We are looking at increasing the early withdrawal penalties on new time accounts opened on or after 1/1/2011. We will change our new account disclosures accordingly - no problem there.

For existing automatically renewable CDs that will mature and renew on or after 1/1/2011, what do we need to do? Can we just disclose the new early withdrawal penalties on the pre-maturity notices that are sent out 20 calendar days before the end of the grace period? This wouldn't give the customer 30 days advance notice though. Do we have to do a seperate notice 30 days before and then the normal pre-maturity notice 20 days before?

You are not changing the terms of the existing account, so no 30 day prior notice is required. You are only required to disclose any change of terms at the time of renewal and that can be accomplished through the normal prematurity notice as you have suggested.

That makes sense - I didn't even think about it being a new account after it automatically renews. Thanks for setting me straight Randy!

Our pre-maturity notices do not include early withdrawal penalties and we are also changing our early withdrawal penalties.

In order to notify our CD account holders, we were going to provide our customers with a notice along with the pre-maturity notices. The notice would advise the customers with CDS one year or less that our early withdrawal penalties have changed and include the new penalty info in the notice.

For our CD customers with CDs greater than one year we were going to provide a notice along with the prematurity notice and the TISA disclosure. In this notice we were going to advise the customer to refer to the enclosed disclosure regarding the change to our early withdrawal penalty.

Is this process sufficient? Instead of including these notices along with the pre-maturity notices, can we do a one time mass mailing advising the customer that our early withdrawal penalties have changed and will be effective upon maturity of their current CD?

Actually, 30 days notice is required.

We changed our early withdrawal penalties for when a CD matures. We notify the customer with the maturity notice and the new TISA disclosures. We highlight on the TISA disclosure what is being changed (the new early withdrawal penalty).

So when you changed your early withdrawal penalties you provided TISA disclosures to all CD account holders not just the account holders that have CDS greater than one year?

If so, then my next question is how do you ensure the customer receives the appropriate disclosure for his CD account. For example, some customers may have different compounding frequencies so currently for our customers that have CDs greater than one year we need to ensure the appropriate frequency is checked off on the disclosure.

We did not change the early withdrawal penalty for any existing account. It will only change if their CD renews. We are sending the change to all CD customers at maturity of the current CD. We are sending the TISA disclosures with the maturity notice that prints about 30 days before maturity due date. We have disclosures for CDs over a year and under a year.

All of our CDs are auto renewable. Instead of providing our customers information at renewal along with the maturity notices, can we provide all our CD customers a mass mailing piece all mailed at once advising them that when their CD renews new early withdrawal penalties will apply? We would advise them of the specifics of the new early withdrawal penalties in the mass mailing letter.

This way we don't have to track who received the new early withdrawal penalties and who didn't since the CDS may mature in 6 months to 7 years from now.

Thoughts/Comments

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To me it just seems as you will be notifying some customers twice, once now and then again when their CD renews. When that CD renews, you need to send new TISA disclosures which will include the new early withdrawal penalties. Our procedures now require to include a TISA disclosure with the prematurity notice for CDs over and under one year.

Yes the customers with CDS greater than one year would be notified twice. First time via the mass mailing and second time via the TISA disclosures along with their prematurity notices. We will not have to worry about highlighting the early withdrawal penalty information in the disclosures since they were already provided that information via the mass mailing piece.

For customers with CDS one year or less they will be notified once via the mass mailing.

Does this sound OK?

This is a new question for the thread:

We are increasing our CD withdrawal penalties and will be sending a notice at renewal time. Regarding the actual notice....can it be generic so it covers all of our different CDs and corresponding withdrawal penalty, or does the notice need to be specific to the CD product?

I couldn't find anything that specifically prohibited this, and I was wondering how other banks have worded their notice in this regard.

Thanks.