First Direct - 3 serious complaints arising out of one maturing Regular Saver!!!

2sides2everystory

Until today, if anyone had asked me to confirm it, I would have agreed that First Direct are a cut above every other UK bank in the internet / telephone banking only arena. I have had accounts with them for very many years, maybe 20 if that makes any sense. They have always been very conservative with that small "c" but I didn't mind that too much. In that respect remained closest in many ways to old-fashioned "Mr Mainwaring" bank management - a bit tight with some forms of credit, but generally quite excellent in their ways.

I opened a First Direct Regular Saver on 3-Oct-2009. 5% Gross, max investment £300 per month.

I was vaguely aware (I think they wrote to me a few weeks ago) that the account would on its anniversary be converted into some simple Savings Account at a typical "dropped off a cliff" type rate. They are not the only bank doing that of course.

I last logged in online last week when I could just see 12 x £300 in credits and a balance of £3.600, and I made a mental note to move the money this week as soon as I could see the interest had been added.

No complaints so far (because I am conditioned to expect to have to deal with such nonsense and better informed than most punters), but are you still with me?

Today is 7-Oct-2010, a Thursday. The anniversary of the opening date of this 12 month deal was in fact Sunday. Had I been thinking about it on Sunday, I might even have logged in and had a look. I didn't.

Today I received a Statement for "3 October 2009 to 3 October 2010" - £77.79 net interest was shown. Still no complaint - but read on ...

I turned over and looked at page 2 .... there was a chunky paragraph about FSCS and then two lines saying this:

Credit Interest Rates balance AER variable
Credit Interest 5.00%

There was also a similar section saying Debit Interest 15.9%

And that was it. Nothing else.

Complaint #1
Now then, here we have my first complaint - that 5.00% is totally false and misleading isn't it? If I wasn't on the ball, how easily might I have been wrongfooted with that piece of info, the last thing in bold type on the statement?


Complaint #2 ... As I said, today is 4 days beyond the anniversary date. It is also 4 banking days beyond it. When I asked about the actual interest rate right now, going forward, I was told it was 0.25%. I wasn't surprised - it was the nonsense we all expect. What I was surprised about was that when I asked to move the money immediately, I was kept waiting for a nonsensical period and then told it would be 5 working days from "maturity date" before the money would be available for transfer.

Naturally I queried that and was referred to Ts & Cs and they were "sorry you feel that way" and all that nonsense.

I was NOT offered an immediate transfer.

Complaint #3... In my querying of the matter in Complaint #2, I then said but this account has been instant access from the start, is that not correct? (It was) So I then politely rubbished the suggestion that it might have not just dropped off a cliff but was currently in some inaccessible 5 day long pipe on its way down. I reminded her that I knew the account was instant access, and I knew that there was no penalty for withdrawal after the 12 months was up. I was then again referred to the maturity process that took 5 days. I said but I want you to move that total £3677.69 immediately to another bank. You have said you cannot. Are you also telling me I could not do that online if I so wished? I haven't tried it, but surely it will let me? At that point the call centre operative said that she thought it would but I would lose 'the interest'. So I said are you telling me that you will take back the interest? Then she said not, but that the interest would stop at the moment I withdrew the money (big deal ... the interest at 0.25%AER was hardly going to be accruing at any startling daily rate now was it?!!!)

So at that point I made her aware of Complaint #3, and she said she wanted to transfer me to a supervisor. I agreed, but before I let her transfer me I asked if she thought she had made a personal mistake which I could forgive, or if she thought that she was just handling my request to transfer the money in the way she had been directed or expected of her by the bank. She did not answer, so I told her to make sure that the Supervisor knew what the question was, because I could forgive her both alternative expanations, but I could not forgive First Direct if they really had made it so difficult for her to do the transfer (which it turns out they had!)

I spoke to the Supervisor who immediately offered to arrange the transfer by Faster Payments within 30 minutes. We discussed what had happened and indeed it was more or less impossible for the first person I spoke to to have actioned my request.


Now then, there are two sides to every story, so what do people think about the statement interest information, the refusal to move the money today, and the apparent deliberate banking internal procedural obstruction to moving the money for at least a week once it had plummeted to 0.25% which was behind the initial refusal?

alanq

The interest rate in the statement is factually correct in that it was the interest rate applied during the period of the statement. You say that they had written to you in advance warning that the rate was going to drop so they weren't really being sneaky.

I have come across the situation with other providers where the maturity date fell at a weekend (or even a Bank Holiday weekend) so unless one arranged in advanced for an internal transfer to take place one had to wait for the next working day for payment to be initiated then 3 more working days for payment to arrive via BACS.

I have also come across a situation where it takes a couple of days to close an account. However, if the account was instant penalty-free access with FP I would have expected to be able to withdraw say all but £1 of the funds immediately on maturity and to close the account within a day or two.

Consumerist

The first rule of banking, these days, is to read Ts&Cs very carefully.

In practical terms, assuming you could stll get a rate of 5% (but you won't) the seven-day delay will cost you about £3.50 gross (£2.75 to a basic-rate taxpayer) in lost interest.

I agree that this sort of behaviour by banks is irritating but I would just regard it as a slightly reduced interest rate on the savings and live with it. So ask yourself the question: could I have earned any more, on similar terms, by saving elsewhere at the time?

alanq

It could potentially involve more than the lost interest.

An investment opportunity could be missed entirely during the extra week waiting for the money. A debt unpaid for an extra week would cost more in additional interest. etc.

noh

Don't really understand what your problem was.
My FD regular saver matured on the 24th September I transferred the £3677.96 [STRIKE](3p less than you!)[/STRIKE] to my 1st Account on the 25th (a Saturday) and then immediately out via faster payments to my AA savings account all done online.
Inter account transfers work 7 days a week as do Faster Payments.
Did you even try to move the money using online banking?

Edit:
Forget the 3p bit above it's just wrong!

ffacoffipawb

noh wrote: »

Don't really understand what your problem was.
My FD regular saver matured on the 24th September I transferred the £3677.96 (3p less than you!) to my 1st Account on the 25th (a Saturday) and then immediately out via faster payments to my AA savings account all done online.
Inter account transfers work 7 days a week as do Faster Payments.
Did you even try to move the money using online banking?

Opened 10/09/2009
Matured 10/09/2010

Interest of £77.96 added on 10/09/2010. Same as noh's.

Excel confirms this is 5% gross, after deducting tax. Interest rate earned was spot on. Remember that the average balance is £1950 (£300 for 12 months, £300 for 11 months, ... £300 for 1 month) and 5% x 1950 x 0.80 = £78.00 so pretty much as expected using a rough calculation.

Transferred to my FD current account on 10/09/2010 and transferred immediately to Lloyds Vantage number 3. No problems whatsoever.

EDIT: Appeared in my Lloyds Vantage 3 account within minutes.

Loughton_Monkey

I have had several Regular Savers with First Direct.

I have to say I couldn't have found them more clear. The Interest actually paid is 100% correct. [Amazing how many people think saving 12 X £300 to total £3,600 means they are going to get 5% on £3,600!!]

It couldn't have been clearer at the outset what happens at maturity (moves automatically to a savings account with FD if you have one. If not, it becomes an ordinary saver at 0.25%). Not only that, they write and remind you shortly before 'maturity. And afterwards, they send a paper statement for your records. [Strictly following the law about disclosing the account interest rates. Would you have preferred them to lie or break the law?]

Regarding Complaint 3, I have read it several times and really cannot understand it, and I suspect neither could they. You Regular Saver Account was, technically 'Instant Access' but to have accessed it (during the 12 month period) would have destroyed the high interest. The 'ordinary saver' that the account became was an instant access account, and could have been moved (by Internet Banking) on the 4th October onwards, if only you had simply done that.

2sides2everystory

I am sorry if I wasn't clear in the original post. I do think however that you Loughton Monkey are being deliberately obtuse when you state

[Strictly following the law about disclosing the account interest rates. Would you have preferred them to lie or break the law?]

All three complaints are about how FD (not the individual I spoke to) seem to have tried to deliberately mislead me, and customers generally, into thinking I could safely (at a good rate) leave, and must leave for a bit longer, the money where it was.

First there was the 5% Credit Interest rate quoted on the statement which was only sent to me after the rate had dropped to 0.25% and there was no mention of the drop on the statement at all, even though the statement purported to cover a period which in fact included the first day at the new tiny rate.

The mention of that 5% Credit Interest rate was not qualified in any way whatsoever. It should have been. For example, "The fixed interest rate which applied throughout the first 12 months was 5%, but in line with the original terms of FD's 12 month Regular Saver, it has now dropped to 0.25% variable" would have been appropriate. But no, you have to look back elsewhere in other documents received on another date to be reminded of that.

I accept that you clever people would have known all along how it works, but of course you are not the norm. Only a minority proportion of the total book of Regular Saver customers could ever describe the contract and what to expect after 12 months with any real accuracy - the headline rates are lauded in the media advertisements, the junkmail, online of course, and in the various bank window posters that advertise these same sorts of contracts up and down the high street. The 'loss-leader' rates are such that every man and his dog is therefore most likely to ask for a contract like that and buy one with hardly another blink. Then, when they have, most haven't a clue what to expect from it except to be confident that when they bought it, it was the "best savings rate" in the high street or the particular bank, or some such. And yes LM, my point exactly is illustrated when you rightly observe another example of most accountholders' ignorances

[Amazing how many people think saving 12 X £300 to total £3,600 means they are going to get 5% on £3,600!!]

I suggest that the repeat mention of that '5%' in the statement 12 months later after the good part of the deal is actually finished deliberately wrongfoots many into leaving the balance where it is, when exactly the opposite action is necessary. A quick glance at the only rate on the only statement received for the account in the whole 12 months suggests the rate is (still) 5% when of course it plainly isn't.

The reason I telephoned First Direct to make the transfer out was because I wanted to be doubly sure that the 12 months had finished so I didn't inadvertently breach any "no withdrawal or else" rule by moving the money online a day or two too early. I also was already annoyed by the 5% figure appearing as it did in the statement and I wanted to tell them so.

Once I got into a telephone discussion, I was, as you can read, then obstructed twice more by being given false advice about having to call again next week before I could ask them to move the money (the 'maturity process takes a full 5 days'). Then when I countered that surely with this account, I could right from the outset withdraw my funds anytime I wanted if I really wanted to, I found myself on the receiving end of the suggestion that for some strange reason an instant access account had become temporarily locked for withdrawals for the week that the 'maturity' process was occurring (which was silly), and finally being told I would lose interest if I insisted on moving it myself online before the maturity process was complete. At no time was I told there was a beter place for the money in FD either (perhaps there wasn't).

I am not querying the original rate of interest - I really could care less whether it was £75 or £80. It's peanuts anyway because of the £300 per month cap on investing new money. I am just annoyed that the bank should have set up its procedures so the statements are misleading and that telephone customers might apparently routinely receive wholly bad advice when these Regular Savers have ended if my experience was anything to go by. The net result is that the bank gets to 'retain' a lot of the balances in these 'matured' accounts whilst paying virtually no interest solely because customers are blissfully unaware they need to do something i.e. move it. I put this practice by FD in the same book as credit card balance transfers by some companies offered at 0% rates which suddenly jump to 20% or even greater a couple of weeks after the card company writes to the customer again and says "Just a reminder that you still have a promotional offer for balance transfers at 0% on your account for another 6 months". The wrongfooting letter in those cases seems deliberately timed to arrive just before the original 0% deal is up but no warning is issued about that (MBNA springs to mind).

triplea35

I have banked with First Direct since its inception and have nothing but praise for it.
There was one occassion that I thought that I was not being dealt with fairly, I will not bore you with the details, but on reflection now realise it was them just applying the terms and conditions and it was I that was overreacting.

FD transferred your money into a low rate savings account when it matured as do all the Banks. They wrote to you a few weeks before, telling you this, though you only 'vaguely' remember it. The T & C's are clear as can be online and you had oppurtunity to go online, read them, and initiate any transactions required.

Your title 'First Direct - 3 serious complaints' is a total exaggeration and unfairly besmirches the banks well deserved reputation.

Move on.

anselld

These fixed term regular savers all work the same way - there should never be any expectation of a good rate after maturity. FD is better than many others I have had where you have to wait for them to send a cheque and for it to clear after the maturity date.

2sides2everystory

I also have banked with First Direct from close to its inception and broadly have praised it over the years.

triplea35 wrote: »

Your title 'First Direct - 3 serious complaints' is a total exaggeration and unfairly besmirches the banks well deserved reputation.

Move on.

There is no unfair besmirchment. You chose to dismiss the three points entirely. They are all serious complaints.

1) The quoting of a wildly exaggerated Credit Interest Rate with the implication that it is correct going forward. The quoted rate was 20x the actual rate.

If a bank wants to join in this game of high headline rates for a short period and then dropping the rate off a cliff, then it should be exceedingly careful not to mislead customers at any time about what the rate is.

2) The refusal to transfer my money out of the bank with the excuse that the 5 day long maturity process was incomplete.

3) The incorrect warning that I would lose interest if I took matters into my own hands and moved the money anyway.

You may not think these are serious matters triplea, but any regulator would agree they are very serious.

anselld, yes we can see you know how they work, and so do I, but the majority of punters could not describe them accurately.

If you're alright, Jack, you may move on if you wish, but this thread exists to expose a surprising multi-faceted example of a major bank enjoying a long-held good reputation but apparently descending into some sorry depths of poor practice which I would not have expected from them at all.