We are looking to change (strengthen) the penalties on CD maturities - what type or time frame of notice do we have to provide for those changes going forward?
I've been asked to research what compliance issues there might be with changing our CD early withdrawal penalties from interest based (e.g., 3 months interest) to principal based (e.g., penaltiy is 1% of principal amount at opening or renewal).In what I've been able to find, the only thing I see relates to the Reg D requirements for the penalty to be at least 7 days simple interest if the withdrawal occurs within the first six days to be considered a time deposit. Assuming we can cross that hurdle, are there other compliance issues that I'm missing? UDAAP potential comes to mind, but if we are clear and transparent in disclosing the penalty are there other aspects of UDAAP that could bite us? We are looking at this as a defensive/customer retention tactic. With today's rates so low, and as a result with interest-based early w/d penalties also low, customers have no real downside to locking in higher yields today by putting into long term CDs with the thought that if rates jump significantly in a year, the penalty will be more than offset by moving to a higher yield CD early.I'd be interested in hearing any thoughts. We have heard anecdotally that other banks may be considering or already doing this. Is anyone aware of a bank doing this at this time?
Cashing out cd's and typing up new ones is the best way to change from a joint account into a Trust Account. Do we give them the current rates we are offering or do we type up the cd to finish the remaining term at the rate they were actually getting?
We are considering increasing the early withdrawal penalty on long term CDs (over one year). Is this dictated by a Reg? If so, which one? If not, are you seeing this happening in the industry and to what has the average increased?
Can the bank charge an IRA customer who is between the age of 59 1/2 and 70 1/2 an early withdrawal penalty if that person has the IRA invested in a certificate of deposit and the withdrawal is prior to maturity of the CD?
I have a question regarding an IRA CD. There has been some discussion among my coworkers, that an IRA CD does not receive any early withdrawal penalties if the owner is over 59 ½ years of age. I am not referring to any RMD or other scheduled distribution. I am referring to a situation where the client rate shops another institution and finds a better rate. Can the CD term be broken and the client take the money elsewhere without penalty, because of the fact that it is an IRA? Is that a Federal IRA rule or is it solely based on banks internal policy?
The board of directors at our institution currently would like to offer a ten year CD with no option for withdrawal. My understanding is that as long as it is disclosed, you can make the early withdrawal penalty "all interest accrued", but that you can’t restrict a customer from accessing his money. Can you please tell me if my understanding is correct and where I can find a regulation that governs this issue?
If we have a properly certified non-resident alien, would we need to report an early withdrawal penalty to the IRS and generate a 1099 even if we do not report interest income for the customer?
Under Reg DD, other than imposing a penalty for early withdrawal, what other restrictions must be imposed for withdrawal limitations on a CD? What if a customer is willing to pay the penalty, but makes withdrawals from a CD on a weekly basis? Do we have to reclassify the account for reserve requirements?
Is there any rule of the basis of days to compute the penalty for early withdrawal from a CD? We are a Metavante Bank and our penalty formula is based on 360 days - not 365 days.