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#1871747 - 11/15/13 07:22 PM CDs - What to disclose/When to charge Penalties
Likes to Comply Offline
Diamond Poster
Joined: Nov 2008
Posts: 1,061
In the mountains
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deposit unless the deposit is subject to an early withdrawal penalty of at least seven days' simple interest on amounts withdrawn within the first six days after deposit.1 A time deposit from which partial early withdrawals are permitted must impose additional early withdrawal penalties of at least seven days' simple interest on amounts withdrawn within six days after each partial withdrawal.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 The penalty will be an amount equal to: 30 days interest on the amount withdrawn.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Interest accrued during a term can be withdrawn: when a request is made in writing to change the payment frequency.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?
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Operations Compliance
#1871938 - 11/16/13 02:26 PM Re: CDs - What to disclose/When to charge Penalties Likes to Comply
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,898
Galveston, TX
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?

I don't understand this question. You already said you charge a 30 day interest penalty on any withdrawal. Doesn't that make the 7 day penalty moot?

Accrued interest can be withdrawn at any time without penalty.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2046903 - 10/29/15 02:26 PM Re: CDs - What to disclose/When to charge Penalties Likes to Comply
thumper1108 Offline
Junior Member
Joined: Oct 2014
Posts: 43
According to our Deposit and Retail area, customer's were using their Certificates more like a transaction account. So, what management did was impose an additional $25 early withdrawal fee on top of 6 months interest. Is this permissible?

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#2046942 - 10/29/15 03:38 PM Re: CDs - What to disclose/When to charge Penalties thumper1108
Elwood P. Dowd Offline
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Elwood P. Dowd
Joined: Aug 2001
Posts: 21,939
Next to Harvey
Your fee can be whatever you disclosed to the customer prior to opening the account. You cannot change your fee during the life of the time deposit. For an automatically renewable time deposit, your maturity notice could incorporate the change in the early withdrawal penalty, but you would have to draw your customer's attention to the change.
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