Readers have received an email from Darby Direct informing them that they can continue to make additional deposits to their 36-month Step-Up CDs as allowed in the original terms of the account. Here's an excerpt of the email:
Please disregard the email message sent to you on February 19, 2010 regarding limitations on deposits to your Darby Direct 36 Month Step-Up CD. There are no changes to the original terms of your account at this time, and you may still make additional deposits to the 36 Month Step-Up CD. For full account disclosure information, please click here.
Our customers are our most valuable asset and your concerns are our highest priority. Please contact us with any questions regarding your account, and thank you for choosing Darby-Direct!
In February Darby Direct sent an email informing customers that they would no longer be able to make additional deposits to their 36-month Step Up CD after February. As I explained in that February post, this was an important issue regarding the right of a bank to change the terms of the account disclosure on an existing CD.
I know several readers had reported this to the FDIC. Perhaps that helped convince Darby Direct that they should honor the original terms of the account. The reader BestCashCow reported to have talked with a FDIC representative on this issue. Here is what he reported:
I have spoken to the FDIC about this type of issue. According to the FDIC, Darby can't change the terms of the initial disclosure unless they specify in the disclosure that it is subject to change. They also need to state that near the term they plan to change. So, they can't say the CD allows unlimited deposits on page 2 and then say this is subject to change on page 5.
Another reader described in the comments his interaction with the FDIC and the bank complaint process:
the way it works when you contact the FDIC about a bank is... the FDIC simply forwards the exact letter you wrote to the FDIC (along with any documents you sent) onto the bank in question itself, and simply asks the bank for a reply. So keep in mind that any letter you send to the FDIC about a bank will be forwarded to the bank itself. Then you're supposed to give them 60 calendar days for a reply.
It's nice to see Darby Direct will honor the initial account disclosure. However, I noticed they did include "at this time" in their email which seems to indicate that they don't believe this is an obligation on their part.
Let's hope this CD doesn't over stress them. This 3-year step-up CD was offered from August through November 2009. The rate starts off with a 3% APY for the first year. It then goes up to 4% for the second and 5% for the third. I'm sure many customers were planning to make substantial additional deposits to take advantage of those higher rates.
It should be noted that Darby Bank is not in the best financial health. It has been operating under this FDIC Consent Order (pdf) since December 18, 2009. In the order there are restrictions to brokered deposits and deposit yields. If regulators take over the bank and the FDIC is able to find a buyer, the acquiring bank is then free to change the original account disclosure of these existing CDs. If the FDIC can't find a buyer, it'll mail customers the checks of their deposits up to the FDIC limit. So it would be wise to avoid adding too much to these CDs that would cause your total balance at Darby to go over the FDIC limit.
Thanks to the readers who commented on this and emailed me news of this.