Possible no interest paid during maturity rollover 14 day cooling off period

eskbanker

bristolleedsfan said:

Significance of them receiving notification from YBS of transfer request prior to maturity is  "Maturity letter stated if do not receive instructions before Maturity Date - auto reinvestment at prevailing interest rate as at date of maturity"

But what specifically are the options within the maturity letter?  I'd interpret their reference to 'instructions' to mean you telling them which of their options you wish to choose, e.g. withdraw or reinvest - a transfer request received from another ISA provider (as needs to be the case for a transfer) may not actually be counted as an 'instruction'?

masonic said:
Although they do refer you to the T&C for more information, I think you could still object to "without any charges", as they have effectively charged you the accrued interest to cancel. When the penalty is ordinarily a sum equivalent to X days interest, then "without any charges" should surely be when all interest is paid unless otherwise indicated.

Not sure I agree with this - I think there's a difference between 'without any charges' and 'with all interest', i.e. it's stretching a point to classify lack of interest as a charge as such.  They do also separately refer to "early withdrawal charges" though, so if that was what they meant then they should have been consistent with the terminology.

masonic

eskbanker said:

masonic said:
Although they do refer you to the T&C for more information, I think you could still object to "without any charges", as they have effectively charged you the accrued interest to cancel. When the penalty is ordinarily a sum equivalent to X days interest, then "without any charges" should surely be when all interest is paid unless otherwise indicated.

Not sure I agree with this - I think there's a difference between 'without any charges' and 'with all interest', i.e. it's stretching a point to classify lack of interest as a charge as such.  They do also separately refer to "early withdrawal charges" though, so if that was what they meant then they should have been consistent with the terminology.

When the early withdrawal charges are classified in terms of interest, then I would suggest that stating "without any charges" implies without loss of interest. Otherwise they are just reducing the interest charge to the duration the account was held. In the absence of the clarifying statement (present in the T&Cs) that interest is forfeit, this seems misleading. Especially so, given this doesn't seem to be common practice across other providers.

eskbanker

masonic said:

eskbanker said:

masonic said:
Although they do refer you to the T&C for more information, I think you could still object to "without any charges", as they have effectively charged you the accrued interest to cancel. When the penalty is ordinarily a sum equivalent to X days interest, then "without any charges" should surely be when all interest is paid unless otherwise indicated.

Not sure I agree with this - I think there's a difference between 'without any charges' and 'with all interest', i.e. it's stretching a point to classify lack of interest as a charge as such.  They do also separately refer to "early withdrawal charges" though, so if that was what they meant then they should have been consistent with the terminology.

When the early withdrawal charges are classified in terms of interest, then I would suggest that stating "without any charges" implies without loss of interest. Otherwise they are just reducing the interest charge to the duration the account was held. In the absence of the clarifying statement (present in the T&Cs) that interest is forfeit, this seems misleading. Especially so, given this doesn't seem to be common practice across other providers.

A similar issue was discussed in a recent early redemption thread on here - the fact that early withdrawal charges are calculated by reference to the interest rate doesn't make them 'negative interest'.  To be fair, I don't think you're suggesting they are, but the principle is that charges and interest are entirely separate, so the absence of one doesn't form part of the other - I don't really understand what you mean by 'reducing the interest charge to the duration the account was held'?

OP - perhaps it would help if you shared the whole maturity letter, personal stuff redacted obviously?

masonic

eskbanker said:

masonic said:

eskbanker said:

masonic said:
Although they do refer you to the T&C for more information, I think you could still object to "without any charges", as they have effectively charged you the accrued interest to cancel. When the penalty is ordinarily a sum equivalent to X days interest, then "without any charges" should surely be when all interest is paid unless otherwise indicated.

Not sure I agree with this - I think there's a difference between 'without any charges' and 'with all interest', i.e. it's stretching a point to classify lack of interest as a charge as such.  They do also separately refer to "early withdrawal charges" though, so if that was what they meant then they should have been consistent with the terminology.

When the early withdrawal charges are classified in terms of interest, then I would suggest that stating "without any charges" implies without loss of interest. Otherwise they are just reducing the interest charge to the duration the account was held. In the absence of the clarifying statement (present in the T&Cs) that interest is forfeit, this seems misleading. Especially so, given this doesn't seem to be common practice across other providers.

A similar issue was discussed in a recent early redemption thread on here - the fact that early withdrawal charges are calculated by reference to the interest rate doesn't make them 'negative interest'.  To be fair, I don't think you're suggesting they are, but the principle is that charges and interest are entirely separate, so the absence of one doesn't form part of the other - I don't really understand what you mean by 'reducing the interest charge to the duration the account was held'?

The early withdrawal charge is stated as being equivalent to (say) 90 days interest. UBL appear to have communicated in this letter that there will be no early withdrawal charge in the first 14 days, without further qualification. If a customer takes this at face value and elects to cancel after (say) 7 days, then they are going to lose the equivalent of 7 days interest, which is equivalent to a reduced early withdrawal charge. I understand that your point is that this forfeit interest is not the same as the early withdrawal charge, but it is an unstated loss of interest (if relying only on the letter) that is accrued and subsequently forfeit as a direct result of the decision to cancel. What proportion of customers would appreciate this distinction?

UBL are drawing attention a favourable element of cancellation (no early withdrawal charge) while omitting an unfavourable element (the forfeit interest). Semantics aside, this creates an unbalanced impression of the consequences of exercising the right to cancel. They could have simply stated they will repay the full balance paid into the account.

eskbanker

Fair enough, I agree with the second paragraph, i.e. I think it's tenable to assert that interest forfeiture not being mentioned is unfair, but still wouldn't go as far as claiming that it shouldn't apply simply because of that!

bristolleedsfan

eskbanker said:

bristolleedsfan said:

Significance of them receiving notification from YBS of transfer request prior to maturity is  "Maturity letter stated if do not receive instructions before Maturity Date - auto reinvestment at prevailing interest rate as at date of maturity"

But what specifically are the options within the maturity letter?  I'd interpret their reference to 'instructions' to mean you telling them which of their options you wish to choose, e.g. withdraw or reinvest - a transfer request received from another ISA provider (as needs to be the case for a transfer) may not actually be counted as an 'instruction'?

Choose a fixed term without guaranteed rate - they sent a sheet with current rates as of 28 March, rate you get is rate they are offering on maturity date. ( turned out they reduced fixed rates the day after my maturity date)

Tick box to say given instructions to another ISA provider and insert name.


My highest balance fixed rate maturing I posted transfer in form to new provider 7 year 4.11% AER + compounding interest on 31 March Special Delivery I have loads of stamps half the cost unfranked on a jiffy bag,  I also posted form back to UBL UK. and sent them secure message, they replied saying they would honour transfer out request irrespective of whether they received instruction by post.

Sadly I felt unable to transfer this second maturing fixed rate ISA to same provider referred to above as 1 years interest would push me over £85000 compensation limit, felt unable to transfer this ISA to Gatehouse Bank 5 year fix for similar reason and missed out on 4.25% Darlington BS 5 year fix due to it being withdrawn after 2 days.

I notified UBL UK by secure message on 20th April that on 21st April I would be lodging ISA transfer request for this second maturing fixed rate ISA.

I have got two choices kick can down the road for 5 years by cancelling ISA transfer and accept 4% AER..  I had to take issue with UBL UK 5 years ago after they seemed to have dim view of apparent fact that no interest should be lost during ISA transfer in, they did rectify matters with a hump,

Or - 

Make issue with UBL UK regarding  then only informing me after matured ISA had rolled over that they do not pay interest during 14 day cooling off period if in there words withdraw, + issue of them only referring to withdraw the funds within maturity letter and subsequent rollover letter.

masonic

eskbanker said:

Fair enough, I agree with the second paragraph, i.e. I think it's tenable to assert that interest forfeiture not being mentioned is unfair, but still wouldn't go as far as claiming that it shouldn't apply simply because of that!

I'm not suggesting that either. Just that there could be a valid complaint. In considering that, what could the OP have done differently if this had been mentioned? Not much I'd venture, unless the difference in rate was marginal and it may have been better staying put. But it would be an opportunity for UBL to make this letter clearer for others, and perhaps worth a few quid by way of apology for the confusion. Another relevant factor is when YBS will apply interest.

bristolleedsfan

masonic said:

eskbanker said:

Fair enough, I agree with the second paragraph, i.e. I think it's tenable to assert that interest forfeiture not being mentioned is unfair, but still wouldn't go as far as claiming that it shouldn't apply simply because of that!

I'm not suggesting that either. Just that there could be a valid complaint. In considering that, what could the OP have done differently if this had been mentioned? Not much I'd venture, unless the difference in rate was marginal and it may have been better staying put. But it would be an opportunity for UBL to make this letter clearer for others, and perhaps worth a few quid by way of apology for the confusion. Another relevant factor is when YBS will apply interest.

Had maturity letter stated no interest during 14 day cooling off period if transfer out, I would have initiated transfer out 3 weeks earlier being as was not even offered a guaranteed rate for another 5 years.

"Another relevant factor is when YBS will apply interest"

Yes my understanding is supposed to be no loss of interest during ISA transfers, however I cannot see YBS backdating interest to cover loss during cooling off period.

tightauldgit

masonic said:

tightauldgit said:

Exercising a cooling off period is cancelling the contract and generally the requirement would be for them to put you back in the position you were in before entering the contract. So you get your funds back but no interest payments. 

They are not required to have a cooling off period. Many accounts do not. Of those that do, it seems more common that they will return the money with interest and without penalty. I just picked two providers at random to check (Santander and Nationwide), and both do pay interest up to cancellation. So the requirement and what is the case generally are going to be quite different.

As there is no requirement to have a cooling off period, if one is offered, it is on the terms specified by the provider. The only issue I would have in this case is that it is not without early withdrawal charges if interest is forfeit. If that statement in the maturity letter was made without the qualification that interest would not be paid (as set out in the product features), then it could be viewed as somewhat misleading.

I don't see that the maturity letter has any relevance. Exercising the cooling off period hits rewind to before you invested and the contract never existed. The terms of the contract don't have any relevance because you cancelled the contract. That's my understanding of what a cooling off period is.

masonic

tightauldgit said:

masonic said:

tightauldgit said:

Exercising a cooling off period is cancelling the contract and generally the requirement would be for them to put you back in the position you were in before entering the contract. So you get your funds back but no interest payments. 

They are not required to have a cooling off period. Many accounts do not. Of those that do, it seems more common that they will return the money with interest and without penalty. I just picked two providers at random to check (Santander and Nationwide), and both do pay interest up to cancellation. So the requirement and what is the case generally are going to be quite different.

As there is no requirement to have a cooling off period, if one is offered, it is on the terms specified by the provider. The only issue I would have in this case is that it is not without early withdrawal charges if interest is forfeit. If that statement in the maturity letter was made without the qualification that interest would not be paid (as set out in the product features), then it could be viewed as somewhat misleading.

I don't see that the maturity letter has any relevance. Exercising the cooling off period hits rewind to before you invested and the contract never existed. The terms of the contract don't have any relevance because you cancelled the contract. That's my understanding of what a cooling off period is.

That's not how cooling off periods are normally applied to contracts for services. With service contracts, the services can be used during the period leading up to cancellation, and this cannot be nullified. So the contract is performed up to the date the cancellation option is exercised: the consumer gets the benefit of the services until this date, and the service provider is entitled to charge for the services that have been used in line with the contract. This appears to be no different in cancellation of a cash deposit ISA under COBS15.2. Hence the effect of cancellation (COBS15.4.1) is "By exercising a right to cancel, the consumer withdraws from the contract and the contract is terminated". Terminated rather than cancelled. Where there would be a charge for the services, the provider can charge for the services actually used under COBS15.4.2, so it is clearly not a 'rewind'.