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#1247359 - 09/09/09 05:57 PM Reg DD Questions
ckb Offline
Member
Joined: Apr 2009
Posts: 80
1) Is there a Reg DD issue with the following scenario – I hope this description is not confusing!

Pre-conversion, we had a product code for 13 month CDs (which we regularly offer). Post-conversion, there was no product code set up for 13 month CDs, so all of the 13 month CDs transferred over with the ORIGINAL 13 month term, but under the 18 month product code. There was absolutely no change in term or rate with the conversion…However, when the CD automatically renews, it renews for the same 13 month term, but the system will assign the rate associated with the 18 month product, rather than the 13 month rate.

When we send the CD Renewal Notice 30 days in advance of maturity, we give the telephone number for customers to call to obtain the rate closer to the maturity date. Essentially, the CD will renew at the correct term (13 mos) but at an un-matching rate (18 mo rate). Am I over-thinking this, or is this a real problem?

2) We are sending out the same CD Renewal Notice for all CD terms longer than one month. These notices give the maturity date, state that the CD will automatically renew (unless we receive other instruction) and we give our phone number to inquire about the renewal rates. In reading 230.5, I am concerned that for CDs longer than one year we are not complying with 230.5(b)(1)…do we need to send entirely new TISA disclosures for the renewed account (i.e., accrual of interest, amount of early withdrawal penalties, etc.)?

THANKS

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#1247378 - 09/09/09 06:07 PM Re: Reg DD Questions ckb
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 40,086
Cape Cod
"The last shall be first ..."

Yes, you do need to send out full CD account disclosures with the maturity notices on time accounts plus the current maturity date. You can use the telephone number substitute for the interest rate and APY. if they aren't known at the time of the notice.

If the interest rate and APY are not stated in the maturity notice for your 13-month product, and if you give the correct interest rate and APY (the one that will be used) in the event of a call, you don't have a violation. However, particularly if your yield curve is inverted so that the 13-month rate is higher than the 18-month rate, you need to get that 13-month product code set up, or you're going to have some interesting customer concerns.
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#1247385 - 09/09/09 06:11 PM Re: Reg DD Questions John Burnett
BrendaC Offline
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BrendaC
Joined: Sep 2001
Posts: 6,029
Sweet Home AL
Would it be possible for you to increase flexibility through use of term category descriptions as opposed to strict monthly CD terms (i.e., 13-18 month term, 19-23 months, 24-35 months, etc.)? You just have to make sure your CD penalties line up with the term categories.
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