Interest Rate Notification Scandal

autopetfeeder

I just received an email today to tell me that an account I have with B&B has reduced their interest rates in line with the BOE rate.

Fair enough so far. However, it says it will apply the rate from mid-December! If I'd known this in mid-december I would have put the cash elsewhere.

Where does this stop? Can a bank paying annual interest make a retrospective change just before interest payday that affects the rate for the entire previous year?

Hungerdunger

If you look at their Banking Code, you will find:

4.5 When we change the interest rates on your accounts, we will update the information on our phone helpline and our website within three working days. To help you compare rates, the old rate will also be available on our website and our helpline.

It appears, in line with many other institutions, that they are not obliged to notify you personally - it's up to you to keep track of the rates.

I don't understand why the change should affect the rate "for the entire previous year". Surely it will only affect it from mid-December. Or am I missing something?

opinions4u

autopetfeeder wrote: »

I just received an email today to tell me that an account I have with B&B has reduced their interest rates in line with the BOE rate.

I believe they have a month to tell you and that can be via leaflets in branches and newspaper adverts. If you'd read the newspapers you may also expect a further cut very soon as the BofE rate has gone down again.

Fair enough so far. However, it says it will apply the rate from mid-December! If I'd known this in mid-december I would have put the cash elsewhere.

As I understand it, the BofE rate was cut in the first week of December. Therefore, as a tracker account, why did you think they would defer the cut? The only time you could feel hard done to by this is if rates increased and they held back the increase for a significantly longer period.

Where does this stop? Can a bank paying annual interest make a retrospective change just before interest payday that affects the rate for the entire previous year?

Now you're being silly. They will calculate interest daily on the account. Do you think that if rates had increased in December they'd have decided to backdate the higher rate for a whole year?

I really don't see why you are feeling hard done to.

Milarky

It is unrealistic for all banks to notify all customers instantly. That said, several (not many) do far, far better and inform customers a few weeks before intended rate changes. But the rule is; 30 days general notification, 3 days* to update current information.

Customers should consult emoneyfacts daily (more than once!) and read the posting here from those that do.

*It's quite amusing to go into Lloyds on the date you suspect rates have been changed (eg tracker accounts with known terms) and ask what their current rate is - and they won't know officially what these may be - just what they were up to 3 days before. Come back 3 days later and they will have given you the wrong rate information for that account.

LongTermLurker

OP is confused. They think that the rate applied in mid December is the rate for the whole of 2008, or that interest is only calculated once a year - neither are correct.

You have been receiving interest every month since you opened the account, at varying rates. You are now receiving less interest, but that doesn't affect what you've received in the past (before December, anyway).

dunstonh

Can a bank paying annual interest make a retrospective change just before interest payday that affects the rate for the entire previous year?

interest accrues daily but is paid annually. The daily rate will be based on the rate of that day. SO, lets say 364 days the annual rate was 10% and 1 day it was 1%, you would get interest paid at 364 days at 10% and 1 day of 1%.

KingL

Although if the rate had dropped from 10% to 1% a week after you had opened the account and they hadn't told you and you hadn't looked, you'd get 7 days interest at 10% and 358 days at 1%.

Technically, this isn't a retrospective change - it's just them not telling you about the change in rates.

autopetfeeder

Thanks for the answers guys - makes sense.

Regarding the 1 year hypothesis I should have made it clearer that is was totally separate to the B&B issue although Dunsonh and KingL clearly knew what I meant.

However, I still think if B&B can email me 1 month after the event, they could do so at the time.....

Oh well, I'm off to lose some money in bonds and oil....

savetilibleed

autopetfeeder wrote: »

I just received an email today to tell me that an account I have with B&B has reduced their interest rates in line with the BOE rate.

I got that email too. I was mildly amused, arriving as it did the day after the interest rate cut of last week, though the email referred to the cut of 4 December 2008. But I was on top of it as I check very regularly so it was no shock.