Charter Savings Interest Rate Change - Advice Requested re. T&Cs and Potential Complaint

npb34

Hi everyone!

I'd be grateful for your views on this situation, and whether I have a reasonable cause for complaint.

On 19 April I opened a 2yr fixed rate account with Charter Savings at 2.1%. I arranged for my first funds to be deposited on 27 April (depositors have 14 days after account opening to transfer funds into the new account). On 21 April Charter Savings raised the rate to 2.35%. I was unsure if the new rate would apply to my account, as my funds were being deposited after the rate change had taken place.

Their T&Cs stated:

"The interest rate is fixed for two years from the date your initial deposit is creditd to your Fixed Rate Bond (the fixed rate period)".

That seemed to confirm to me that the fixed rate applied from the date of the initial deposit, i.e. before that date it was not fixed, and therefore any rise in rate would be applied in the interim period. Other banks do operate in this way. I did try to call the Charter customer services line, but after waiting 40+ minutes twice gave up. I was confident that I'd understood the T&Cs correctly.

However, they have applied the old rate of 2.1% to my new account, as the valid rate on the day I opened the account. I've now spoken to customer services, who have been very confused. In reply to a secure message, a Charter employee wrote:

"Please be advised, the paragraph you are referring to in the Key Feature advises; 'The interest rate is fixed for 1 Year from the date your initial deposit is credited to your fixed rate bond'. This does not however mean that if the rate has increased since then that your rate would increase."

This also seemed to confirm my thinking - of course, changes after the date of deposit (i.e. during the 'fixed rate period') would not be applied, but that, by definition, changes before the date of deposit (before the 'fixed rate period) would be applied.

Yet CS has since rejected a first appeal by letter, stating:

"Please note, we do not confirm in any of the literature we have provided you that the interest rate would receive interest based on the date of receipt of your deposit"

But that seems precisely what the T&Cs quoted above do confirm ....

I'm keen to take this further - via social media, Which and the Ombudsman, but only if kind readers here agree with my interpretation of the T&Cs. Or do you think I've misunderstood?

Many thanks for thoughts on this!

K.

Olinda99

for me, if nothing else the terms are confusing so I would make a complaint.

before you do, check that there are not 'issue numbers' eg you opened a fixed rate account issue 12 at 2.1% and the 2.35% applied to.issue 13.

refluxer

Personally, I think you've jumped to the wrong conclusion and the first secure message they sent to you confirms this.

In my experience, if the rate of a fixed rate product increases after you apply but before you've made you initial deposit and the bank would then automatically increase the rate on the account you applied for, then it would explicitly say so in their T&Cs and almost certainly on their product page, too. 

For example, Ford Money call this their 'Best Rate Guarantee' and state on their fixed rate product page (before you even get to the T&Cs)... "On fixed rate products you’ll receive the interest rate shown at the time you apply, but if we subsequently increase our product rate for new customers before you’ve made your initial deposit, you’ll receive the same higher interest rate."

They make a big thing of this because this isn't the norm (in my experience with the companies I've opened fixed rate accounts with in recent years at least) but even if other banks do operate in that way, if Charter don't and don't state it in the T&Cs you signed up to, then I don't think you have a case.

I do agree that the last secure message they sent was confusing though and is obviously incorrect as it doesn't tally with their T&Cs, but it still doesn't help with you case, unfortunately.

I appreciate that it's easy with hindsight, but if you'd spotted the rate had increased on the 21st April then you could have looked into the issue before making your first deposit. I suspect the best course of action would have been to apply for the new account with the higher rate and not pay anything into the original account (and therefore it would automatically close) or contact them to close it yourself, if necessary.

lindabea

The way I understand the T&C is that when you open a fixed rate account, the rate of interest is fixed for the account you opened at the agreed rate.  However, interest is earned on the account from the date funds are deposited into the account, not from the date of opening.  Perhaps it is this distinction which creates the ambiguity.

FlemishBond

I would leave it. You were prepared to accept the interest rate when you opened the account. Their T&Cs could be clearer but they could argue that the condition you quoted was at the rate you accepted.

Olinda99

i would also add (for anyone else reading this thread) that now is probably not the time to be opening fixed rate accounts.

eskbanker

npb34 said:

Their T&Cs stated:

"The interest rate is fixed for two years from the date your initial deposit is creditd to your Fixed Rate Bond (the fixed rate period)".

That seemed to confirm to me that the fixed rate applied from the date of the initial deposit, i.e. before that date it was not fixed, and therefore any rise in rate would be applied in the interim period.

I disagree with your conclusion and think that this is simply stating that the two year fixed rate period starts on the date of initial deposit, and that during that period the rate won't change, rather than that implying that rate changes before that period will be reflected.  Turning it round the other way, how would you have felt if they'd dropped their rate between application and deposit, and reduced the interest you'd be paid?

masonic

I agree with others. Your contract was for a rate specified at the time of your agreement. To secure a different rate, you should have applied for a new account and elected not to fund the existing one. You were in a position to do this, but through your own misunderstanding took the wrong action. The terms are not unclear on this in my view.

masonic

Olinda99 said:

i would also add (for anyone else reading this thread) that now is probably not the time to be opening fixed rate accounts.

Why not? I open a new one approx every 4 months to replace a maturing one. Interest rate expectations go up and down all of the time, it may not seem so due to a recent period of historically low interest rates, but looking over multiple decades puts things in perspective. A ladder of fixed term accounts is quite a valuable holding at the present time.

Thrugelmir

npb34 said:

On 19 April I opened a 2yr fixed rate account with Charter Savings at 2.1%. 

This is the key fact. As far as Chartered Savings is concerned will not simply be a question of switching interest rates. If you wanted the higher fixed rate product then you needed to apply for it. A new account would have been opened accordingly. 

kaMelo

The interest rate is fixed at application time. If the interest rate on offer increased before you deposit your money then don't deposit the money. Just open a new one at the increased rate and put your money in that one.

The original account at the lower rate will eventually be closed due to no money being deposited.