Sneaky T&C's in New BoI 3 Year Deposit Product

[Lightning]

This is unbelievable and typical of the complexity that BoI employ with their deposit products to the detriment of consumers.

BoI are heavily advertising a new 3 year "special term" term deposit product. This is different to their other 3 year "growth" term deposit product which is mentioned in the best buy thread.

The rate offered is fixed for year one but variable in year two and three but you are locked for 3 years. It is not made very clear anywhere in the newspaper advertisements that this is the case. It is in the small print in the T&C's on the website.

You can bet that the rate will significantly decline on the first anniversary of the account leaving people locked at a low rate for 2 years.

How can BoI get away with locking peoples money away without advising as to the rate for the full 3 years at account opening stage? Also, how can BoI get away without making this sneaky T&C clear in their advertisements?

Avoid this product.

 

[theresa1]

Good old BoI at it's best - in an ideal world state savings would bring out an advert for it's 3 year savings bonds and rip this Product apart.

 

[Brendan Burgess]

I can't believe that this product is in compliance with the Consumer Protection Code.

It breaches the principle of unfair advertising.

I expect that the CB will stop it.

 

[Time]

Only if someone complains about it.

 

[advice pls]

Wonder if you went in to open one how clear the sales pitch would be about it?

 

[Luternau]

Quite an imbalanced agreement. Do they not have to get approval for the product beforehand? So that it complies with consumer legislation/regulatory guidelines etc?

 

[Brendan Burgess]

No. Products are not pre-approved

 

[Time]

It would appear they don't have to.

 

[Luternau]

Have the CB not learned anything about what light touch regulation can result in? I was hoping they had!

 

[Brendan Burgess]

I don't think it would be possible to approve all products.

But I do think that they should come down like a ton of bricks on BoI for this one.

 

[The Ghoul]

I pretended I hadn't seen this thread and went looking on BOI's website for fixed term deposits. Click on "save & invest" and then "fixed term accounts" and here is the first thing I saw, have bolded what I think is the misleading part

At particular times in your life you may find that you have a sum of money you can put away. It could be a lump sum received through inheritance, retirement or even from savings built up over the years. One option for such a lump sum deposit is a Fixed Term Deposit Account. It offers security for your money for the term chosen, with a fixed rate of interest.

• Advantage Fixed Term Deposit Account
• 3 Year Growth Account
• Special Term Account 3 Year

Clicking on the link for the Special Term Account 3 year brings up info on the gross and AER rates for the first 52 weeks/1 year, there's also the reasonably clear statement

Interest rates for years 2 and 3 will be confirmed on the anniversary of the account

The sneakiest part of all IMO is where it says

The account term is three years
The rate is fixed each year

There is no doubt in my mind that this has the potential to mislead. Well done to CiaranT for spotting this.

 

[Renter7]

Why is the first EUR480 Dirt free?

Agree with all the posts above.

 

[Lightning]

Thanks all.

The press advertisements are one of the worst aspects of this with no mention of the fact that the rate is at the banks discretion for 2 years of the 3 year term.

BoI clearly designed this product to lure customers in with an attractive rate for year one and then pay them next to nothing (possibly 0.01%) for year 2 and year 3 but to leave them with no way out. Trickery, entrapment and misleading.

Hopefully, the media pick up on this.

Why is the first EUR480 Dirt free?

Agree with all the posts above.

Banks can offer DIRT free products for 3 and 5 year terms in order to help them compete with the NTMA, subject to certain conditions.

 

[cbreeze]

I was in my local BoI recently making a lodgement and the teller was trying to off load some savings products. I told them no thanks that that for three-year terms they were not in contention. You would not put your own money in the BoI I suggested. and went off to buy a bond from NTMA Interest rates will drop again. Though while NTMA are good for now, the banks are lobbying to get the state to drop these rates. NTMA can quickly get a new S.I. through over a weekend which will change their rates should they feel they need to be influenced by the Banks.

 

[Bobby1]

This isn't a new product for BOI, they are just rehashing an old one, AIB offer similar "Special Term". The basic rules of the product are set by Revenue, in order to comply with earning a portion of interest DIRT free. I have looked at this at great lengths for banks thinking of introducing the product, but most abandoned it when you read the mind boggling rules Revenue thought up of .

[broken link removed]

If you look at the AIB version, they pay a variable rate of interest on a fixed term account, which goes against the grain really - fixed terms should have fixed rates!

The banks have to live within the crazy rules of the scheme to offer the product, these need to be reviewed on a wider scale

 

[Brendan Burgess]

Hi Bobby

That is very interesting. This product from AIB and BoI leaves customers very vulnerable.

Why would anyone opt for this account where you are stuck in it for three or five years and the bank can set the interest rate after year 1?

(Look what happened to the unfortunate Bank of Ireland tracker mortgage holders in the UK, who didn't bother reading the terms and conditions. They are now on SVR mortgages. )

What if AIB or BoI drops the rate to 0.1% after year 1? Can the customer get out of the product?

It is essential that banks who offer this product highlight the fact that the interest rate is at their discretion in Years 2 and 3.

 

[Brendan Burgess]

I see that this was raised 6 hours ago on the BoI forum on boards.ie

http://www.boards.ie/ttfthread/2056957782/1#post84799089

They have not replied yet.

See the ad attached. While the cartoon character in the ad is winking at us to let us know that they are having us on, they don't specify an interest rate. Can anyone with a copy of the ad which is misleading on the interest rate , email a copy of it to me at brendan at this website.

Brendan

 

[Brendan Burgess]

Thanks all.

The press advertisements are one of the worst aspects of this with no mention of the fact that the rate is at the banks discretion for 2 years of the 3 year term.

BoI clearly designed this product to lure customers in with an attractive rate for year one and then pay them next to nothing (possibly 0.01%) for year 2 and year 3 but to leave them with no way out. Trickery, entrapment and misleading.

Hi Ciarán

The odd thing about the ad in the Sunday Times is that it does not mention a rate.

€480 on the maximum deposit of €20,000 would be 2.4%, but it does not quote this.

Have you seen a different ad which shows an "attractive" rate?

 

[Brendan Burgess]

I got the following statement from a spokesman for Bank of Ireland

Unfortunately, Bank of Ireland is bound by strict legislation on this product that does not permit us to fix or indicate the rates on this product for year 2 and 3. The specific legislation restricting this is contained in the Finance Act 2001, Section 7 (e) which states "(e) there shall not be any agreement, arrangement or understanding in existence, whether express or implied, which influences or determines, or could influence or determine, the rate (other than an unspecified and variable rate) of interest which is paid or payable, in respect of the relevant deposit or relevant deposits held in the account, in or in respect of any period which is more than 12 months" (page 150 on pdf). Thus, while we are clearly meeting our obligations under CPC, we are bound and restricted by specific legislative conditions of this product.

 

[Lightning]

Why would anyone opt for this account where you are stuck in it for three or five years and the bank can set the interest rate after year 1?

Only those with a lack of financial knowledge would opt for such a product type!

(Look what happened to the unfortunate Bank of Ireland tracker mortgage holders in the UK, who didn't bother reading the terms and conditions. They are now on SVR mortgages. )

Yeah, there have been other controversial BoI T&C decisions.

What if AIB or BoI drops the rate to 0.1% after year 1? Can the customer get out of the product?

Which they probably will. The customer is stuck for the remainder of the term.

It is essential that banks who offer this product highlight the fact that the interest rate is at their discretion in Years 2 and 3.

Exactly.

The odd thing about the ad in the Sunday Times is that it does not mention a rate.

Fair point that the advertisement does not mention the rate. I still think that BoI should be mentioning the fact that the rate on this 'fixed' product is at the banks discretion for 2 of the 3 years in their advertisements.

I got the following statement from a spokesman for Bank of Ireland

Unfortunately, Bank of Ireland is bound by strict legislation on this product that does not permit us to fix or indicate the rates on this product for year 2 and 3. The specific legislation restricting this is contained in the Finance Act 2001, Section 7 (e) which states "(e) there shall not be any agreement, arrangement or understanding in existence, whether express or implied, which influences or determines, or could influence or determine, the rate (other than an unspecified and variable rate) of interest which is paid or payable, in respect of the relevant deposit or relevant deposits held in the account, in or in respect of any period which is more than 12 months" (page 150 on pdf). Thus, while we are clearly meeting our obligations under CPC, we are bound and restricted by specific legislative conditions of this product.

Interesting, I was unaware that legislation prevented the fixing of rates beyond year 1 on medium/long dated DIRT free products. Strange that the NTMA are allowed do that with State Savings products but banks aren't.

However, this point does not give BoI a green light to (1) put the product in their fixed term deposits section, (2) to state that there is a "fixed rate of interest" in the header description on the website and (3) to preclude to mention that the rate beyond year 1 is at the banks discretion in advertisements.

I have looked at this at great lengths for banks thinking of introducing the product, but most abandoned it when you read the mind boggling rules Revenue thought up of .

Interesting. The key point there is that banks are under no obligation to offer such a product if they have issues with the way Revenue have implemented rules around it. It is the banks choice to offer this product.