Beware The Devil In The Small Print!

Thousands of savers with Lombard Direct accounts have every right to be angry at the moment.

Lombard Direct, which is part of the huge Royal Bank of Scotland group, slashed its savings rates on 10 May, in order to concentrate on the more lucrative market for personal lending. To add insult to injury, it has yet to notify savers of this change, although letters are supposedly going out today.

Now here's the bad news for Lombard Direct savers: your annual interest rates have been absolutely destroyed. Instead of earning from 3.46% to 4.16% a year before tax, you are now earning just 0.49% a year - a cut of up to 3.67% a year. Crikey!

Yet again, this shocking news reveals the cunning of the banks, which are all-too-keen to sell their customers short. Furthermore, it demonstrates how important it is to read the small print, as some customers spotted the rate cut in tiny print on their latest statements and were able to react swiftly by moving their savings pots.

Sadly, this kind of rate-cut trickery is not illegal, even though it often leaves vulnerable customers in the lurch. Indeed, the holes in the Banking Code (18-page PDF file) are large enough to pilot an aircraft carrier through, as the following extracts reveal!

Section 4.6: "...at least once a year, we will send you a summary of... current interest rates, unless your account has less than £500 in it."

Section 4.8: "If you have a variable-rate account with £250 or more in it and the interest rate has fallen significantly compared to the Bank of England base rate, we will contact you within a reasonable period of time..."

Some legal experts might argue that reducing the interest rate on a savings account to just over a tenth of its previous level and neglecting to inform customers for almost a month is both a breach of trust and an infringement of the Unfair Terms in Consumer Contracts legislation.

If you ever get caught out by slashed savings rates in this way, my advice is to jump ship by shifting your nest egg to one of these Best Buy easy-access accounts:

More: Switch to a superior savings account - compare savings accounts now in our savings centre!