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#2065561 - 02/23/16 05:59 PM Releasing Partial CD Balance for Secured Loan
PorcelainDoll Offline
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Joined: Sep 2015
Posts: 93
The West
We have a customer who wants a CD secured loan. However, periodically he wants to withdraw from the CD as the balance is being paid down on the loan. Does anyone see a problem with waiving the early withdrawal penalty in a situation like this?
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#2065614 - 02/23/16 08:20 PM Re: Releasing Partial CD Balance for Secured Loan PorcelainDoll
John Burnett Offline
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John Burnett
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Cape Cod
It seems a reasonable thing to do, and there's no prohibition on it, unless there was another partial withdrawal from (or deposit to) the CD account within the last 6 days. The only other concern would be your bank's policy on partial withdrawals before maturity of its CD accounts.
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#2065702 - 02/24/16 01:54 PM Re: Releasing Partial CD Balance for Secured Loan PorcelainDoll
Elwood P. Dowd Offline
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Can you waive the penalty, sure. Does it make sense? Not to me.

Why should the time deposit be subject to periodic withdrawals just because its being used as collateral for a loan? The customer agreed you could have the funds for XX months and you established a rate based on that commitment.
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#2065748 - 02/24/16 04:27 PM Re: Releasing Partial CD Balance for Secured Loan PorcelainDoll
John Burnett Offline
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Ken is stingier than I. But he'd be better than I at running a profitable bank.
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#2065761 - 02/24/16 04:49 PM Re: Releasing Partial CD Balance for Secured Loan PorcelainDoll
LSmith Offline
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LSmith
Joined: Dec 2002
Posts: 703
I agree with Ken. A CD is not a transactional account. It is a contract for a certain rate for a certain term. In lieu of partial withdrawals, we make the customer cash in the CD, make the withdrawal, and then redo the balance in a new CD. Creates extra paper work if it's collateral for a loan. They need a deposit account if they intend to make withdrawals.

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#2065921 - 02/24/16 10:52 PM Re: Releasing Partial CD Balance for Secured Loan PorcelainDoll
PorcelainDoll Offline
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Joined: Sep 2015
Posts: 93
The West
Yeah, I'm not in favor of this customer having the understanding that he can make partial withdrawals without a penalty when the account is opened.

Good responses. Much appreciated!
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