Chip cash ISA ban after transferring out !

Clarendon40

Hi Everybody I’ve just transferred my Chip Cash ISA to Trading 212 and have received an email from Chip acknowledging the transfer request which also bans me from investing in a Chip Cash ISA in the future.  Can they do this ?  Seems like a pretty juvenile response !

Hoenir

Account administration is  expensive. No business really wants unprofitable customers. 

eskbanker

This policy is documented in their FAQs:

How do I transfer my cash ISA out of Chip?

[...]

Please note that when transferring your cash ISA out of Chip, your Chip Cash ISA will automatically be closed once the transfer is complete and you won't be able to open another Chip Cash ISA in the future once it's closed.

https://intercom.help/get-chip/en/articles/8856781-the-chip-cash-isa-faqs#h_becdada0f9

Albermarle

Clarendon40 said:

Hi Everybody I’ve just transferred my Chip Cash ISA to Trading 212 and have received an email from Chip acknowledging the transfer request which also bans me from investing in a Chip Cash ISA in the future.  Can they do this ?  Seems like a pretty juvenile response !

They can do what they like. You can not force a business to take your money if they do not want to.
Having said that it is a very unusual policy !

gravel_2

Believe Chase has a similar policy for current accounts.

eskbanker

Moneybox also have a similar stance, albeit specifically for transferring back rather than opening again:

Please note that if you are transferring out to another provider, it isn’t currently possible to transfer back to Moneybox once the transfer out is complete.

https://www.moneyboxapp.com/faqs/how-do-i-transfer-my-moneybox-isa-to-another-provider/

Johnny-Cage

Can’t you transfer out and leave a little balance in Chip 

eskbanker

Johnny-Cage said:

Can’t you transfer out and leave a little balance in Chip 

Not when they don't support partial transfers....

masonic

Clarendon40 said:

Hi Everybody I’ve just transferred my Chip Cash ISA to Trading 212 and have received an email from Chip acknowledging the transfer request which also bans me from investing in a Chip Cash ISA in the future.  Can they do this ?  Seems like a pretty juvenile response !

The T&Cs state: "Once a transfer out request has been successfully processed, Chip will close your cash ISA and currently you will be unable to open another one with Chip in the future."

This reads more of a limitation of their system than a deliberate policy. Chip has not been around for long and no doubt is prioritising features for existing customers. Perhaps at some stage they will create an application journey for former customers. In the mean time, I suspect they won't be offering anything better than the ISA you are ditching.

someone

It does seem to be buried in the terms. However, it contradicts a statement on their main website.

What does a flexible ISA mean? - A flexible ISA allows individuals to withdraw money from their ISA accounts and then replace it within the same tax year without affecting their annual ISA allowance. Also, if you withdraw your money in our Cash ISA, you won’t receive any restrictions or penalties.

Transferring the ISA is “a withdrawal from the money in the Cash ISA” and should be possible without any penalties. To me, not being able to open a chip Cash ISA in the future is a penalty of sorts.

Is this an unfair term?

The situation here may be in the scope of unfair contract terms as the Competition & Markets Authority (CMA) says

If a term could come as a surprise to the consumer, it will require more effort to ensure its prominence compared to other terms (and this applies not only in the contract but to all pre-contract information, for example brochures or webpages). [link (pdf)]

The sanction being applied to consumers also appears disproportionate; whilst account administration has costs, there are other ways of dealing with this.

Is the term anti-competitive?

There also seems to be a market fairness element to this. Rate, brand, customer service, and convenience are usually the factors used in picking a Cash ISA. If chip customers also have to factor in “never been able to have another Chip cash ISA again,” this might be considered anti-competitive.
My gut says something is not right about this term. As an account holder with them who is interested in moving my current year’s subscriptions, I’ve sent their support an initial message about this. We will see where this ends up.

masonic

someone said:

It does seem to be buried in the terms. However, it contradicts a statement on their main website.

What does a flexible ISA mean? - A flexible ISA allows individuals to withdraw money from their ISA accounts and then replace it within the same tax year without affecting their annual ISA allowance. Also, if you withdraw your money in our Cash ISA, you won’t receive any restrictions or penalties.

Transferring the ISA is “a withdrawal from the money in the Cash ISA” and should be possible without any penalties. To me, not being able to open a chip Cash ISA in the future is a penalty of sorts.

Just dealing with this point, withdrawing is not the same as transferring. They differ in several ways, the clearest of which is the tax status of the balance withdrawn is lost (albeit this could be temporary in the case of a flexible ISA, but would be permanent if paid into a different ISA). That simply does not happen if an ISA is transferred by the provider to another ISA. Withdrawals also do not result in the ISA wrapper moving between providers and the consequent loss of the account from the original provider. Transferring an ISA does not need to be possible without any penalties. Indeed many accounts impose a penalty if you transfer out or withdraw money outside of the agreed terms and the ISA rules allow for this. It does not make a good argument to conflate withdrawals and ISA transfers in order to apply the terms of one to the other when they are clearly distinct in the T&Cs and in practice. 

It is also a stretch to describe a future hypothetical application decision as a penalty. The terms don't bind either party to open any additional accounts, so either party is free not to enter into any subsequent agreement. So nothing has been taken away that was previously offered. A penalty would involve a forfeit or loss, so what has been forfeit or lost?

Whether it is an unfair term or anti-competitive depends on the reason behind the limitation. So it will be interesting to hear what they have to say about why customers are not able to open a second account.

To add to the list of providers who also do this, didn't Marcus do this when they launched in the UK in 2018? If so, I don't know if they ever got around to changing it.