Bank fair and reasonable in its handling of early withdrawal requests

Categories:

Investment, Fees, charges & rates,

Summary:

In February 2025, Katie put $344,000 into two term deposits that were due to mature in November of that year. In July, she had to relocate urgently to Australia and asked the bank to break the deposits early so she could buy a house. The bank agreed to her request. It also waived the 31-day notice, although it reduced the interest rate payable on her money because she broke the terms early, referred to as an interest clawback. Katie complained the bank did not show any flexibility about waiving the interest clawback and failed to properly consider her individual circumstances as hardship. She wanted the bank to reimburse the lost interest.

Published:

February 2026

Our investigation

Katie first asked the bank to break her term deposits on the basis of a hardship application for living expenses. The bank offered a partial break for one month’s expenses without any interest clawback. Later, Katie asked to break the full amount to buy a house. The bank said this required notice and would also incur an interest clawback because buying a house did not meet its hardship criteria. It offered a temporary overdraft instead. Katie then said that she had had to leave New Zealand urgently because of concerns for her personal safety, whereupon the bank waived the 31-day notice but said it could not budge on the interest clawback. The bank released the deposits 19 days after her initial request.

After reviewing the bank’s terms and conditions for early withdrawals and its policy on breaking term deposits, we found the bank acted fairly and reasonably. It responded promptly to Katie’s requests, considered her individual circumstances, and communicated its responses clearly. The bank’s terms allowed an interest clawback for early withdrawals, and buying a house did not meet its hardship criteria.

Outcome

We did not uphold Katie’s complaint, although we recommended the bank reimburse her for applying an incorrect interest rate when breaking one of the term deposits.

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