Terms that give the provider broad scope to determine the terms and conditions of the new bond by stating that the firm may reinvest the customer’s funds into whichever bond that it considers ‘appropriate’ have been slammed by the regulator.
According to the FCA thepotential unfairness arises from the firm being able to interpret what is ‘appropriate’ in a way that is most favourable to the firm, and reinvest the customer’s funds into a new bond, which could have less favourable terms than those of the original bond (e.g. worse access rights or a longer fixed-term, etc.).
* Amended terms, agreed upon with the FCA, now restrict the firms’ discretion when automatically reinvesting a customer’s maturing funds, for instance by stating that the new bond will be of similar duration and have the same access rights as the original bond.
* Mid-term variations of fixed-term bond contracts to introduce automatic renewal were also slammed. The FCA found some firms were introducing, or planning to introduce, the feature of automatic renewal during the life of a fixed-term bond contract (i.e. where it was not part of the original terms and conditions).
The FCA told those firms that this type of new feature fundamentally changes the nature of the contract that the consumer has entered into, which is not in line with the FCA’s Treating Customers Fairly principles.
* Short notice periods ahead of maturity in which consumers were expected to make informed decisions about how to use their maturing funds were criticised.
* Firms were told they must make it clearer that automatic renewal is not mandatory and customers are entitled to withdraw their maturing funds.
http://www.fca.org.uk/static/documents/thematic-reviews/tr13-04.pdf
