Central Bank orders additional interest to be paid where ads were misleading

Central Bank Inspection Identifies Errors in Bank Products With Promotional Interest Rates

Information Release 20 May 2011

The Central Bank of Ireland today (20 May 2011) published the results of a themed inspection of products sold by banks with promotional interest rates.

(mortgage bit deleted)



Misleading advertising
In the case of one deposit product, two brochures were examined and were considered to be unfair and misleading to customers. The brochures advertised an attractive equivalent annual rate, and information relating to the minimum rate payable, which should have been highlighted, was not clearly presented to the customer. Within nine months of issuing the brochure, the rate payable on the account was the minimum rate. In this case it was determined that customers were misled on the actual rate that could be achieved. The relevant bank is now in the process of recalculating the interest for each customer as if they had received the advertised rate for the entire year, and refunds will be made.

Any idea of who this might be?

I don't suppose anyone has received a refund?

I suspect first in the queue will be the mortgage holders of PTSB who did not read our warning here and demand their tracker at the end of the initial fixed rate. i suspect a lot of other banks did the same.

Firstly, great news that the Central Bank of Ireland are acting against the misleading tactics by some banks when selling deposit products. It is far too common that complex or misleading information is used with deposit products.

Brendan Burgess said:

Any idea of who this might be?

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This smells of Ulster Bank marketing tactics. Ulster Bank regularly offer a bonus interest rate on their demand deposit products and the bonus disappears after 6 months or 9 months with some of their historic products. They way Ulster Bank display their bonus rates could easily, and I am sure it does, mislead.

if we, the punter read our terms and conditions we would probably find that there's a one liner saying they can do this.

jonocon said:

if we, the punter read our terms and conditions we would probably find that there's a one liner saying they can do this.

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The banks know that 99% of punters do not read T&Cs. They use small print in deposit products to trick customers. There is no reason or purpose for much of small print other than to act as a marketing trap door. It needs to change.

"There's terms and conditions, but no sneaky stuff."

jonocon said:

if we, the punter read our terms and conditions we would probably find that there's a one liner saying they can do this.

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the history of all markets, not just banking, is to offer introductory offers with high rates, and then for the banks to pare bank the headline rate over time to take advantage of customer inertia. Supermarkets do it with low rates on certain products, or 2for1 etc. Telecom companies do it - e.g. 39.99 for 6 months (no mention of what it will go to at the end of the period in the ads) etc etc.

I am really surprised that people savvy enough to be looking at AAM, etc would not expect banks to do this and indeed see it for it is, rather than thinking that banks are being in some way underhanded. The regulator's issue is more about deliberately mis-leading or indeed incorrect calculations. For example where an AER variable is stated and then a bank cuts the rate after 6months. For the AER to have been "true" they would have had to wait at least until 12months otherwise the original advertising was misleading.

The bottom line is that you should always be looking at the rate on your accounts - e.g. via eBanking. Anything else is naivety.

CiaranT said:

The banks know that 99% of punters do not read T&Cs. They use small print in deposit products to trick customers. There is no reason or purpose for much of small print other than to act as a marketing trap door. It needs to change.

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Very true - there really is a huge imbalance in most of these contracts, and even in simple things like the kind of software licences or web T&Cs that many of us click 'agree' to every day. These terms and conditions are couched in impenetrable language. It is just not realistic to impose binding contracts on consumers in this way.

South Africa seems to be leading the way in requiring service providers to use Plain English in contracts; [broken link removed]

marksa said:

For example where an AER variable is stated and then a bank cuts the rate after 6months. For the AER to have been "true" they would have had to wait at least until 12months otherwise the original advertising was misleading.

.

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Hi a

This is very interesting. Is this in the rulebook for calculating AER?

I understand that this is what actually happened in this case. After 9 months, they cut the rate, and the FR told them to pay the advertised rate for a total of 12 months.

So they actually broke the rules? I had thought that the Central Bank had exercised judgment. And it is one of my criticisms of the CB - if a rule is broken they take action, but if an ad is misleading but not breaking a hard rule, they don't have the confidence to find against the advertiser.

Brendan Burgess said:

Hi a

This is very interesting. Is this in the rulebook for calculating AER?

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I don't know to be honest - it's just intuitive... AER being ANNUAL...marksa