Reg D states: Time deposit means:
(i) A deposit that the depositor does not have a right and is not permitted to make withdrawals from within six days after the date of deposit unless the deposit is subject to an early withdrawal penalty of at least seven days' simple interest on amounts withdrawn within the first six days after deposit.1 A time deposit from which partial early withdrawals are permitted must impose additional early withdrawal penalties of at least seven days' simple interest on amounts withdrawn within six days after each partial withdrawal. If such additional early withdrawal penalties are not imposed, the account ceases to be a time deposit.
Our disclosures state the following:
If we consent to a request for a withdrawal that is otherwise not permitted you may have to pay a penalty. The penalty will be an amount equal to: 30 days interest on the amount withdrawn.
I understand that we can charge more than 7-days interest. So as long as we charge the penalty if the withdrawal is within six days of a deposit or another partial withdrawal, we are compliant, correct? Do we have to specify that in our disclosures or just make sure it is done in practice?
We also disclose:
Interest accrued during a term can be withdrawn: when a request is made in writing to change the payment frequency.
However, in practice we allow a withdrawal of interest at any time. Is it permissible to allow withdrawals of interest at any time? Are these permissible transactions exempt from any penalties? For example, if today the customer withdraws $1,000 of interest that has accrued and been credited to the CD over a number of years, and then withdraws the remaining earned interest of $600 two days later, should we have charged the interest penalty due to the second withdrawal?
Always learning something new...