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Credit Union Increases Early Withdrawal Penalty on Existing CDs

POSTED ON BY

In my post on the details of CD early withdrawal penalties, readers commented that Fort Knox Federal Credit Union had changed their early withdrawal penalty, and this change applied to existing CDs. Since there were some conflicting reports in the comments, I asked the VP of marketing at Fort Knox FCU if this new early withdrawal penalty applies to all CDs, even ones that were already opened before the early withdrawal penalty change. The reply wasn't 100% clear, but it supports what readers said in the comments that the change does apply to existing CDs:

Fort Knox Federal Credit Union announced on January 1, 2011 that effective February 15, 2011, the early withdrawal penalty on certificates with maturities greater than 24 months will be forfeiture 180 days dividends whether earned or not. The EWP applies to all applicable Fort Knox Federal Credit Union CDs on the effective date.

The previous early withdrawal penalty was 90 days of dividends on all certificates.

The Right to Make This Change?

This change was inline with what reader me1004 described in this this October thread. In that thread, me1004 warned that Fort Knox FCU was making the case that it had the right to change early withdrawal penalties on existing CDs. He included the reply he received from Fort Knox FCU:

We can change the early penalty at any time. If you have a CD with us at the time of the change we have to give you a 30 day notice which would give you a chance to with drawn at the currect withdrawal penality.

Some clauses in the membership agreement could be construed to give the credit union the right to make this type of change. One clause is on page 6, Section 8 "Account Rates and Fees":

You agree that we may change the Schedule at any time upon proper notice as required by law.

Another clause is on page 13, Section 29 "Miscellaneous":

The terms and conditions of any account, including the method of determining dividends, may be changed by the Credit Union upon written notice, or as required by applicable law.

I don't see anything in the section on term share certificates on page 34 and 35 which says the early withdrawal penalty could be changed on existing CDs.

I can't say if this would stand up in court. It does seem unfair to me to overturn an important term (the early withdrawal penalty) that's explicitly specified based on generic clauses that are in different sections of a large document.

Reasonable Change?

I haven't been able to receive a legal opinion from an expert about what's allowed or not allowed based on a membership agreement or an account disclosure. However, the general opinion from experts is that early withdrawal penalties should not change on existing CDs.

Last year I submitted this question to Ask a Banker website. Here's an excerpt from their reply:

Increasing the penalty for closing a CD early is not a normal change. Call the bank and ask to speak to a bank officer about this. They shouldn't be able to do it any more than you could tell them you have reduced the penalty to 45 days. Again, an allowance to modify the CD contract unilaterally would be very unusual.

In the article CDs as Bond Bubble Protection - Revisited, Allan Roth received the same general opinions from spokespersons of the FDIC and NCUA. Allan summed up the responses he received:

in the eyes of the regulators, no institution can unilaterally change the early withdrawal terms.

Unfortunately, these general opinions may not be of much help for specific cases, but they do show that such changes are not generally acceptable.

Immediate Impact of This Change

About a year ago, Fort Knox FCU was offering 3.50% APY on 5-year CDs. So how will this change in the early withdrawal penalty affect the rate of returns? It will depend on when the CD is closed early. The longer one waits, the smaller the effect will be. Below is a table that shows the impact of this change for a Fort Knox FCU 5-year CD that was opened last year when the APY was 3.50%.

Year of Early Withdrawal 3.50% APY CD w/3mo Penalty 3.50% APY CD w/6mo Penalty
year 1 2.61% 1.73%
year 2 3.06% 2.61%
year 3 3.20% 2.91%
year 4 3.28% 3.06%
year 5 3.50% (no penalty) 3.50% (no penalty)

 

Risk of Changes by Other Institutions?

Closing a long-term CD early and taking a small early withdrawal penalty can result in a higher rate of return than a short-term CD that's held to maturity. As seen in the case of Fort Knox FCU, this strategy has some risks. I don't know how significant a risk this is for other institutions. The concern is that if interest rates shoot up, banks and credit unions will have a much larger incentive to make these changes.

One institution known for its small early withdrawal penalty is Ally Bank. When we first learned of Ally Bank's early withdrawal penalty of only 60-days of interest, several readers were informed by Ally Bank reps that Ally had the right to change the early withdrawal penalty on existing CDs with 30-day notice. I investigated this, and received assurance from Ally Bank's public relations director that Ally would not change the early withdrawal penalty on existing CDs (see post). Of course, this doesn't eliminate the risk. To reduce the risk that all of your money will be stuck in low-yield long-term CDs if rates shoot up, you might want to consider CD ladders and using multiple banks and credit unions.

Wronged by Your Credit Union or Bank?

If you have experienced a problem with your bank or credit union that you have not been able to resolve, it may be time for you to contact the regulator of your financial institution. The NCUA provides instructions for submitting complaints on federal credit unions. For other types of banks and credit unions, I have details and links in my post, How to File a Complaint Against Your Bank or Credit Union.

Many times complaints to regulators don't help, but there have been some success stories. In one example a bank changed the terms of its add-on CDs for existing CDs. A reader wrote a complaint to the FDIC which was the primary federal regulator of the bank. It appears his letter helped get the bank to rescind the disclosure change.


  Tags: Fort Knox Federal Credit Union, CD rates

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Comments
79 Comments.
Comment #1 by Anonymous posted on
Anonymous
This could be a "trial baloon" that all the other credit unions and banks watch.  Therefore, I think that we all should be alarmed and protest this action to the highest level whether we have funds here or not.

Ken, can you organize some type of write in forum or form that can be gathered and submitted as a class action?  A large protest will be more effective than a dribble of individual complaints.

6
Comment #2 by Anonymous posted on
Anonymous
From Ally's T&C: "Please be aware that accounts or services can change over time. We reserve the right to delay,discontinue or make changes to accounts or services, and to convert your existing accounts and services into new accounts and services. You may not get advance notice of this. We may change this Agreement, and we may add to or delete from this Agreement, and the updated agreement will supersede all prior versions. We will provide notice of changes, additions, and deletions as required by law. If you do not agree with a change, you may close your account(s) before the effective date of the change, addition or deletion."

So Ally also officially retains the right to make changes to accounts after-the-fact. It isn't clear if this clause applies to CD's which have been interpreted as contractual, but even if it did, it would seem unreasonable not to allow existing certificates to be closed under the prior terms. Unlike Ft. Knox Federal CU with under a billion in deposits, Ally is among the country's top 50 banks with over 30 billion in assets, so the public relations fallout of such a predictably unpopular post-facto change in account terms would be far more reaching.

6
Comment #3 by Dan2 (anonymous) posted on
Dan2
You can argue as much as you like, but the Banks and CUs have the upper hand.

They can change anything at any time without any recourse from the customers.

You actually agree to those terms when you opened the CDs or accounts.

12
Comment #4 by Anonymous posted on
Anonymous
I would think that if a bank/credit union changed its terms, the customer should have the right to withdraw their money without a penalty, rather than withdrawing at the current penalty.  It just doesn't seem fair to me.

8
Comment #5 by pnina (anonymous) posted on
pnina
Me and another person in my household wish to join common action against changing early withdrawal penalties for existing cds.

4
Comment #6 by Anonymous posted on
Anonymous
I think the possibility of an interest rate hike probably stopped the issuance of any new Penfed 10 year CDs.  Penfed probably sold about $100 to $150 Million in 10 years CDs with a CD base of $5 to 6 Billion.  A one year penalty on 7 year CD offers significant protection for the CU in case of an interest rate hike.

A 10 year CD holder is more likely to redeem early is interest rates go up.

1
Comment #7 by cactus posted on
cactus
Fort Knox CU is in a relatively isolated market area with a pretty much captive customer base. Like many CUs and banks in that situation, they can abuse their customers with impunity.

4
Comment #8 by Anonymous posted on
Anonymous
Thanks so much for this information!  I came very close to depositing a large amount of money in a Fort Knox CD.  Knowing what they have done causes me to definitely change my mind.  It is so important that customers be able to trust their financial institutions.

6
Comment #9 by Anonymous posted on
Anonymous
(Except for existing Fort Knox CD holders) it is good this happened.

 

I had been considering the Ally five year "strategy".  But so far I've not acted.  This outcome at Fort Knox will serve to increase my hesitation, absent something IRON CLAD out of Ally.

 

I simply cannot risk my money this way, with a long term CD the terms of which they might alter.  Rates are headed straight for the north pole.  I can wait.  I'm going to pay the cost of low short term rates, and enjoy the benefit of keeping my powder dry. 

 

Also, April is less than a day away.  With QE2 ending in June, I don't think the wait will be all that long.  And I don't think there will be a QE3.  If they try to pull that stunt, the sh** is really going to hit the fan.

4
Comment #10 by Gerard (anonymous) posted on
Gerard
Let's get some perspective here.  I was a state banking auditor for 23 yrs. and know the industry pretty well.  The EWP's are really just a convenience mechanism for depositors, originally intended for hardship withdrawals.  The banks don't intend for depositors to use them in response to changes in market interest rates.   Unless contractual (which is rare, and there is a big difference there), they can and sometimes are, modified by the banks.  The big mistake is to assume that they can be relied upon.  Usually, they can't.  The states have usually chosen not to intervene in complaints on this issue.  Here's the lesson: assume that a CD cannot be broken, and if you really need to do it, don't look at the EWP policy as being unchangable.   The poster Lou from the other day is way off the mark.  If he was in the banking world, he would realize that.

11
Comment #11 by Anonymous posted on
Anonymous
I just use CU CDs with large well managed national CUs.  The interest of the depositor and CU are aligned.  The probability of a large CU like Penfed or Alliant or Navy doing something like this is remote. 

3
Comment #12 by Anonymous posted on
Anonymous
To Gerard:

 

I am the one that first posted this about Fort Knox and was told I was wrong by Lou and Fort Knox Fan,the problem I have is that it appears as if people were sucked in by Fort Knox including me with a 90 day EWP,usually I don't break my cds it kind of works out if you 5 year ladder them I still have cds that are paying 5% to 6% but the only reasons I buy the cds is they were always much higher then treasury notes but if you don't have the option of a fair EWP then I believe you are better off in laddering 5 year treasury notes especially if you live in a state with a high income tax.  The treasury notes are very close to the higher cd rates and they are much higher then the average 5 year cd and you don't pay state taxes on them if, you can't trust the EWP at the banks and credit unions let them do without our deposits.

Very disappointed in Fort Knox after all I thought credit unions were all about helping their members not cheating them and however it is written in their contract it still amounts to taking advantage of your customers,I can understand raising the EWP to 6 months that is the usual, 90 days was low but still it should not have been done retroactively. Why have a 90 day EWP unless you were trying to attract customers. If not crooked for sure a very bad business move. Mountain america credit union did the same thing last year they raised from 90 days to 180 days but not retroactively.

If the banks don't intend for you to use them they should never put a low EWP on their cds if they wanted to help people with a hardship case then they could go on a case by case basis. The banks and credit unions would have to be stupid not to think people would be attracted to low EWPs especially the way the federal reserve has monkeyed with the interest rate in the last 10 years.

 

td

3
Comment #13 by Anonymous posted on
Anonymous
It's becoming increasingly clear that the banks and cu's can, and will, change the terms of their CD's, both old and new, whenever it is to THEIR benefit and, as a practical matter, there is very little, if anything at all, that we can do about it. Class actions and other possible remedies are expensive and time consuming and the lawyers end up with most of the damage proceeds if any are ultimately won. Complaining and letter writing to the institutions will do no good since, if they really cared how we feel,  they would not make the changes to begin with. The only real chance for the CD holders is for congress to pass a law(s) that protects us in a situation where the institution attempts to change the CD terms subsequent to the deposit date. Any such laws will be a long time coming, if ever at all. In the meantime, just be prepared for a real hosing as rates begin to rise. A sad situation but thats just the way it is, and very perplexing for the conservative investor.

3
Comment #14 by Anonymous posted on
Anonymous
To #11: Don't be so sure I have cds at pen fed and while they did not change their EWP their EWP is at the normal range not low like Fort Knox but pen fed has done some other things that were unfair to their customers such as giving customers special cd rates and not offering it to others and in the last case they did this they actually allowed some people that were not supposed to get the special rate to get it and they still denied it to others.

4
Comment #15 by Greg (anonymous) posted on
Greg
Ken's analysis is well-researched, thoughtful and right on target.  Each case would turn on the exact terms at issue -- and they vary widely.  Read the fine print.  These are above all contracts and would be governed the specific language, as temepered by the rules that govern agreements between institutions and customers.

 

 

2
Comment #16 by Anonymous posted on
Anonymous
Dan2-#3 and Gerard-#10 are right on.

Myself, being aligned with that very sentiment, take out CDs with the full intention of holding each and everyone until maturity.  Not as a trading vehicle if interest rates were to rise during the course of their term.  CDs are just that, term certificates.  The money from which banks and credit unions rely on and plan use of for a specific amount of time.  That is precisely why CDs pay higher interest than savings and money market accounts.

3
Comment #17 by Gerard (anonymous) posted on
Gerard
to td (#12) and others:

I understand your disappointment, unfortunately, banks and CU's are looking to lend these days and not take care of their depositors.  We get mail all the time from our credit union -- they're not looking for our savings, they want to lend us money for auto laons, credit cards, etc.  They are all smiles about that, but if you go in there to open a CD, they will pay you 1% or 2% and call it "HIGH SAVINGS RATES."  I think that to make EWP analysis a "Strategy" is a big mistake, although I know Ken looks at that a lot.  You can't make it a strategy if it can be altered by the banks and CUs, which it usually can be.   That's the error.  You really have to assume that you will hold it for the entire term. Good luck to all!

Gerard McCain

Brattleboro, VT

4
Comment #18 by Anonymous posted on
Anonymous
Looked at Penfed's membership and CD agreement.  I do not believe Penfed could change existing CD agreements.

However, Penfed reserves the right for 60 day notice for any withdrawal.

1
Comment #19 by willp (anonymous) posted on
willp
A suggestion solution: A WINDOW IS WHAT IS NEEDED HERE, and the FEDERAL RESERVE BANK can be of great help both to certificate holders--who deserve a window as a matter of equity and also of practicality given the extremeky low interest rates dictated by the Fed, which clearly encouraged depositors to place funds in longer-term certificates of deposit, and also to financial institutions as well, who need to know the restrictions applicable to early withdrawal penalties. We need a FRB RULE providing that that any financial institution subject to the FRB that seeks to modify any provision of its terms and conditions relating to a penalty for early withdrawal of funds invested by a depositor in a certificate of deposit issued by that institution, shall be (a) REQUIRED to provide that any such modification may be applicable to any withdrawal of funds from a certificate of deposit issued by the financial institution only after NOTIFICATION is made to depositors that a revision to the early withdrawal penalty shall be effective upon a minimum of 45 DAYS NOTICE to such depositors, and (b) that any modification to an institution's penalties for early withdrawal of such funds IS SUBJECT TO the provision that the financial institution shall provide that the penalty for early withdrawal of funds from a certificate of deposit SHALL NOT EXCEED the institution's penalty for early withdrawal IN EFFECT ON THE DATE WHEN FUNDS WERE FIRST DEPOSITED in any certificate of deposit issued by the institution and opened AT LEAST 45 days before any revision of the institution's penalty for early withdrawal of funds.

1
Comment #20 by cactus posted on
cactus
Re Anonymous #14 - Why is it unfair to members to favor current members over new members?

Re Anonymous #18 - Most bank and CU "Truth in Savings" agreements include the right to delay withdrawals. This is in case there is a panic "run" on the institution, which is to the overall benefit of all the institution's customers.

1
Comment #21 by Bozo posted on
Bozo
Folks, look at the bright side. The fact that a credit union wants to dissuade you from exercising the EWP (by making it longer) means they have your money tied up and they want to keep it. Why? Rates are going higher. I guarantee you if you had a 10 year CD at 5.75% purchased in January 2008, they'd trip over themselves waiving the EWP just to get out from under that "onerous" rate. BTW, as I think I discussed some time ago in another thread, Fort Knox CU is on very shaky legal ground here (I'd be happy to elaborate, but your eyes would glaze over). However, as a practical matter, there is no effective legal remedy. And they know that.

Bozo

3
Comment #22 by Channeler posted on
Channeler
Regarding Ally's early withdrawal policy: When I began investing (depositing) with them, I requested written confirmation of their policy. In response, I received an official letter from the bank stating that "while it's true that at some point the terms could change, customers who have invested in a CD under the 60-day terms would continue to enjoy that benefit until the CD matures." It seems that they are, indeed, straightforward.

4
Comment #23 by Anonymous posted on
Anonymous
Bozo - #21

Yes, please go ahead and elaborate.

1
Comment #24 by Anonymous posted on
Anonymous
It might help to keep some perspective here.

If you want to put your money in a fixed income investment, and you don't want to do these CDs for fear of the EWP increasing, your only other options are bonds, treasury notes/bills, or brokered CDs from your broker.

All of those feature no early withdrawal option at all. If you want out you have to sell at whatever current market value is...depending on maturity, in a rising rate environment this may result in a much bigger loss than the EWPs of even the more onerous banks and credit unions.

I think Allan Roth's article about CDs pointed out that it is fundamentally irrational to have these investments, which are as safe as treasuries, but pay more than treasuries of equal maturity AND have early withdrawal options. Even if EWPs increase, CDs still might be more attractive than other fixed income investment options. And if we force the banks hands, we may end up in another situation like the recent credit card legislation - where the banks will be forewarned, shall we say, that the savers are coming to reclaim their funds, and will all jack up their EWPs to much higher levels than current, prior to the rules changing.

Just some contrarian food for thought.

3
Comment #25 by Anonymous posted on
Anonymous
Not too sure why all the hoopla. If rates rise significantly, cash these CD's out if it makes sense and suck up the penalty whatever it is - not every investment works out. It's not as if the money is irretrievable. A relatively high insured CD rate with a nominally short closure penalty is still attractive.

2
Comment #26 by Anonymous posted on
Anonymous
Below is part of the chat that I kept when I opened my 5 year CD with Ally:

 

Joe: Am I correct in understanding that there is only a 60 day penalty for early withdrawals?

Joel: That's correct.

Joe: Can Ally Bank refuse to release the funds to me if I want to make a early withdrawal? Is that in the terms anywhere?

Joel: No, we can't do that unless for some reasons your funds were on hold still.

This seems pretty clear to me!

1
Comment #27 by Anonymous posted on
Anonymous
To cactus #20: I said nothing about new members pen fed did it to me among others and I have been a member for 10 years.

2
Comment #28 by Bozo posted on
Bozo
To: Anon #23

Re: Elaboration

A CD is a contract. The express terms of the contract are embodied in the disclosure statement, the deposit agreement or "ticket" (rate, term, amount, and compounding) and any ancillary documents particular to special accounts (IRAs, for example). Representations in advertising materials may also be considered contractual (express or implied). Representations not in writing (such as those of a CSR), unless confirmed in writing signed by the bank or credit union (good luck on that!) are generally not binding as a result of integration clauses. As a general rule, specific terms in a CD (your rate is "X", your term is "Y", your compounding is "Z" and your EWP is ___ months/years) govern over general terms ("we reserve the right to change any terms on a whim, or whatever"). Terms of a CD are subject to change unilaterally by the bank/CU only in "callable" CDs. In a fixed-rate, non-callable CD, the bank must honor its terms, including the EWP at the time of purchase. Every term is deemed "material" which directly bears on yield. EWP, as we know, bears on yield. Terms immaterial to yield may, on reasonable notice, be changed by the bank. An example would be the provision of free monthly paper statements of account. State Farm Bank discontinued them, to save a bit of money. That's OK.

Aside from the express terms of the contract, the law may imply terms based on equitable principles. For example, under various theories (such as promissory estoppel), the law (I so love that term "the law", as if it really meant anything in the real world) may "estop" (prohibit) a bank from changing even what might be immaterial terms in a contract if the purchaser of the CD detrimentally relied on the otherwise immaterial term in the purchase of the CD and, but for the otherwise immaterial term, would not have purchased it. Stated another way, the term might be material to one (me) but not others.

So much for "the law". As a practical matter, a bank or credit union can do just about anything that isn't flat-out criminal (some would disagree and point out that banks and bankers commit crimes all the time, but that's a topic for another day). What it does in changing the EWP might be a breach of contract, but that's a civil "wrong" (you can't generally call the cops). It might also be a violation of some rule or regulation of some governmental body. But the bank is counting on the fact that the amount of money is so small (relatively speaking), you'll give up the fight. Do the math. Let's say you're getting 3% on a $100,000 CD and the EWP "was" three months interest ($750). The bank unilaterally changes it to six months ($1500). You bite the bullet, let the bank charge you the extra $$, and then what? Take them to small claims court? Good luck with that. Ever try to collect a small claims court judgment?

I could elaborate on the elaboration. And don't even think about a class-action, folks. I'd have a serious problem even trying to define the class, much less making a cogent argument for certification.

Did your eyes glaze over? I told you they would.

Bozo

7
Comment #29 by Mike posted on
Mike
I think the contract at the time the CD was opened should stand. 

 

Likewise, I think the banks being FORCED to forgive high mortgage balances for deadbeat borrowers is WRONG.  They are having to reduce the amount owed and/or the interest rate, and even lengthen the duration of the loan.

 

The banks know exactly how we feel.

1
Comment #30 by Anonymous posted on
Anonymous
From Anon #23 to Bozo #28

Thank you!!!

1
Comment #31 by no stock 4me (anonymous) posted on
no stock 4me
This could be , I say could be, the canary in the mine. It may be that some inside info is going around these banks and CU's about a pending rate hike coming sooner than later.

I hope so anyway :)

 

1
Comment #32 by Anonymous posted on
Anonymous
Penfed recently increases their early withdrawal penalty from 180 days to 365 days for CDs term 5 years or more.

1
Comment #33 by willp (anonymous) posted on
willp
Things now seem clearer to me after focusing on the facts (thank you, Bozo)  that a CD is a contract, that written terms that apply to the contract with the financial institution will govern the depositor's rights unde the contract, and that financial institutions (including credit unions) seems to to operate beyond these restrictions in practice based on their belief that, in effect, savers have too much of an uphill fight to secure relief after a financial institution takes an action that in reality breaches the contract. To me, that seems to raise questions about some possible sourcesof help to depositors:  Wouldn't a complaint filed with the Federal Reserve Board (rather than the deposit insurance folks in the FDIC or NCUA) get anywhere, since there does seem to be less than brain surgery involved in analyzing what's being attempted?  Wouldn't also filing a complaint with the consumer protection section of the depositor's attorney general's office and/or the same office in the state where the financial institution is incorporated, or has its head office, do the job of simply enforcing these rights even though the bureaucratic route would, of course, take time?

1
Comment #34 by Anonymous posted on
Anonymous
Bottom line here folks - disregard what the paid PHD's and 'pros' blather to you and go with your own inclinations....and above all, protect your hard earned capital and proceed with caution.

5
Comment #35 by Anonymous posted on
Anonymous
It depends on how serious you are about fighting this. Remember Darby? They tried to change the terms in the middle (by trying to stop allowing additional deposits). They were governed by the FDIC (not NCUA). Customers officially filed complaints about the change to the FDIC. In the end, the bank had to relent and stop the change. However I don't know if there were any clauses in the CD saying they could make changes at any time.

But unless the contract SPECIFICALLY said they could change the EWP at any time (instead of just a general "we can change the terms at any time) that brings up another interesting question: can they change the RATE at any time? How would a sudden EWP change be any different from a sudden rate change, if their ground to stand on is simply a generic we-can-change-the-terms-at-anytime kind of statement? This is why if anyone wants to fight it (I certainly would, if I had an account there) and contact the NCUA -- even taking them to court if need be (if the need arose) you might want to consider it. Would you just roll over if the bank decided to lower your interest rate suddenly when it was supposed to be locked in a certain APY?

1
Comment #36 by Anonymous posted on
Anonymous
As Ken wrote: Allan Roth received the same general opinions from spokespersons of the FDIC and NCUA. Allan summed up the responses he received: "in the eyes of the regulators, no institution can unilaterally change the early withdrawal terms."

These institutions ARE regulated, folks. They will try to cheat you every way they can. But they ARE regulated. They're hoping no one bothers. If you roll over, they will roll over you. I suggest all those who have accounts at Fort Knox file FORMAL complaints through the NCUA. Or you could just wait for them to start changing the rates and charging you $100 monthly fees or whatever they think they can get away with. I'm 100% serious here. Formal complaints to the FDIC in the past helped stop such abuses at other institutions. I don't see how the NCUA would be any different, especially looking at Ken's post where it seems the NCUA doesn't think a bank's EWP is changable unless spelled out.

6
Comment #38 by Anonymous posted on
Anonymous
#36 - The only assurances that Roth cited were general opinions from unnamed spokespersons which hardly represents a binding policy or rule. Even though the institutions are, in fact, regulated, are they regulated in regards specifically to the EWP situation? Obviously not, since certain institutions have already made said changes and others will probably do so in the near future. If Roth wants to provide some meaningful help in this regard, perhaps he can obtain written statements from the FDIC and NCUA as to their binding rules on the matter. Otherwise, his comments are totally useless for our purposes. Until such time that each individual institution, either voluntarily or as a regulatory requirement, reduces to writing it's exact policy with respect to the EWP, then the EWP situation will essentially remain unknown and we will have to live with the consequences, and it is not to difficult to imagine what the instituions will likely do when the withdrawal stampede reaches their door....and all the letter writing in the world will not help a snit.



 

 

4
Comment #37 by Anonymous posted on
Anonymous
If they're giving me 30 days notice to make a decision I'm content with that

1
Comment #39 by Anonymous posted on
Anonymous
The more "bad press" the offending institutions get the better.   It may even prompt a change in their continuing policies.    If they think they can run over the savers like a steam roller, the bad press might pursuade them otherwise.

All savers ought to think about dealing with institutions that have everything spelled out very clearly with no room for ambiguity.  Although I am a member of Pen Fed I was turned off by the way they handled the 10 year CD offerings and would think twice about doing CDs with them.   Also, other credit unions started offering better rates to locals than out-of-towners --- no equal opportunity to get the best deal.  The saver must think about the time and energy and dollars lost spent in getting what is rightfully theirs if they sign up with an institution that is already known for bad practices with regard to CDs and other savings vehicles.   Some will mind very much the hassles to get what is rightfully theirs while others don't mind at all going back and forth to get what's theirs. 

The Federal Reserve Board, in my opinion, has shown no regard for the saver getting a fair deal as evidenced by their policies and the rhetoric.   However, the more press there is about the effects of Bernanke's policies on the savers the better.   There doesn't seem to be any group or institution to which we can write to who stands up for the "saver".  

3
Comment #40 by Anonymous posted on
Anonymous
I believe it was in 2007 when Member's Credit Union changed the terms of their Flex Certificate. 12 month was 6%, 24 month was 6.25%. Minimum $5,000 maximum $100,000. One time bump in in the interest rate after 6 months and before the last 3 months. Member can add money any time to CD. Member can do a 1 time withdrawal of money without penalty up to 50% but must maintain at least $5000. In just a short time they no longer accepted additional deposits  2-3 weeks after the CD was purchased. We called, wrote letters, contacted NCUA and was referred back to  State of North Carolina Credit Union Division and Tony Knox and in the end nothing happened. I believe one person may have lost their job but the change of rules stood.

2
Comment #41 by Cheated by Fort Knox (anonymous) posted on
Cheated by Fort Knox
I opened 3 very large 5 year CDs whith them 2 weeks before the change in their early withdrawl terms.

I specifically asked them this question about the terms changing on preexisting CDs.

Many emplyees and supervisors at Fort knox assured me and my wife (verbally-refused to answer written) that they would NEVER do this if I opened a a Cd before the date of the policy change. So I rushed my CD opening and funding to get in before the change.

They must have known that this was misinformation that they were giving me!

This is fraud by any definition!

I am going to file a complaint withthe NCUA.

I would gladly take part in any class action lawsuit.

5
Comment #42 by me1004 posted on
me1004
First, thank you, Ken, for following up on this. Second, sorry about my verboseness that follows!

Anonymous #2: Re whether the clause you quoted applies to CDs, "which have been interpreted as contactual," that CD "contract" (and some have said it is not a contract, is just an agreement - but I sure don't know) includes all the disclosures of the institution, including that clause you quoted. And that is a major point, is where most institutions are putting these clauses, in other disclosures of the bank that control everything else, including CDs. They are generally not anywhere near the clause that tells of the early withdrawal penalty. And they are general; you are unlikely to find any of them specifically listing CD early withdrawal penalties.

Ken, sorry, but what a PR (public relations) guy says is quite unimportant. They are paid to tell you whatever it takes to make you feel good about the company. 

Cactus #7: Fort Knox is not in an isolated market. They are open to depositors nationwide. Anyone can join. 

Gerard #10: You got it exactly right. I note, in previous threads, we had a lawyer saying that a judge would not allow any fundamental point of the CD to be changed, and it was his interpretation that that would include the EWP. But as Gerard notes,  the EWP is NOT intended as a mechanism for depositors to skip out and go to another, better deal in midcourse. They are just intended as an out in case of emergency. In my VERY NON-lawyerly interpretation, this means they are not a fundamental part of the CD that a judge would not allow to  be changed, such as the interest rate. And, as Gerard said, "they can, and sometimes are, modified by the banks." That means this Fort Knox matter is NOT the first time. And as I have said in other threads, we have had at least 3-4 posters saying over the past year that their institution had done similarly, and applied it retroactively to existing CDs.

If something in the overall disclosures of the institution, or in the CD itself or other pertinent disclosures and terms gives flexibility for the institution to make changes, then all of that is part of your "contract." The "contract" in the CD papers includes all the other disclosures of  the institution, cannot be read alone. Clearly, I have not looked at ALL such paperwork of all institutions, but some months back I looked at it for several, and I found such clauses somewhere at all of them that I looked at. So, I have to think at least many,  maybe even most, maybe even all institutions have such a clause somewhere that applies. Of course, that doesn't mean they will exercise that clause.

I will say, when I first broached the issue in these threads last year regarding Fort Knox, they had volunteered the information to me without me even asking. I had merely asked what the early withdrawal penalty was, they told me --and then volunteered that it can be changed at any time even after the CD is opened. And when I then pursued this issue with other CSRs and supervisors and eventually all the way up the ladder to the guy who sets the policy, they all said the same. Because of their honesty, I did not open a longterm CD with them. But I will look to do business with them in the future -- because of their honesty.

That is, at least in my contacts, they were always honest and forthright about it, and didn't even keep quiet about it when I did not even ask into that angle. It remains to be seen whether Ally and others have been as honest and forthright about it, or whether a PR guy  is a good source of info on it. On the other hand, Channeler #22 seems to have gotten the statement in  writing from Ally. That would help, although not being a lawyer, I don't know if that would clinch it, might depend on who wrote the statement, whether it means they cannot do so or merely means they do not intend to, etc., etc.

I also will say, the forthrightness I had from Fort Knox gives me the impression that Fort Knox has its CSRs well trained, unlike virtually EVERY other **** CSR contact I have had with any company about anything at all (the worst of all is unquestionably Citi Bank!).

Anonymous #26: that is only clear as to what the terms NOW say. We are talking about whether they can change the terms.

I had read Allan Roth's article. I thought poorly of it. But I will leave that to the thread in which we discussed it. I mention it here only to note that the excepts are just that, are not in the full context. But Anonymous #38 seems to understand some of the problems with the article.

What I have been saying in the threads is to be aware of this issue and give a lot of consideration to whether you will need or really want to get your money out of a CD early before you take those longer terms. To take a longterm CD with the idea you will close it early and end up with more than you would have in a shorter term CD is real speculation, and that is now being confirmed. It is not unlike people speculating in the stock market. But most people in banks and credit unions are there because they don't want to speculate with that money.

Fort Knox has made the EWP merely 6 months. Maybe others will change it from 3 months to 2 years worth! That is, you might not have seen the worst yet. A year and a half from now, you MIGHT think Fort Knox actually turned out to be decently easy about it. And, of course, maybe not.

Rest assured, when rates rise and all the people speculating decide it is time to pull their money out early as if it were a run on the banks, the banks and credit unions are not going to sit idly on the side and watch all their money disappear; they will do what they need to do, most especially if their solvency is at stake but even just to keep profits up. Their "intents" expressed now are not going to stop them from acting in their best interests later.

We do have unique circumstances expected to be arising that will bring all this into play. In fact, that is the very reason why this strategy arose in the first place

2
Comment #43 by Anonymous posted on
Anonymous
I have asked Ken to contact a compliance officer at NCUA.  I have reported the matter to the NCUA.  I think it is important that Ken talk to the compliance officer.  He knows most of the details. 

Ken, I have emailed you with the name and number of the compliance officer.  The email is titied in caps, "PLEASE CONTACT XXX   XXX AT NCUA COMPLIANCE RE FT. KNOX FCU EARLY CD TERMINATION CHANGES."

2
Comment #44 by Anonymous posted on
Anonymous
I am Anonymous #1 above.  There is much commentary speculation going on here, much indirectly in support of the banks and cu's that they can do what they want and thinking of the Fort Knox change too narrowly.

If they can change 90 days to 180 days, what if they next change it to no early withdrawn at all without their consent?  I dealt with contracts for many years.  An institution is considered in the position to have superior knowledge of the subject matter being contracted.  Since these are the bank and cu's contracts, written by them they know full well what they are offering within them.  So an early withdrawal clause is there to use, as written, without further speculation of unwritten intent or concern.  (Lets not forget that when rates go up, the institutuions are also raising their rates on loans as they lend the money out.  Money not lent is invested in bonds, treasuries, etc at the higher rates we are all seeking so it is not like they will be paying us more while they are still making the same return on those funds - they just want to make more while not paying you more).

They should be challanged by every means possible to abide by the product as sold.  Savers have supported the banks via unreasonably low interest rates long enough without this issue.  We need to gather together to head off this change before it becomes a trend.  We should get average Joe public behind this via financial news investigation, etc.  

Ken, do you have access to media outlets?  Can we begin a petition drive?  Lets do something !!!

2
Comment #45 by mm308 (anonymous) posted on
mm308
me1004- you and I posted about this back in October 2010. I am a little shocked that you would have any kind words for Fort Knox CU. They set the EWP and their other disclosures when they opened cds for their members. Surely you don't think the EWP can be changed retroactively just because someone who may or may not have an emergency opts to withdraw money from a cd or close a cd. Obviously all the disclosures would be meaningless if the cu senses an emergency and changes all their disclosures retroactively. Surely, the disclosures were NOT intended to be a worthless mechanism to entice people to open cds only to find out later the the enticing disclosures were subject to retroactive change by Fort Knox CU. Your idea of a "fundamental" part of a cd as decided by a judge is a novel and frightening idea. The judge might be a bank stockholder and think that the rate you got when you opened  the cd was too high. In order to save the bank's profits (a more "fundamental" goal to the stock holders), the judge might allow your rate to be reduced or maybe even cut to zero. Some additional fees might also need to be imposed before you could get your money. Remember, the more "fundamental" part of this dilemma for any bank or cu that would change their disclosures retroactively is their PROFIT. As you so elegantly implied in your last couple of paragraphs, they will do whatever it takes for their solvency and best interests to be served. And the customer--they can go to h_ll.

                                                                                                                       

 

 

1
Comment #46 by cactus posted on
cactus
I don't see a 1 year penalty for 5yr CDs on the PenFed site: 2)

 



Certificates Having a Term Greater Than Six Months and up to and including 5 years. a) If redeemed within 180 days of the issue date or any renewal date, all dividends will be forfeited.

b) If redeemed thereafter, but prior to the maturity date, dividends for the most recent 180 days will be forfeited.

https://www.penfed.org/pdf/accountsforms/688.pdf

 

1
Comment #47 by Anonymous posted on
Anonymous
If I must take funds from a CD there and they enforce the change,I will file suit for fraud, in

small claims court.

3
Comment #48 by cactus posted on
cactus
re: me1004  I think that Fort Knox allowed broad membership at some point in the past when they needed more funds than they could get locally. 

Several months ago, their best rates started to be limited only to local and longtime members. Now they have retroactively changed the early withdrawal penalty on existing CDs.

Judging by their actions, by their website and by their phone agents, they don't seem to be interested in being a national credit union like PedFed or Alliant.

They are in a relatively isolated market area with a pretty much captive customer base of soldiers and local residents. Like many CUs and banks with a captive customer base, they can abuse their customers with impunity.

3
Comment #49 by lou posted on
lou
Okay guys, I am appalled by what Ft Knox has done here. It is despicable and, at least for me, I wouldn't do business with this miscreant credit union if they were the last standing financial institution in America. However, their disclosures were awful, certainly not friendly to depositors. I suppose they could say, if you want the EWP not to apply retroactively, we will refuse your request for any withdrawal. Remember, it is in their contract to refuse early withdrawals at their discretion.

I called Penfed and they told me the change in EWP for the 5 year certificate is definitely not retroactive. It applies for certificates purchased on March 15 or later. The CSR said the reason for the change is because the 5 year certificate rate is closer to the 7 year rather than the 4 year, so they decided to group the 5 year with 7 year. I have closely read their certificate agreement and other disclosures and I do not see any language approximating the Ft Knox nonsense. As far as I can tell, they can't refuse a withdrawal or change the terms retroactively.

2
Comment #50 by cactus posted on
cactus
Good that PenFed didn't make it retroactive. And they have every right to set whatever terms they want.

However, they had better revise the documents online

"Certificates Having a Term Greater Than Six Months and up to and including 5 years. a) If redeemed within 180 days of the issue date or any renewal date, all dividends will be forfeited. b) If redeemed thereafter, but prior to the maturity date, dividends for the most recent 180 days will be forfeited.

 https://www.penfed.org/pdf/accountsforms/688.pdf  Form 688 JF (2/08)  

 



 

1
Comment #51 by willp (anonymous) posted on
willp
There does seem to be something that might be very helpful in this whole matter of dealing with a bank or credit union's that might attempt to rely on "discretionary" language and a history of requiring a showing of an emergency to refuse to permit an early withdrawal of CD funds. The "discretionary" and "emergency" rationale might not hold up very far given the depth of the downturn of the economy that has resulted in the present monetary policy, with its ultra-low interest rates. Given the relative effects on the incomes of many seniors that's resulted from ultra-low interest rates, seniors ay find ready allies in regulatory agencies and courts in support of early withdrawal of CD funds even if a bank or credit union wants to exercise its "discretionary" rights.

1
Comment #52 by me1004 posted on
me1004
Just for the record, I am opposed to the EWP or any other terms or conditions related to a CD being changed to the detriment of the depositor after the CD has been opened. However, that does not mean it can't be done or won't be done or hasn't been done in the past. I have merely been pointing out what appears to be the facts, the reality that people better be aware of -- kind of look before you leap, don't get sidetracked by flashy rates and not see the dangers. For me, I voted with my feet and did not take a longterm CD with Fort Knox -- or anyone else (at the time I was looking at them, Fort Knox had a great deal on a longterm CD).

I don't like that this retroactivity seems to be the reality. I think it should be barred. But meanwhile, I think people better be aware of it and act with knowledge and make their choices, considering the risks.

But as I have said over the months, we have had at least 3-4 reports in the threads about other institutions doing similar. That is, Fort Knox is neither alone nor the first. I have also pointed out that we are in unique times and you can expect it to possibly come into widespread use by banks when interest rates start going up, which will probably happen by early next year (sure, I said that a year ago!). I'm afraid over the next couple-few years, Fort Knox will merely be one in a large pack of banks doing this, merely an early one, not the only one -- and the others MIGHT make changes that make those by Fort Knox look like child's play, because they are NOT going to allow a run on their banks.

But yes, I will compliment Fort Knox for being honest about and proactive in revealing the possibility of retroactive changes, especially to the EWP, up front and before any action to open a CD. They  broached the topic themselves, rather than shutting up because I didn't know to ask about that. In my experience, that openness is something that never happens, institutions won't broach such information if you don't at least demand it. How do you think so many people have gotten into longterm CDs without realizing they might have this issue -- because those other institutions kept quiet about it. Because Fort Knox has been honest, I was able to decide whether I wanted to take that risk, and so now I have nothing to worry about. If they are open, forthright and honest about things, I can decide if I want  to take the risks -- and I decided I did not; if they are mum, they will dupe me. Yes, I will deal with an honest operation; its the ones that were quiet about it that and lured people into those longterm CDs without pointing out the poison-pen possibilities that I worry  about.

But again, this is not to say that I think they should be able to take such action retroactively. I think there should be a law barring such retroactivity for typical CDs because that is not what people think they are getting involved with, even if it is disclosed deep down in the fine print and vaguely. 

But meanwhile, if they tell you all about that before you do anything, and you consider the risk and choose to proceed anyway, then that is your choice, no different than if you chose to invest in bonds or stocks and accept the risks. 

But definitely do be aware of the possibilities and the risks. For me, I would not want to get into that, and have taken the lower, shorter terms CD rates instead because of that -- because I very well might need to access my savings before five years passes and I don't want to  get stuck by some retroactive changes.

2
Comment #53 by me1004 posted on
me1004
It occurs to me that I should add context to my willingness to do business with Fort Knox even as I think neither they nor others should be able to make such retroactive changes. I figure all the banks are a bunch of cheats, but I'm stuck dealing with them. From that context, I would find one that proactively reveals the bad stuff to be someone I can deal with. That isn't to say that I think it is OK to make these changes retroactively, even if there may be no law against it. I do not think it is OK for them to doit just because they can.

1
Comment #54 by Cheated by Fort Knox (anonymous) posted on
Cheated by Fort Knox
They were NOT honest with me when they told me in late January that if I opened my large CDs before the change in terms date that my CDs would be under the old terms and that they would not change those terms for people opening before the chage in terms date.

That is fraudulent inducement to get me to make my investment!

How in the world can you say you admire their honesty while thay are cheating us????

3
Comment #56 by me1004 posted on
me1004
#54: If they represented differently to you, then yes, you are being cheated. I can only speak about my experience with them. I spoke with three different CSRs, the supervisor and the person there in charge of the polices and all were immediately forthcoming, didn't even try to sugercoat it or even suggest it was not likely to happen. I was insisting that surely that isn't so, and they all insisted that yes, it is. It was nearly a year ago when I spoke with them. But as I said, I don't think they should do it just because they can. But they fully informed me in advance that they might.

1
Comment #55 by Anonymous posted on
Anonymous
My wife and I have four fairly large 5 year CD's with Ally, all four were opened fairly recently. The reaons we went with the Ally 5 year CD's were twofold....because of the relatively mild 3 month EWP and the assurance that their approval of an early withdrawal was not required. Based on recent developments and comments, we very well have made a financial mistake....only time will tell but the vibes are not good.

2
Comment #57 by lou posted on
lou
Hey me1004, I wonder if you planted the seed with them last year and got them thinking about doing this at some point. Of course, I am not blaming you for this, but sometimes I wonder if it is wise to stir the pot (speaking to 3 CSR's, a supervisor and a higher up) when they may be totally oblivious regarding the issue of retroactivity. I generally rely upon the written disclosures, so I don't bother asking them questions where I may not like the answers. Usually it doesn't matter what they say, because I am never going to rely upn a verbal assurance. With the Penfed 10 year certificates, we had posters here constantly calling the CSR's to discuss every controversial aspect of this one time offer. At one point, I thought they were going to rescind the offer, because they had so many members calling their CSR's. Just a thought!

2
Comment #58 by Anonymous posted on
Anonymous
Oh, cry me a river already!

CDs were always meant to be TIME DEPOSITS for the specified period of TIME. 

If you can't do the TIME, don't put your money into them.  PERIOD!

2
Comment #59 by me1004 posted on
me1004
Lou: No, they didn't get the idea from me. As I wrote, THEY broached the topic of retroactivity to me, not the other way around. I merely was confirming the term and rate, and that the early withdrawal penalty, if needed, was such and such. They said yes it was -- but it could be changed down the line, even after I open the CD.

Although I will say, while I didn't raise the topic of retroactivity in talking with Fort Knox, I was already a bit worried as I had already seen a couple people posting in the threads about changes after they opened their CDs. By the time I spoke with Fort Knox, I had decided to figure those postings had been wrong, just could not be, although in the back of my head I was still wondering if those people knew what they were talking about. Now I have to think they did.

1
Comment #60 by Goldfinger (anonymous) posted on
Goldfinger
If you've got too much money to keep it in a jar, then keep it in a liquid account while you wait for the price dips in the precious metals.  The world is running out of all of them, and they are sure to go up for that reason.  The average man cannot trust bankers, including quasi-bankers at Credit Unions.  They are all a nefarious and greedy bunch.

Banks are essentially parasites who rely on inflation being higher than the interest rates they change in order to make their livings. Forget the idea of putting your money in them, long term, and buy gold, silver, platinum and/or agricultural lands.  These will all appreciate remarkably well as the hyperinflation the corrupt Federal Reserve is giving us comes to fruition. 

4
Comment #61 by Anonymous posted on
Anonymous
As pointed out in the article, the Membership Agreement gives FKFCU the right to change unilaterally the Schedule (which states, among other things, the dividend rate and early withdrawal period of the CD) and the Membership Agreement itself.  However, with respect to the dividend rate and the early withdrawal period, federal regulations found at 12 CFR 707.4 and 12 CFR 707.5 require FKFCFU to give 30 days written notice to the depositor before changing the dividend rate or the early withdrawal period. 

1
Comment #62 by me1004 posted on
me1004
#61: Fort Knox did give notice. They announced the policy change on Jan. 1 and said it would take effect on Feb. 15. That is 45 days notice -- 15 days longer than the requirement.

1
Comment #67 by mm308 (anonymous) posted on
mm308
#61 and me1004: I have read 12cfr 707.4 and 12cfr 707.5. In my opinion, neither of these regulations refer to changing anything retroactively. Please refer me to the paragraphs or lines where you see any reference to a retroactive change of any kind. I can't find the word "retroactive" or any similar phrase or concept in these regulations. Just because FKFCU or any other institution SAYS that they have a right does not mean that they HAVE that right. Please refer me to any regulation or law saying that they have that right. I will believe it when I see it. Until then, I will continue to believe that they are just betting that no one will call their bluff. These same kind of institutions are engaging in a massive foreclosure scam all over the country.

2
Comment #69 by Anonymous posted on
Anonymous
#67:  The laws don't talk about retroactive change.  However, the change is not retroactive.  Fort Knox provided 45 days notice of the change in terms.  That seems perfectly consistent with the excerpts of the law in #68.

On the other hand, there's this from the beginning of this article:  "...in the eyes of the regulators, no institution can unilaterally change the early withdrawal terms".

It seems to me that people who feel they've been mistreated should contact their state banking commission.

I did this once.  I had an account at a bank that was bought by a much larger bank.  My accounts were then subject to a usury monthly fee because they no longer held the balance necessary to avoid a fee. 

I tried to close the account, but it was impossible to reach the (apparently one) person who was in charge of the old bank's customers.  Emails, registered mail, and phone calls all went ignored, while the usury monthly fees continued to mount.

Finally, I called the banking commissioner (North Carollina, I believe it was), and asked him if the bank could levy fees against an account they had been asked to close.   He said, no, they could not, and offered to call the bank president with whom he spoke "on an almost daily basis" (little surprise there).  The bank president called me the next day, the fees were removed and the account was finally closed.

 

 

 

 

1
Comment #73 by Anonymous posted on
Anonymous
#69 here again.    #71 #72, I apologize;  I missed the fact that no personal correspondence was issued.  From that perspective I see your point.  I would expect them to be required to send letters to help guarantee accountholders know about the change.   

In any case there is certainly appears no satifisfaction will be forthcoming from FKFCU.

As I suggested before, I hope that you and others affected file complaints with the banking commision because there's certainly more of this kind of behavior coming if account holders don't get regulators behind them.

2
Comment #63 by Anonymous (anonymous) posted on
Anonymous
Anonymous 61 here.  I opened a CD on February 9, 2011 with a 90 day EWP clearly stated in my Schedule and Membership Agreement.  I was not mailed or delivered a 30 day notice that my EWP has changed.  Until I do, I have a 90 day EWP. 

1
Comment #64 by Anonymous posted on
Anonymous
Anonymous 61 again.  The notice to which your refer is for CD's opened on or after February 15, 2011.  If FKFCU (or Ally Bank for that matter, since they, too, reserve the right to unilaterally change terms) wants to change CD terms on CDs opened prior to February 15, 2011, then federal law requires a 30 day written notice of its intention to do so.

1
Comment #65 by Cheated by Fort Knox (anonymous) posted on
Cheated by Fort Knox
First we need to file written complaints with NCUA.

If these don't get us justice, then we must file a lawsuit.

Those are our only choices.

Discussing the issue here won't get us justice since Fort Knox has cheated us and has the upper hand now.

Some other entity, either governmental regulatory body or a court of law are our only choices since Fort Knox won't back down dispite our good points and logical arguement.

1
Comment #66 by Anonymous posted on
Anonymous
Anonymous 61 again.  Cheated by Fort Knox,  have you even contacted FKFCU to see if your EWP has been changed on your Schedules.  I did today on my CD opened on Feb. 9, 2011, and it has not been changed.  If FKFCU unilaterally changes the EWP, it has to give you 30 days written notice first.  Read the law I cited.  Anyway, before getting into a huff, contact them first and request assurances that your CDs have not changed.

2
Comment #68 by mvbosch posted on
mvbosch
Anonymous 61 here.  707.4 deals with initial disclosures required. 707.5 deals with subsequent disclosures.

12 CFR 707.4(b)(6) states, in relevant part:

(b) Content of account disclosures. Account disclosures shall include the following, as applicable:

...

(6) Features of term share accounts. For term share accounts:

...

(ii) Early withdrawal penalties. A statement that a penalty will be imposed for early withdrawal, how it is calculated, and the conditions for its assessment.

12 CFR 707.5(a)(1) states:

(a) Change in terms—(1) Advance notice required. A credit union shall give advance notice to affected members of any change in a term required to be disclosed under §707.4(b), if the change may reduce the annual percentage yield or adversely affect the member. The notice shall include the effective date of the change. The notice shall be mailed or delivered at least 30 calendar days before the effective date of the change.

EWP must be disclosed in 707.4(b).  Making EWP longer may adversely affect the member under 707.5(a)(1).  Therefore, if a credit union wants to change it and make it longer, it must give advance notice under 707.5(a)(1).

3
Comment #70 by mvbosch posted on
mvbosch
Anonymous #69, if FKFCU makes a change to a depositors CD, then, by definition, the change is retroactive.  I strongly disagree that FKFCU has given notice.  What notice are you talking about?  The squibble in the January 2011 Corner Stone (quarterly  news letter).  That is not a notice within the meaning of the regulations.  Each depositor would have to receive a personal notice for each of their CDs being changed.  I have not received one, and as I have said before, after speaking with FKFCU, I was assured that me EWP on my February 9, 2011 CD remains 90 days. 

2
Comment #71 by Anonymous posted on
Anonymous
Here's the "notice" - http://www.fkfcu.org/images/cs_jan11.pdf - last page - bottom right corner. Doesn't say whether or not retroactive

2
Comment #72 by mvbosch posted on
mvbosch
That ain't a notice, in my humble opinion.

1
Comment #74 by mvbosch posted on
mvbosch
I am not effected.  I have not received a notice of any change to my CD.  Further, I have written assurances that my CD's EWP is still 90 days.  If I had not received such assurances, it would be a different story, and I would be breathing down FKFCU's neck.  As it is, FKFCU is on good terms with me.  I would suggest that those concerned contact FKFCU to confirm that their CD's EWP has not changed.

1
Comment #75 by lou posted on
lou
mvbosch, are you saying that Ft Knox has provided you with written assurances that the change to the EWP does not appy retroactively to your certificates? Are they making an exception just for you?

1
Comment #76 by mvbosch posted on
mvbosch
I saw this blog.  I emailed FKFCU requesting confirmation that I did not receive written notice changing any of the terms of my 2/9/2011 CD, in particular the APY and the EWP.  After a little back and forth, FKFCU emailed me that my CD still had a 90 day EWP and that my APY hadn't changed.  It would not comment on the notice issue other than to refer to its January 2011 Cornerstone newsletter.  As I have stated, that is not a notice in my opinion within the meaning of the regulations.

1
Comment #77 by mvbosch posted on
mvbosch
In my opinion, the Cornerstone is not notice upon which FKFCU can rely to change CDs in existence prior to February 15, 2011.  FKFCU could change terms, including the EWP, on CD's already in existence (or, as you insist on putting it, retroactively) if it gives proper notice under the regulations.   

1
Comment #78 by lou posted on
lou
Hopefully, everyone here who has CD's at FKFCU has seen your post and will contact them to have their CD's grandfathered. Until we hear from the regulators, I urge people to read the disclosures and never do business with any institution that allows them to change terms retroactively. I hope regulators do the right thing and outlaw this nonsense, because otherwise these CD's are no better than liquid accounts.

3
Comment #79 by Anonymous posted on
Anonymous
This Ft Knox is a nickel and dime you to death institution, especially when they charge you when you run your card as debit vs credit.  They also charge you a fee when you withdraw money from another credit union.  They charge you a fee for bill pay if you dont keep a certain amount in account and a fee if you dont use it in90 days.  Your direct deposit Social Security check isnt posted until the bank opens at 0900.  And yeah, what customer service.

4