Bank entitled to reduce interest and give the standard notice period

Categories:

Investment, Fees, charges & rates,

Summary:

In February 2023, Amanda deposited $334,657 in a five-year term deposit. In June 2025, Amanda asked the bank to break the term deposit early after her husband received a letter about a proposed workplace restructure. The bank did as Amanda requested, but she later complained that the bank did not tell her it would reduce the interest rate by 2 percentage points or tell her how much interest she would lose. She also complained that the bank did not offer a partial withdrawal or explain why she had to wait 31 days to gain access to the money when her family was in financial difficulty. She wanted the bank to reimburse the $14,122 interest the bank took back when she broke the term deposit.

Published:

July 2026

Our investigation

The terms and conditions of the term deposit allowed Amanda to request early withdrawal of part or all of her money, but they also allowed the bank to reduce the interest rate payable and take back some of the interest already paid. The bank was therefore entitled to apply the lower interest rate and take back a portion of the interest already paid.

In addition, the terms and conditions required 31 days’ notice unless Amanda’s circumstances were exceptional or she was in financial hardship – neither of which applied. The bank’s policy required evidence such as a redundancy or termination letter, and Amanda’s husband had only received a document proposing a restructure, not a confirmed loss of employment. Amanda thus faced no immediate or confirmed financial hardship. We therefore considered it reasonable for the bank to apply the standard notice period.

As for whether Amanda was properly informed about the implications of taking back her money early, the form she signed at the branch where she made her request included an option for a partial withdrawal, but Amanda selected the withdrawal of all available funds. The form also included a tick box confirming she understood that the bank would apply a lower interest rate and would take back some of the interest already paid. Amanda’s first language was Mandarin, but she had access to Mandarin-speaking staff at the branch, giving her an opportunity to ask questions or seek clarification about any aspect of her application.