An area bank has sent out a letter to their valued customers dated 05-17-13 informing of the new early withdrawal penalties effective 07-01-13. I have always understood that these fees were set by the regulaton. In reviewing TISA, I didn't see specific timeframes for TCD early w/d penalties. I guess I'm asking for validation, that banks can set their own early w/d penalties? Are there ceilings? Thank you for your help.

The only mandated penalty is that an institution MUST charge an early withdrawal penalty if the withdrawal is made within the first 7 days. Other than that it is a contracual issue between bank and depositor.

If they are informing customers of an upcoming change for new CDs, that is fine. If they are changing the penalties on existing CDs, they never talked to their legal counsel.

You truly can teach an old dog new tricks. Thanks for the input.

BrianC: where in the regs can I find the within 7 days statement?

Reg. D.

...in the definition for time deposit, at http://www.bankersonline.com/regs/204/204-2.html#time.

In Reg DD's commentary to section 1030.5(b)C-5i it says, "(Paragraph 1030.5(a) applies if the change becomes effective prior to the maturity of the existing time account.)"

This seems to imply that changes can be made to a CD before maturity. I always considered a CD to be a contract that couldn't be changed.

What kinds of changes can you make to a CD before it matures?

One that might fit that requirement is a decision to alter the term of renewal for the account. For example, if the current account has a provision that it will automatically be renewed for a like term, and the bank doesn't want any more 13 month CD and decides the renewal of current 13-month accounts will be for 18 months, that could be said to impact the current accounts before renewal.

Or if the CD is a floating rate account with a published index that ceases to exist, the bank will need to substitute another index. That would fit the "before maturity" scenario.

Thank you!!