incurred plus perhaps a small admin fee . What that loss is will depend on interest rates. If they have gone up and are now higher than the original rate then clearly a charge or penalty is payable to compensate the bank for that loss. If interest rates have dropped and the bank profits from a customers breaking of the agreement only an admin charge should be payable.
OK you will say..my bank thinks otherwise .
Your remedy, if you have the time and wish to make the effort and you feel the penalty imposed is unreasonable and unjust : claim against the bank for breach of the Unfair Contract Terms Act and if you have to, use the special procedure for handling smaller claims in a county court.
NB Above is according to English law..haven't a clue what Scots or IOM law has to say on this matter .

Paul_Herring

mac321 wrote: »

I'd be interested to know if anyone has come across a fixed rate account (paying a decent rate) that has better penalty terms.

Isn't the whole point of a fixed rate bond, that you hold it there because you know you won't need it? If you think you might then either don't put it in, or use a ladder of fixed rates so that you get some of it back each month (or so.)

earlgrey_3

eeja wrote: »

The answer is that the law stipulates only the courts ie the law can impose fines on people...

I therefore assume you have no experience of the construction industry where penalties are routinely built into contracts.

If you don't like the idea of having the additional option of ending a fixed term contract by paying a penalty then go for one that doesn't allow that option if that makes sense to you. Either way, if we agree to terms we fully understand the decent thing is for both sides to honour that agreement without trying to renege.

earlgrey_3

mac321 wrote: »

I'd be interested to know if anyone has come across a fixed rate account (paying a decent rate) that has better penalty terms.

From time to time accounts are offered with fixed rates but no penalty for withdrawals. The Coventry 50+ Esave was an example: 6.4% fixed for 1 year but funds could be added or withdrawn as required. No longer on offer to new customers sadly.

ManAtHome

eeja wrote: »

Same bank. Can you think of a reason why the penalty clause in two British Isles subsidiaries of the same holding bank should be different ?
Dying to hear the explanation........please explain the logic .

To reverse the question - you seem to believe that companies should sell products worldwide at the same price (currency and tax adjusted) with the same T&Cs regardless of different regularity and consumer laws..? Dying to hear that explanation...

eeja

ManAtHome wrote: »

To reverse the question - you seem to believe that companies should sell products worldwide at the same price (currency and tax adjusted) with the same T&Cs regardless of different regularity and consumer laws..? Dying to hear that explanation...

Posting Nothing to do with pricing/rates but concerns penalty clauses.
The lawyers of Anglo Irish in Dublin drew up the rules, the management clearly having a policy on this matter and they build it into their contracts. Are you saying that the Co decided in their wisdom that they would levy a penalty 600 percent higher in one of their British subsidiaries than in another ? Of course not...this was just sloppy management. Futhermore how many f/d clients know the penalty on early withdrawal can in theory and fact be 600% higher in Douglas IOM than it is in Douglas Strathclyde, any penalty amount being of UNLIMITED size ..and need have nothing whatsoever to do with any loss or damage suffered by the bank. That is why such a penalty is UNLAWFUL in England as it is UNFAIR. Hence the legal decision against banks' charges where these are unfair.