I need some help with what appears to me to be an arcane practice.

Customer dies. CDs were in his name with a payable-on-death beneficiary named. Beneficiary comes in with death certificate for customer and proper identification for herself. However, she does not have the Original of the paper-based CD. It is our practice to prepare an "Indemnity Bond" for each of the CDs, for a value of twice that of each CD. This is apparently to protect ourselves in case someone else comes in with the originals and we pay out on them. I don't know that this has ever happened, but I'm questioning the value of the indemnity bond.

How are others handling redemption of a CD by the POD when the original is not available (we have bank copy)?

In my prior life, we obtained affidavit of lost instrument and retained as permanent document. This was based on advice of bank counsel. We once paid out a CD which we knew had been paid out previously, but we couldn't find affidavit. Again, on advice of counsel.

There are BOL gurus who vehemently disagree with this approach.

I can see some usefulness of an "Affidavit of Lost Instrument" as added documentation for our actions. However, an indemnity bond just didn't seem to make any sense.

"It is our practice to prepare an "Indemnity Bond" for each of the CDs, for a value of twice that of each CD."

What and whom are they indemnifying? What insurance company is selling this bond? These CD's are not negotiable are they? If not, I agree, it does not make any sense.

There is no insurance company, which is one of the reasons I feel that they have no worth. I think they were intended to say 'hey, you need to pay us back the money we gave you if we wrongly give the money to someone else when they bring in the original CD'. As far as I'm aware, they are not negotiable, but I'll check the wording.

'hey, you need to pay us back the money we gave you if we wrongly give the money to someone else when they bring in the original CD'

If you wrongly give the money to someone else if they bring in the original - you would have to go after them - not the person that was legitimate.

I agree. It makes no sense to me. "But we've always done it this way, Doug"

I researched further back and at one time we also required a 'surety' bond from an insurance company in addition to the indemnity bond. That makes more sense.

However, I'd appreciate more input. For those of you who are still issuing paper-based CDs, if a person comes in and says that they cannot find their original CD to surrender, what is your process for closing the CD and giving them the funds? And how long do you keep any documents associated with such a closing?

NOTE: I don't see anything on the CD (issued via DepositPro) that would indicate that it itself is a negotiable instrument.

The certificate form that you are referring too is really nothing but a receipt and has no actual value. I'm not that familiar with the Deposit Pro forms, but are there provisions for redemption on the actual certificate form? Deposit Pro probably also has a CD redemption form available when the CD is not present. Either way, these closing records should be maintained as long as any other closed deposit account.

The FDIC has a nice recap informing people the status of old forms that they may find at some later date:

http://www.fdic.gov/consumers/consumer/news/cnspr02/lost.html

This whole thing may turn on terminology:

Indemnification bond is a contract purchased from an insurance company by the person who lost the instrument. The insuror agrees to make the bank whole in case the instrument is presented later.

Indemnification agreement is a contract between the person who lost the instrument and the bank. Here, the individual promises to make the bank whole if the instrument is presented later.

The first has value. The second is a piece of paper. Its value turns on the individual's 1) ability to pay and 2) willingness to pay when the time comes.

For decades, any vendor produced "certificate of deposit" bore the legend: Non negotiable/non transferable. Regardless, banks still punished customers losing certificates of deposit and passbooks by dragging them down the paper trail and requiring one of the above.

Skip a few decades of evolution and start using "book entry" time deposits. There is no "certificate of deposit," just a receipt.

"Skip a few decades..."

Yes, that is my challenge!

Is anyone out there using DepositPro for the CD initiation, but just giving a receipt instead of the paper-based CD?

Also, if we move to 'book entry' CDs, what initial and/or period disclosures are necessary (e.g., does the customer get a monthly/quarterly statement)?

Not normally, the reciept just replaces the piece of paper you are currently handing them.

We don't use LaserPro but our platform also produces a receipt for the customer.

That's the way we've always done it, Doug!!