Dedicated to Deposits: Deals, Data, and Discussion

Troubles at AmTrust Bank


The Office of Thrift Supervision (OTS) publicly released a Cease and Desist Order (pdf) for AmTrust Bank. Some of the orders include raising its capital ratio and restrictions on certain types of loans, on golden parachute payments, dividends and brokered deposits. More details of these regulatory orders and AmTrust's response are described in this news article.

One restriction of note to savers limits interest rates that AmTrust can offer:
shall not solicit deposits by offering interest rates more than 75 basis points over the local rates in the association's normal market area

AmTrust's internet division, AmTrustDirect is definitely complying with this. Their savings account and CD rates are way down. Their highest CD rate is currently only 2.50% APY for a 12-month term. The Premium e-Money Market Account only pays 2.75% APY. Those who opened the e-Money Market Account last year receive only 1.25% since it's not the premium version. This is one example of their sneaky ways of cutting interest rates in which they create new accounts that offer decent rates, and the old accounts get stuck with low rates.

A reader commented on another way AmTrust is trying to cut rates. It's allowing CD customers to do an early closure of their CDs without penalty. Here are excerpts of an email a reader had posted:
A special offer for our AmTrust Direct customers:

With the holiday season approaching, AmTrust Direct is offering a limited time opportunity to our customers. Until December 5, 2008, you can close your CD without an early withdrawal penalty.

AmTrustDirect had been offering some very competitive CD rates, so they must be hoping to cut their costs. I'm not sure how they intend to maintain adequate deposits. Their actions won't help them keep customers for the long-term.

Thanks to the readers who emailed and commented on this AmTrust news.

  Tags: AmTrustDirect

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