BoI 3 year Special Term Deposit Product

JTMan

Hi,

I would like to raise several concerns about the way the BoI 3 year Special Term Deposit is being marketed and the nature of the product. 

This product is fixed for year one but has a rate that is at the banks discretion for year 2 and year 3. 

(1) This product is listed under "Fixed term deposits" but the rate is 2/3 at the banks discretion and not fixed at account opening stage. This product should not be under the heading fixed term deposits. The title is misleading. The consumer may end up being paid 0.01% for year 2 and year 3.

(2)  The product is under the description "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". This is incorrect. The rate of interest is not fixed for the term. The real AER rate of interest is unknown when you choose your term and the rate of interest is not fixed for the full term. 

(3)  The advertisements that you have run for this product in the Sunday Business Post and Sunday Times yesterday failed to make the key T&C for this product clear. Why do the advertisements not clearly state that the rate of interest is not fully determined at account opening stage and the bank sets the rate for year 2 and year 3 at a rate of their choice? This is such an important criteria of the product. It should be made clear in the advertisements. 

(4) This whole product gives the feeling of entrapment. You lure the customer in with a high rate for year one and then pay them next to nothing for year 2 and year 3 but yet leave them locked for 3 years. It is trickery and entrapment. The Consumer Code has clear provisions against this kind of misleading product. I would encourage you to review this products compliance with the Consumer Code. 

Thanks in advance.

DB74

Would hate to see this drop off into Page 2 with no response from the Bank themselves.

Bank of Ireland: Billy

Hi Fungus, 

Thanks for posting. 

We're looking into this for you and waiting for some clarification.
If we have a response before 5pm, we'll post the details, if not we will come back to you early in the morning. 

Thanks

Billy

Bank of Ireland: Billy

Hi Fungus,
 
Thanks for posting
 
The Special Term Account is a fixed term account to comply with the legislation governing Special Term Accounts. While the term is fixed, the rate cannot be fixed for the entire term as dictated by Section 264A (e) of the Taxes Consolidation Act, 1997 (as inserted by the Finance Act, 2001) 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".

However, for customers who may be dissatisfied with the rate in Years 2 or 3, the Special Term Account may be closed, with no penalty from Bank of Ireland. However, the account will lose the Special Term Account status, which means that DIRT will be payable on the interest earned to that date.

(2) The product isunder the description "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". This is incorrect. The rate of interest is not fixed for the term. The real AER rate of interest is unknown when you choose your term and the rate of interest is not fixed for the full term.
 
You arecorrect in pointing this "categorisation" error out. While we do have fixed term products with variable rates, the Special Term Account is not and cannot be categorised as "an account for the term chosen, with a fixed rate of interest". Thank you for pointing this out - Bank of Ireland will immediately display this product under a different category to ensure there is no ambiguity.

(3) Theadvertisements that you have run for this product in the Sunday Business Post and Sunday Times yesterday failed to make the key T&C for this product clear. Why do the advertisements not clearly state that the rate of interest is not fully determined at account opening stage and the bank sets the rate for year 2 and year 3 at a rate of their choice? This is such an important criteria of the product. It should be made clear in the advertisements.

Because ofthe rate related restrictions prescribed by legislation, Bank of Ireland was restricted in publicising the rate on the advert as we would have been compelled to also state the AER, which, as you point out in your second comment, is 'unknown' as we cannot confirm the rates on Year 2 and 3. However, with best efforts, the advert was designed to highlight the core qualifying criteria for this account as required under the Consumer Protection Code. To qualify for a Special Term account, there is a minimum investment of €5K and customers must comply with the terms and conditions to benefit from the DIRT free exemption. The rate is not, in fact, a qualifying criteria.

(4) This whole product gives the feeling of entrapment. You lure the customer in with a high rate for year one and then pay them next to nothing for year 2 and year 3 but yet leave them locked for 3 years. It is trickery and entrapment. The Consumer Code has clear provisions against this kind of misleading product. I would encourage you to review this products compliance with the Consumer Code.

It isclearly not our intention nor is it our desire for customers to break out of the STA and as a consequence, it would make little sense for BOI to provide a year 2 rate that is adverse to prevailing market rates at this time. Bank of Ireland is meeting its obligations under the Consumer Protection Code, but is bound to adhere to the restrictions imposed on this account by specific legislation. However, as previously highlighted, customers who may be dissatisfied with the rate in Years 2 or 3, are fully entitled to remove their funds, with no penalty from Bank of Ireland, but they will lose the STA status.  
 
The SpecialTerm Account 3 year product offers an opportunity for customers to receive interest of up to €480 per annum DIRT free, which Bank of Ireland determined may be a welcome incentive for savings particularly as DIRT rates have increased significantly over the past 5 years and as deposit interest rates reduce in line with market rates.
 
We hope this answers your query.
 
Thanks
 
Billy

JTMan

Thank you for the detailed response and the further information Billy. 

Thanks also in advance for making the website changes you have detailed above.

I have further queries I will let you know.

Cheers.

BrendanBurgess

"However, as previously highlighted, customers who may be dissatisfied with the rate in Years 2 or 3, are fully entitled to remove their funds, with no penalty from Bank of Ireland, but they will lose the STA status.  "

The Sunday Times ad says: "No withdrawals are permitted during the term"

So is the ad wrong?

I was passing a branch of the Bank of Ireland, so I dropped in to discuss the product with them.

The woman very helpfully printed off the forms for me entitled "Speical Term Account 3 Year"

Clause 2.3   You can not take money out of the STA 3 during the term(See Clause 3)
Clause 3      The term of the STA 3 is 156 weeks (3 years)

So are these terms and conditions incorrect?

I put it to the woman that BoI could pay me a rate of 0.1% on this account in the second year. She said that they could. I asked her if she would put her money in an account where the bank set the rate and she said that she would not and she would want a guarantee of the rate in writing.

The Advertising Terms of the CPC are clear. You cannot mislead customers. You should highlight the key terms and conditions. You should have a clear warning on this ad.

"the rate is fixed for the first year. We set the rate after that and if you don't like it - tough. You are stuck with it for the rest of the term"

JTMan

Very good point Brendan. 

Bank of Ireland - Is it possible for you to address Brendan's query? 

Thanks.

Bank of Ireland: Linda

Hi guys,

As previously communicated on this subject, Special Term Accounts are governed by Section 264A of the Taxes Consolidation Act 1997 (as inserted by the Finance Act, 2001).

The Special Term Account (STA) advertisement as recently published by Bank of Ireland is correct. No withdrawals are permitted during the 3 year term to achieve the STA status under legislation, necessary to allow DIRT free interest up to €480 per annum. We also confirm that the Special Term Account (STA) 3 Year Terms and Conditions are correct.

We understand customers’ concern about the Year 2 and 3 rates. This is why we have confirmed that, should our customer deem the rate to be adverse to expectations, withdrawals are allowed with no penalty at the 1st and 2nd anniversary of the account. However, in this event, as dictated by the legislation and as highlighted in our communications, the customers account will loose the STA status and DIRT will be paid on any interest earned to the date of closure.

Thank you very much for contacting us through boards and bringing your concerns and questions to our attention. I hope this clears it up for you.

Thanks
Linda

BrendanBurgess

Hi Linda

The advert is not correct.
The Terms and Conditions are not correct.

They should read "You may withdraw money on the 1st or 2nd anniversary but you will  have to pay DIRT"

You should not be blaming the Taxes Act for this terrible product.

If the legislation does not allow you to offer a good product, or to advertise it fairly, then you should withdraw the product.

Bank of Ireland has a terrible record in the treatment of its customers e.g. the treatment of investment mortgage holders with cheap trackers.  You cannot be trusted to act fairly in Years 2 and 3 when the only one to face a penalty if you misbehave , is the customer.

Bank of Ireland: Paula H

Our Head of Retail Deposits has sent us on the following response to your queries:
As previously articulated, there are statutory requirements on this product. As such the terms and conditions of the Special Term Account cannot be considered in isolation. I would point out the following:

• Bank of Ireland's message in its advertisement was "enjoy DIRT Free interest on your lump sum", which applies to Special Term Accounts.. Like any other tax exemptions, there are requirements that must be fulfilled in order to avail of this exemption. In the case of the Special Term Account (STA) 3 years, the requirements include that the customer MUST retain his/her funds in the Special Term Account for the full 3 year term in order to avail of the DIRT free status on the interest earned up to the maximum allowed by legislation. If the customer cannot or does not comply with the requirements, the account ceases to be a DIRT Free account, the customer is liable to pay DIRT on all interest earned and the STA status is discontinued.
• It would be wholly inappropriate for Bank of Ireland to advertise a Special Term Account without clearly outlining the eligibility requirements to avail of the DIRT Free status. For this reason the Bank clearly outlined what the customer must do to comply with the legislative requirements imposed on Special Term Accounts in order to avail of DIRT free interest. Our obligation is to ensure that the customer is made aware of what he/she must do to avail of the STA DIRT Free incentive. The Bank is confident that it has achieved this in its communications and its STA terms and conditions.
• Bank of Ireland is not blaming Taxation or other legislation for the requirements of this product; on the contrary - we clearly outlined the requirements to inform the customer. One of these legislative requirements means that we cannot give any rate indication for Year 2 and 3 until the first and second anniversaries (respectively) of the product. We fully accept, as articulated before, that this is a difficult condition for the customer as they have to decide at the end of year one and year two, whether the rate provided by the Bank is sufficiently attractive to remain in the STA and avail of the DIRT free interest status or not. If our customer decides that the rate we offer at that time is sufficiently attractive and they leave their funds in the STA for the 3 year term, they will (subject to compliance with the remaining terms and conditions) continue to be eligible for the STA status and be entitled to earn up to €480 interest DIRT free per year.
• Where a customer decides that the interest rate offered is not sufficiently attractive in Year 2 or 3, they may withdraw from the STA and the terms and conditions are clear : "Interest earned on the STA 3 may be subject to DIRT if you breach any of the Terms and Conditions or any of the requirements for the STA 3 to be DIRT free as set out in Taxation Law". Based on your view, however, I will now seek to improve the clause in question to differentiate between the requirements to avail of the incentive (i.e. DIRT free interest) and the requirements of the account.
• Bank of Ireland believes that this is a good product for eligible customers as they contend with lower interest rates in the market and rising DIRT rates. This product could help smaller savers to protect their earnings and maximise the return on their interest. The STA allows the customer to benefit from the DIRT exempt status for the 3 years but also gives them flexibility to withdraw their funds with the only penalty being the loss of the DIRT free status. Bank of Ireland would like its customers to maximise their ability to receive DIRT FREE interest up to €480 per annum under current legislation relating to STA’s and thus it makes no commercial sense for Bank of Ireland to disincentivise its customers and undo the STA status for customers in 12 month’s time.

In summary, the advert displayed by Bank of Ireland is neither incorrect nor misleading to the customer as it clearly advertises how the customer can enjoy DIRT Free interest on their savings. As stated above and based on your feedback, I will now seek to improve the clause in question.
I trust this closes the matter.
Damian Young - Head of Retail Deposits Bank of Ireland

BrendanBurgess

I  don't know how often I have to say it, but the ad is clear "No withdrawals are permitted during the term".
The Terms and Conditions are clear "Clause 2.3   You can not take money out of the STA 3 during the term(See Clause 3)"

These are very clear.  If I try to take my money out before the three years, I could just imagine the guy in Bank of Ireland or the Ombudsman saying "Which bit of no withrawals are permitted during the term do you not understand Brendan?"

So, either you or the ad is incorrect because you are saying different things. I don't know which.

But the key issue here is that you are not highlighting in the ad that the rate in Years 2 and 3 are at the discretion of Bank of Ireland.  It is reasonable for people to assume that a fixed rate product is fixed for three years. 

This is such an unusual product that you have an extra duty to highlight this in the ad with a very clear warning

"Although this is a three year product, the rate is fixed for one year only. The Bank will decide what rate you will get after the first year.  If you withdraw your money before three years, you will lose the Dirt Free status"

If you say all that, and people are still willing to trust Bank of Ireland, then they can have no complaint. 

Overall, I think you should withdraw the product as the tax restrictions on it are such that you do not seem to be able to advertise it fairly or clearly yourselves.

The Voice of reason

BrendanBurgess wrote: »

I  don't know how often I have to say it, but the ad is clear "No withdrawals are permitted during the term".
The Terms and Conditions are clear "Clause 2.3   You can not take money out of the STA 3 during the term(See Clause 3)"

These are very clear.  If I try to take my money out before the three years, I could just imagine the guy in Bank of Ireland or the Ombudsman saying "Which bit of no withrawals are permitted during the term do you not understand Brendan?"

So, either you or the ad is incorrect because you are saying different things. I don't know which.

But the key issue here is that you are not highlighting in the ad that the rate in Years 2 and 3 are at the discretion of Bank of Ireland.  It is reasonable for people to assume that a fixed rate product is fixed for three years. 

This is such an unusual product that you have an extra duty to highlight this in the ad with a very clear warning

"Although this is a three year product, the rate is fixed for one year only. The Bank will decide what rate you will get after the first year.  If you withdraw your money before three years, you will lose the Dirt Free status"

If you say all that, and people are still willing to trust Bank of Ireland, then they can have no complaint. 

Overall, I think you should withdraw the product as the tax restrictions on it are such that you do not seem to be able to advertise it fairly or clearly yourselves.

Brendan, this seems like a personal vendetta against Bank of Ireland? Or are you looking for a job drawing up their terms and conditions? Or doing their PR?

BrendanBurgess

Hi Voice

You are quite right. It's just a personal vendetta to add to my other vendettas over the years

Against  endowment mortgages -
Against the Irish Permanent Building Society's demutualisation
Against Irish Nationwide's lending practices
Against Michael Fingleton -( now wasn't that a real personal vendetta? )
Against investing in property overseas
Against BCP's "Quadruple" Growth Bond
Against the proposed unlimited guarantee of depositors and bondholders

Against the banks' efforts to get people off cheap tracker mortgages
Against ptsb's SVR
Against the banks' veto on PIAs in the Personal Insolvency Act

JTMan

The Voice of reason wrote: »

Brendan, this seems like a personal vendetta against Bank of Ireland? 

Very valid points have been raised in this thread, they have made headlines in the Indo. Brendan and Charlie Weston deserve thanks. 

BoI, while responding in detail, and making website changes, have still not addressed Brendan's very valid points above. There are still some highly questionable aspects of this product with regard to contradictions between marketing, T&C's and what BoI are saving here. 

I have also certainly raised many concerns with BoI about their deposit products in recent times. BoI have taken remedial action and made website updates on many occasions as a consequence. 

The purpose of raising these issues is not to gang up on BoI but rather than encourage BoI to have more honest, clearer and simpler dealings with the little guy. In that regard there are areas that BoI can improve on. BoI have been on occasions slow to fix frequent website mistakes on deposit products, BoI house some of the more complex deposit T&C's and play a constant game of deposit product rotation and sneaky T&C's in order to trick customers into signing up at a high rate that only exists for a short period. 

Without raising these issues, like with the 3 Year Special Term product, BoI would never change.

The Voice of reason

Fungus wrote: »

Very valid points have been raised in this thread, they have made headlines in the Indo. Brendan and Charlie Weston deserve thanks. 

BoI, while responding in detail, and making website changes, have still not addressed Brendan's very valid points above. There are still some highly questionable aspects of this product with regard to contradictions between marketing, T&C's and what BoI are saving here. 

I have also certainly raised many concerns with BoI about their deposit products in recent times. BoI have taken remedial action and made website updates on many occasions as a consequence. 

The purpose of raising these issues is not to gang up on BoI but rather than encourage BoI to have more honest, clearer and simpler dealings with the little guy. In that regard there are areas that BoI can improve on. BoI have been on occasions slow to fix frequent website mistakes on deposit products, BoI house some of the more complex deposit T&C's and play a constant game of deposit product rotation and sneaky T&C's in order to trick customers into signing up at a high rate that only exists for a short period. 

Without raising these issues, like with the 3 Year Special Term product, BoI would never change.

fair points, I just find it hard to take Brendan seriously since I "filled my boots" with bank shares and lost more money than the banks ever took from me

DB74

The Voice of reason wrote: »

fair points, I just find it hard to take Brendan seriously since I "filled my boots" with bank shares and lost more money than the banks ever took from me

But sure even a simpleton knows not to put all your eggs in one basket

The Voice of reason

DB74 wrote: »

But sure even a simpleton knows not to put all your eggs in one basket

Never said I put all my eggs in one basket, read the post correctly. To simplify it for you, I have many, many eggs, in many, many baskets