Upheld: Service failures generally complaint against HSBC UK Bank Plc trading as first direct

Decision detail

Summary

Mr S opened a Regular Saver Account with First Direct in September 2024 earning 7% fixed interest for 12 months, conditional on maintaining a linked current account. In August 2025, approximately one month before maturity, Mr S instructed a switch of his current account to another provider, which automatically triggered closure of his RSA. The interest rate on his savings dropped from 7% to 1.3%, representing a 5.7% loss. Mr S complained that First Direct should have warned him of this consequence, stating he would have delayed the switch. The ombudsman upheld the complaint, finding that First Direct breached its Consumer Duty obligations by failing to provide timely and effective information to support Mr S's understanding and mitigate a reasonably foreseeable harm, particularly given the significant financial consequence occurring so close to the maturity date. First Direct was ordered to pay Mr S the difference between the interest received and what he would have earned had the account completed its full term.

The Ombudsman's reasoning

The ombudsman found that First Direct breached its obligations under the Consumer Duty (implemented 31 July 2023) to communicate information clearly and support customers' understanding at suitable points throughout the product lifecycle. Although the terms were technically clear, it was reasonably foreseeable that Mr S might innocently forget or not realise the impact of switching his current account on his linked savings account, particularly given the significant financial consequence (5.7% interest drop) occurring so close to maturity. First Direct rigidly adhered to its terms and processes without providing timely and effective information to mitigate this foreseeable harm. The ombudsman rejected First Direct's argument that the switching provider should have notified Mr S, as First Direct was not a passive party and actively chose to close the RSA based on its own terms. The ombudsman was satisfied that had Mr S been warned, he would have delayed the switch until the RSA matured.

How this compares

Source

Read the original decision on the Financial Ombudsman Service website