Reg D states for a deposit to be a time deposit, a depositor 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deposit unless the deposit is subject to an early withdrawal penalty of at least seven days' simple interest on amounts withdrawn within the first six days after deposit. Is it ok to charge a penalty of more than the first 7 days of interest? Our core system cannot impose 2 different penalties on the same cd (one for within the first 6 days and one beyond the first 6 days), so we charge the standard penalty. Since the reg says the penalty must be of at least seven days interest, are we ok charging more?

You can always charge more based on your TISA.

You cannot charge less.

The penalties mandated by the regulation (in combination with today's interest rates) are financially insignificant. The fact that banks charge more indicates that they have some comprehension of what a flood of early withdrawals could do to their A/L management.

So do most banks charge more than the first seven days’ interest?

Yes.

Not at all unusual to see a penalty of 3 months' interest on early withdrawals from 1-year term accounts, 6 months' interest for early withdrawals from longer-term accounts, with the penalty deducted from the principal if insufficient interest has accrued.