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Something to be aware of with "odd-month" GICs
May 15, 2015
9:49 am
Koogie
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Meh, believe what you will. Again, it is available online. I am looking at mine right now. Some people just like to make things difficult.

June 19, 2015
12:09 pm
Loonie
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After several attempts by email, and no microfiche yet becoming available, my friend has now been told exactly how much interest he will have earned at the end of the 18 months. It works out to exactly 2.35% IN TOTAL. This was for an 18 month cashable RRSP GIC at a rate of 2.35%.

Therefore, assuming this email, which is the only communication so far to provide any concrete details, is accurate, my suspicions and warning are confirmed. It was a term rate and is not compounded. It is equivalent to about 1.5% annual compounded.

He will never do business with them again and will be moving the money as soon as he figures out where to put it. We both feel this was deceptive, particularly since it was next to impossible to get the truth out of them.

The only good thing is that the GIC is cashable and interest will be paid to date. He can move it elsewhere - for a fee, of course.

He could have done much better at, for instance, Hubert. He STILL could do better at Hubert, even though their rates have gone down since then.

June 19, 2015
1:56 pm
kanaka
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Loonie said

My info comes from someone who bought the 18 month cashable at 2.35. They said at the time that they would sent him the paper work later as it was the end of the day and they didn't want to take the time to make the copies, but they never came, so he inquired by email as to whether the rate was compounded annually, never imagining that it was only a term rate. He could not get an intelligible answer except to say that the interest would come at the end of the 18 months, so asked how much interest he would receive at that time. They were able to answer this question! It was a simple matter to figure out that this was not an annual rate, but a term rate as it was exactly 2.35% of the principal.

I suppose it's possible that this employee doesn't have it figured out right, but that too would be a red flag if true.

Since this is what he's been told and since it's cashable, he plans to move it elsewhere asap, although it will cost the mandatory $50 probably, as it's an rrsp. I think he'll be glad to get out of there. I feel badly that I recommended it as an option in the first place but am glad I didn't personally invest with them.
I would not do business with them.

I'm glad you have documentation about yours which suggests an annual rate, Koogie. Hang on to that document! It may have been designed for "regular" rates and not updated for their more recent intentions. Who knows? Something is screwy anyway.
My warning stands, as it's always something one should look out for. No telling what they'll think up next!

Loonie, am I missing something??? Who is the wonderful fianancial institution that put this offer out? Would be interesting to see how they promoted it.

June 19, 2015
4:33 pm
Loonie
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No, you're not missing anything, Kanata. I actually forgot that he'd received this same answer earlier, as he had recently been pursuing the question of getting a copy of the microfiched document, through a different employee. Having no luck, he asked again about the interest that he would receive.

Anyway, we now have 2 employees saying the same thing - each after several emails back and forth - and the answer is the same.

Luminus is a local Toronto credit union, so you won't have to deal with it. Still, the principle is worth noting when dealing with special offers which are not worded as clearly as they should be. And, of course, in this case, we do not have the original document, as it has never been provided.

An email from two days ago said the following: "You have $XXX in an 18 month cashable term, at 2.35% interest. Interest is paid annually into your rsp variable account." This was the first he had heard about interest being paid into another account (not compounded annually), and contradicts two earlier communications which said interest would not be paid until end of the term. It would be too much effort at this stage for me to dig out the earlier emails, but you get the drift.

June 19, 2015
7:29 pm
Bill
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Luminus' site now shows a special offer "2 Year Fixed Term Deposit at 2.50%".

June 19, 2015
10:26 pm
Norman1
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Loonie said
...
Anyway, we now have 2 employees saying the same thing - each after several emails back and forth - and the answer is the same.

Luminus is a local Toronto credit union, so you won't have to deal with it. Still, the principle is worth noting when dealing with special offers which are not worded as clearly as they should be. And, of course, in this case, we do not have the original document, as it has never been provided.

An email from two days ago said the following: "You have $XXX in an 18 month cashable term, at 2.35% interest. Interest is paid annually into your rsp variable account." This was the first he had heard about interest being paid into another account (not compounded annually), and contradicts two earlier communications which said interest would not be paid until end of the term. It would be too much effort at this stage for me to dig out the earlier emails, but you get the drift.

Looks like a formal complaint may be in order.

Ontario credit unions, like Luminus, are regulated by the Financial Services Commission of Ontario (FSCO). Their page Resolve a Complaint about a Credit Union or Caisse Populaire indicates that the first formal step is to contact the credit union's designated complaints officer.

The FSCO page Officers Designated to Resolve Complaints Contact Information lists the designated complaints officer of each credit union. For Luminus Financial Services & Credit Union Limited, the officer is George De La Rosa. The address, phone number, and fax number are in the listing there for Luminus. Mr. De La Rosa's contact info is also listed at Luminus: Who We Are.

I find the situation very odd. I think it ought be a simple matter for your friend to (1) obtain the promised copy of the forms he signed and (2) be provided something in writing that indicates whether the 2.35% rate is per term or per annum.

June 19, 2015
10:32 pm
Loonie
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Thanks for the update, Bill. I honestly don't know what this new one means, but with Oaken at 2.1 and Hubert at 2.3 for 2 year GICs (for example), the odds of this being 2.5 per annum are questionable.

Based on what I have learned so far, and in the absence of other clear info on their website (of which there is none), I would have to assume the current offer is a term rate. In other words, you will get 1.25% per annum, credited at the end of two years or put in a separate account annually, and no compounding. This is very low, so I can't be sure. however, their 5 year rate is only 2.0%.

They appear to call all their GIC-like offerings "fixed term deposits", so it's possible that these are annual rates. But none of this is crystal clear from their website. Nowhere on the website is the phrase "GIC" used, as far as I can see. Why are they so consistently avoiding it?

In the past, "term deposit" was generally understood to refer to terms less than one year with interest paid once at the end, but that has gotten murky over time and is often conflated with "GIC".

IMO, Luminus is not worth the effort to decipher meaning or to do business with. They've been scratched off my list for sure.

June 19, 2015
10:48 pm
Loonie
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I may not have been very clear about the most recent communication from Luminus. This is because I couldn't copy it without using the actual number of dollars in question, and didn't want to reveal that. Only if you know the numbers can you see that it is exactly 2.35% of the principal.

However, here it is, with the numbers blocked out.
"I inquired further about your term, and from what I have been told, the interest is based on the entire 18 month period, and no, it was not set up to compound.
The total amount of interest that will be paid out is $XXX, according to the system, making the total you will have at maturity, including the principal, $XXXXX."

I agree, there is basis for a complaint, but I have the feeling my friend feels he has already expended too much time on this disappointing exercise, and is exasperated.
If it were me, I would expect at least a fee-free transfer-out and be glad to be done with them. Perhaps the Complaints Officer, who is also the CEO, can do this, but it would undoubtedly involve several more phone calls and/or emails.

Norman, it's possible that if we had (1), as you suggest, then the answer to (2) would be included, although I remain skeptical because I know it was not clear on the original online offer (which I don't have). I suppose that in calling it a "term deposit", they think that covers them for not offering annual interest. However, they use that language on all their rates, including 5 years. Surely they don't propose to give 2% total after 5 years?!
You will note that in neither of the two most recent communications have the phrases "per term" or "per annum" been used, and that is consistent with every other communication from them. The only way to get an answer to the question was to ask how much money he would have at the end of it all.

It may be that the best we can hope for is that everyone here will learn something from this experience, which is why I have posted it.

June 20, 2015
4:31 pm
Norman1
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Loonie said
...
However, here it is, with the numbers blocked out.
"I inquired further about your term, and from what I have been told, the interest is based on the entire 18 month period, and no, it was not set up to compound.
The total amount of interest that will be paid out is $XXX, according to the system, making the total you will have at maturity, including the principal, $XXXXX."

I agree, there is basis for a complaint, but I have the feeling my friend feels he has already expended too much time on this disappointing exercise, and is exasperated.

If it were me, I would expect at least a fee-free transfer-out and be glad to be done with them. Perhaps the Complaints Officer, who is also the CEO, can do this, but it would undoubtedly involve several more phone calls and/or emails.

Norman, it's possible that if we had (1), as you suggest, then the answer to (2) would be included, although I remain skeptical because I know it was not clear on the original online offer (which I don't have). I suppose that in calling it a "term deposit", they think that covers them for not offering annual interest. However, they use that language on all their rates, including 5 years. Surely they don't propose to give 2% total after 5 years?!
You will note that in neither of the two most recent communications have the phrases "per term" or "per annum" been used, and that is consistent with every other communication from them. The only way to get an answer to the question was to ask how much money he would have at the end of it all.

It may be that the best we can hope for is that everyone here will learn something from this experience, which is why I have posted it.

I can see how your friend is exasperated with the experience! The responses so far are suggesting that the rate is 2.35% per term, instead of the expected 2.35% per annum.

This is looks like the offer from a Luminus Financial February 18, 2015 posting on their Facebook page:

Luminus Financial at 1 Yonge st.
February 18

Check out our special offer until March 31st! 18 Month Fixed Term Deposit at 2.50% OR 18 Month Cashable Term Deposit at 2.35%. Toll free: 1.877.782.7639 ‪#‎clearlybettersavings‬ ‪#‎creditunion‬ ‪#‎specialoffer‬

Koogie posted earlier that he invested in an 18-month term at 2.5% on January 13th. I presume that's the non-cashable, 18-month fixed term. Koogie found that the paperwork mentions annual compounding and the rate appears to be per annum.

I find it hard to believe that the implied presentation switched from 2.50% per annum to 2.35% per term in the same sentence.

In all the years I've been investing, I've only seen per term rates with RBC MarketSmart GIC's. Everything else I've seen (regular GIC's, term deposits, 90-day treasury bills, corporate bonds, government bonds, commercial paper, and strip bonds) have had their returns presented as a per annum rate.

Consequently, I highly suspect that the two responses Luminus sent your friend are incorrect.

Any way your friend can be convinced to fire off an e-mail to the Luminus Financial complaint officer?

May not need to be a complaint. Just a question about that 2.35% rate on the 18-month cashable term deposit he invested in. Was the rate supposed to be 2.35% per term or 2.35% per annum?

June 20, 2015
8:25 pm
Loonie
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I discussed it with him, and he wondered what he'd get out of it if he lodged a complaint. I don't think he's decided whether to bother yet.

Thanks for the facebook link, Norman. Yes, that is the same offer.

I actually suspect that these two responses are correct, because they are consistent. Also, the last person said she had asked someone else about it, and she has also consulted "the system", which is no doubt the computer, where all is presumably set in stone.

The fact that other institutions don't do it this way doesn't mean that they can't, I suppose, but I would argue that they have an obligation to be clear about it.

I haven't seen Koogie's documentation.

I'll keep you posted.

July 14, 2015
8:58 pm
Norman1
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Been thinking about the two e-mails your friend received from Luminus:

An email from two days ago said the following: "You have $XXX in an 18 month cashable term, at 2.35% interest. Interest is paid annually into your rsp variable account." This was the first he had heard about interest being paid into another account (not compounded annually), and contradicts two earlier communications which said interest would not be paid until end of the term. It would be too much effort at this stage for me to dig out the earlier emails, but you get the drift.

However, here it is, with the numbers blocked out.
"I inquired further about your term, and from what I have been told, the interest is based on the entire 18 month period, and no, it was not set up to compound.
The total amount of interest that will be paid out is $XXX [exactly 2.35% of principal], according to the system, making the total you will have at maturity, including the principal, $XXXXX."

No compounding. Interest paid annually into RSP variable account. The total amount of interest that will be paid out is $XXX, according to the system.

Could both Luminus employees be mistakenly interpreting the "no compounding" on their computer screen to mean just one interest payment at maturity?sf-frown

Perhaps, they are used to terms of one year and shorter where that is the case. But, for your friend's 18-month Luminus term deposit, there may be an interest payment at one year and another at maturity at 18 months.

Could that interest of 2.35% of principal shown by their system actually be just the amount of the next interest payment at 12 months and not of the one and only interest payment at maturity at 18 months?

July 14, 2015
10:29 pm
Loonie
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Hi Norman,
I sort of doubt your hypothesis. His question to them was very clear in referring to the end of the agreement, and the answer said that this was their point of reference. I am inclined to think nobody did the calculation, but just found some place on their computer where they could look it up. On the other hand, having to check with someone else may indicate otherwise.

We should have some clarification soon, as my friend has recently pushed his inquiry up the ladder.

I find it significant that the answer did not seem obvious to staff. If it had been a matter of simply doing the calculation, surely they could have just gone ahead and done it? (Or do I expect too much of their abilities?) When I went to school, at least, the calculation of fractions and percentages was covered in elementary school. And these people have calculators.
It appears that they were not really sure of the terms themselves - having sold umpteen of these GICs by then, no doubt. It was right at the end of RRSP season. You'd think that by then they'd be rattling it off in their sleep!

Whatever the ultimate answer, it does not speak well that staff could not answer such a simple question easily, clearly, confidently and convincingly.

I hope you're right,though, as it would be a better outcome overall.

July 14, 2015
10:47 pm
Loonie
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This experience certainly reinforces what kanaka was saying recently on another thread about preferring to patronize institutions that give clear statements during the period of the investment about what the end result will be. It should be clearly stated from the get-go on all such investments, and in my opinion this should be a legal requirement- just to make sure they actually do it.

It should be very easy for them to do this, especially since they are always keen to tell us that the reason they can't offer us any more interest is because our rates are tied to mortgage commitments. They ought to have this all very finely tuned and accessible.

July 15, 2015
7:36 am
Koogie
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Frankly, you are engaging in hearsay and denigrating this institution with no firsthand knowledge and no verifiable proof as yet. This "friend" of yours has been worried about this since April and hasn't bothered to actually go in person to get it sorted out ? Either they aren't very "worried" or it isn't true.

As I said, I signed up for the same deal. Here is a screenshot from Luminus' online system for the term deposit I have with them.

==================
Account Activity
Current Balance$100,000.00
Interest Rate2.500%
More Details
Principal Investment$100,000.00
Started on13-Jan-2015
Maturing on13-Jul-2016
Interest compounded annually.
Next Interest Payment Date13-Jan-2016
==================

"Interest compounded annually."

As I suggested months ago, have your "friend" sign up for online banking if they are to lazy to go in to the main branch and sort it out. Then they will know in black and white and you can share that with us as well.

July 15, 2015
2:25 pm
Loonie
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Thank you for the details concerning your investment, Koogie.
It is not the same one that my friend has.

July 17, 2015
11:22 pm
Loonie
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Finally, after contacting the CEO, my friend has another answer from yet another person at Luminus who has more authority than the previous ones he has dealt with, the "Member Relations Manager". Suddenly, he was able to provide a copy of the original document, which has been impossible for months. The answer is the opposite of the ones given before:

"Your 18 month term pays 2.35% per annum and you chose to have it compounded. The $XXXX in the 'Interest Amount' field indicates the 'Amount of first interest payment'." (This is the same amount that he was previously told was the entire interest payout. If it's being compounded, then presumably it isn't going into a separate account as suggested earlier.)

"This last point may be where confusion arose from (staff member A) who told (staff member B) the incorrect information. It would seem they thought it was for the entire term. This miscommunication, understandably, resulted in your concerns. Thank you for pointing this coaching opportunity out to us."
Apology followed.

Conclusions:

1. The rate was intended to be 2.35% per annum and will be compounded.

2. 2 or 3 staff members (I'm not sure which) totally misinterpreted the interest rate and gave out totally wrong information, despite having no doubt sold a great many of these investments.

3. Either these staff are not very bright when it comes to arithmetic (a core skill, I would have thought) or the internal wording that they are relying on is confusing to them. Their boss seems to think it's a staff problem.

4. Staff may need "coaching" but the organization also needs to write in plain English. Apparently even the staff can't correctly interpret the info they have been given.

5. They may not be any more incompetent than many other FI's, but, still, this has left me with a bad feeling about the institution. After an entire RRSP season, I can't accept any excuse as to why they did not have a grasp of such basic information.

6. Don't rely on frontline staff.

7. Always check for the wording as to whether these kinds of odd-month investments are "per annum" or "per term". That is the key phrase you should be looking for, as well as compounding, but that is less critical.

8. Never leave their office without your documents; don't trust them to send it later.

9. SAVE ALL EMAIL COMMUNICATION with your FIs. In this case, ALL previous correspondence in this matter had been deleted by staff "to make room". Yahoo may be able to provide you with unlimited space, but apparently your FI can't. My friend, however, had kept all his emails, and was able to send them back to explain his problem.

I think I would prefer getting a nice multicoloured GIC certificate and a box of chocolates from Oaken!sf-smile

July 18, 2015
7:30 am
kanaka
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Re points 8. And 9. Very important points!!

Don't leave without copies......but rarely does the FI sign your copies.

Save all emails and in the event of an online purchase keep a copy of every step you take by making a full screen print and keep any copies of emails that are associated to the CIC. As in most cases that is your one and only paper copy on your complete transaction.

I recommend using a PDF maker for doing screen prints. It is easy to use and becomes a printer driver to easily select.
Download here, it is free http://www.dopdf.com

And I am still waiting for my chocolates

July 18, 2015
8:49 am
Bill
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Koogie, I agree with your points about communication, etc, but the screenshot you provided does not say "annual interest rate", it just says "interest rate". So if could be read, I suppose, that interest is 2.5% over the 18-month term yet interest earned after the first 12 months is compounded. Although I have to say that would not be the "normal" interpretation, at least for anyone who knows the usual working of the financial system, but who knows what frontline staff is like these days.

July 18, 2015
8:55 am
Norman1
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I'm glad it worked out for your friend, Loonie: His 18-month cashable deposit at Luminus turned out to be 2.35% per annum, as one normally expects, and not 2.35% per term.sf-smile

As I suspected, a Luminus staff member had misinterpreted what was shown in their system. It looks like the other staff member did not know herself and relied further on that incorrect interpretation.

Challenges with arithmetic can be compensated for by a calculator. However, a calculator won't be able to tell them when the term deposit has multiple payments.

Unfortunately, such frontline staff misunderstandings about the details of a financial product are not limited to Luminus. I've run into them even at certain branches of the big banks. As well, someone found in Accelerate are very strict that what he and his wife were told by a major bank was incorrect. They were told they could not consolidate any of their four non-spousal and spousal RRSP with the bank. As a result, they were going to be charged four transfer out fees of $100 for each individual transfer.

I think it really depends on what transactions the staff have the opportunity to do day-to-day. I'm sure the Luminus staff can efficiently do purchases of their various term deposits and enter them into their system. But, I don't think any of them are involved in calculating the interest payments. I strongly suspect their system does that for them.

After a while, the staff will forget what that 2.35% rate means exactly. Customer asks what the rate is. Answer with the 2.35% shown on their system. Your friend may have been the first to ask them whether that rate of 2.35% is per annum or per term!

Luminus' product description for their term deposits on their web site has room for improvement. It is clear that interest is paid at maturity for their short term deposits. But, how interest is paid on their longer term ones is left to the imagination:

Long Term Deposits

Want certainty and flexibility with your investments? Our L-Series of Term Deposits introduce a brand new benefit for our members: the transferable option. Choose from our 12 month, 18 month, 24 month, 36 month, 48 month and 60 month options!
• You can switch from one term to another within the L-Series without penalty, within a 90 day period
• Unlike mutual funds or stocks, which can go up or down, you are guaranteed a highly competitive interest rate. Thus, you know how much your investments will be worth at the end of their term
• You can use your term deposit within your RRSP
• All term deposits at Luminus qualify for our Member Rebate Program
• Eligible deposits are insured by DICO up to an aggregate maximum limit of $100,000 except for Registered deposits which have unlimited coverage

The months it took to obtain copies of the original signed documents is definitely odd. That's especially since the documents were signed months ago and not years ago. Could your friend also be the first to request a retrieval from their microfiche archive too?sf-laugh

July 18, 2015
2:32 pm
Loonie
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kanaka said

And I am still waiting for my chocolates

Ha! ha! I literally got the last box - in Toronto at least! I went there in person to open account. I had to ask for them though, and, although they were very busy that day, I was the only one walking out with chocolates. It took her a while to find them, and she said it was the last box.

The packaging suggested it was a Christmas promo, so, better luck this year!sf-smile

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