Timely Disbursement Of CD Proceeds: How much can the institution delay?

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Question:

A couple of our customers have had problems getting their CD's from a large bank. They have notified the bank a couple of days prior to the maturity date that they do not wish to roll-over the CD and would like the funds wired to them on the maturity date. The bank in question claims a ten-day waiting period (without payment of interest) and then refuses to wire or fed-ex funds (even though the customer wants to pay the appropriate fee). They state they can only mail a check which causes an additional 2 - 3 day delay. (To make money from the float, no doubt.) I can see in the reg's that you don't have to pay interest during the grace-period (if you disclose it), however I am completely at a loss as to why they wait ten days and refuse to wire. Have you heard of this practice? Also, where in the regs does it address prompt payment of funds to the customer?

Answer:

I am not aware of any federal law or regulation which governs a bank's responsibiltiy to disburse funds from a maturing time deposit promptly. However, if enough banks adopt such practices, I am certain we will get one.

Hopefully, the reference to a 10 day "waiting period" reflects a misunderstanding by the customer. There may be a 10 day "grace period" in which the funds can be withdrawn without penalty, but a "waiting period" after maturity? No. The issues would be breach of contract; the accuracy of the APY under TISA; and unfair and deceptive practices under state law.

On the other institution's refusal to wire the funds, there may be an explanation other than intransigence. For example, they may require a written agreement for all wire transfers and your customer does not have one in place.

I have seen banks do things as abusive as your customer describes, but have gotten burned a couple times when I relied only on the customer's rendition of the facts. However, if I were the customer whose time deposit had matured and the depository institution was as obstructive as indicated here, I would file a written complaint with their primary regulatory agency, state or federal. For additional weight, I would file a complaint with the state attorney general's office.

First published on BankersOnline.com 3/11/02