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#84257 - 06/02/03 02:12 PM Reg DD

We have two Certificates of deposits, eight and fifteen month, that have a disclosure that states: If your daily balance is $14,999.99 or less, the interest rate paid on the entire balance in your account will be 1.40% with an annual percentage yield of 1.41%. If your daily balance is $15,000.00 or more, the interest rate paid on the entire balance in your account will be 1.65% with and annual percentage rate of 1.66%. The interest rate and annual percentage yield for the account depend upon the applicable rate tier. We will pay these rates until maturity. Minimum balance required to open the account is $500.00.

I say this is a tiered rate account and that when the balance reaches $15,000.00 the higher rate should be paid.

This is not what our system is doing. The higher rate is only used with new or renewed certificates if the balance is $15,000.00 or more. If the balance goes to $15,000.00 during the term of the certificate it stays at the lower rate until maturity.

I say we need to send a notice of change or re-disclose to our customers to inform them that the rate will not change during the term of the account. We send a maturity notice and this notice does not have the tier rate information, so we should only have to re-disclose to the certificates that have not matured and also we will need to change the wording on these certificates. I have been informed by the CSR and the CEO that we do not need to re-disclose or change the certificates because it is not a tiered rate account.

Please give me your opinion. Thanks.

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Operations Compliance
#84258 - 06/02/03 02:22 PM Re: Reg DD
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,629
Cape Cod
I agree that the disclosures as you have quoted them are appropriate for a tiered-rate account. The use of "daily balance" is inappropriate for a fixed-rate account. It looks like an example of borrowing inappropriate wording in an attempt to say "The rate on the account depends on the balance at opening or renewal." As disclosed, there is a strong argument that if a customer increases the balance in such an account to the threshold of $15,000, the higher rate should be paid. Of course this could occur if interest compounds within the account, too, depending on where the balance started.

I vote for sending a clarifying re-disclosure, or making the system do what your disclosures say.

John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8

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