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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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NCUA Rules in Favor of Credit Union That Raised Early Withdrawal Penalty on Existing CDs

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In March I had confirmed that Fort Knox Federal Credit Union had increased the early withdrawal penalty on its long-term share certificates (CD) from 90 days to 180 days of interest. I also confirmed that this change applied retroactively to existing CDs. One of this blog's readers filed a complaint with the NCUA, and he has been kind enough to keep me informed of NCUA's review process. The NCUA's Office of Consumer Protection did the review, and I'm afraid it ruled that Fort Knox FCU's action was permissible. I've copied the majority of the letter below (only exclusions were personal information). Note, it references the Fort Knox FCU's membership agreement.

We have completed our review of your correspondence and information regarding Fort Knox Federal Credit Union. Specifically, you asked if it was permissible for the credit union to increase the early withdrawal penalty on existing share certificates.

Based on our review of the documentation relating to this matter, it appears the credit union made the change in accordance with the terms of the Membership Agreement (copy enclosed).

Section 7.c. on Page 6 of the Membership Agreement states:
Any term share certificate, certificate or share certificate accounts offered by the Credit Union are subject to the terms of this Agreement, the Schedule, and any account receipt or certificate, which are incorporated herein by reference.

Section 29 on Page 13 of the Membership Agreement states:
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.

For share certificates with maturities greater than one month, the credit union would have needed to provide affected members with a written change-in-terms notice at least 30 calendar days before the effective date of the change in accordance with Section 707.5(a)(1) of the NCUA Rules and Regulations.

Since the credit union reserved the right to change terms in the Membership Agreement, the credit union would not have violated a federal consumer protection law or regulation regarding this matter provided it complied with the written notice requirements outlined in Section 707.5(a)(1) of the NCUA Rules and Regulations.

In my opinion, it seems unfair 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. The worry is that all banks and credit unions have similar disclosures with similar general blanket clauses that give them broad rights to make account changes. If inflation and interest rates shoot up sometime in the future, many CD holders will likely want to break their CDs to reinvest their money in new accounts that have much higher yields. That may put pressure on the banks and credit unions to increase the early withdrawal penalties to reduce the number of withdrawals.

As I mentioned in my previous post, the general opinion from experts is that early withdrawal penalties should not be increased on existing CDs. However, these were just general opinions that did not take into account the details of the disclosures.

Other credit unions and banks that have increased early withdrawal penalties did not make the changes retroactive. The larger penalty only applied to new CDs or CDs that rolled over after maturity. In my opinion, that upholds the spirit of the CD contract. In May I described Bank of America's early withdrawal penalty change which only affected new CDs. PenFed and OneWest Bank also made similar EWP changes that only affected new CDs. The question that can't be answered is if these institutions would be as honorable if interest rates were shooting up instead of going down. It's easier to be honorable when there's no financial pressure.

It's important to keep things in perspective on this issue. If interest rates stay low, institutions will have little reason to increase early withdrawal penalties especially on existing CDs. They will more likely make changes that are favorable to depositors such as waiving early withdrawal penalties.

Also, regulations require institutions to provide at least 30 days written notice before the changes are made. Before that change, a CD holder can make an early withdrawal with the existing penalty. If the institution is making this change due to interest rates shooting up, the CD holder should be able to reinvest the funds in higher yielding accounts.

The main risk for CD holders is if the institution can refuse an early withdrawal request. That completely locks a customer into a CD until maturity. Some institutions do include in their disclosures the right to refuse an early withdrawal request. Disclosures often state that an early withdrawal of principal is only allowed with their consent. However, unlike the blanket change clause, many banks and credit unions don't have this "right to refuse" clause.

One way to reduce the risk of being locked into a long-term CD is to maintain a CD ladder. With a CD ladder, long-term CDs are staggered to mature in regular intervals. In this way you don't have all of your money locked for many years.


  Tags: CD rates, Fort Knox Federal Credit Union

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Comments
53 Comments.
Comment #1 by Anonymous posted on
Anonymous
There's a concept in general contract law of an "implied covenant of good faith and fair dealing."  This basically means one party to a contract, at least in some circumstances, can't exercise a discretionary right in a way that destroys the value of the contract for the other party.  I've never thought simply raising a redemption penalty under standard deposit contract amendment language violated this implied covenant, because the underlying bargain is left intact.  Something more drastic--like lengthening the maturity--would be required to violate the implied covenant. 

5
Comment #2 by Anonymous posted on
Anonymous
As with most regulators, the NCUA's job is to defend their clients, which are the credit unions, not the consumers. Just like the FAA defends the airlines.

The Consumer Financial Protection Bureau, the new Federal agency that is chartered with protecting consumers from the financial industry may feel differently about this. 

16
Comment #3 by me1004 posted on
me1004
Well, I was afraid this was the fact of the matter. But I'm still very unhappy to have that confirmed. Regardless of its legality, it remains unfair. Nonetheless, accountholders should remain forewarned. And, as some have said in the past discussions, it pretty well makes the CD "contract" a completely one-way street, with protections for the bank and in effect none for the account holder. Gee, it seems that even the interest rate you "lock" in can be changed by the bank at will, considering the clauses the NCUA just upheld!

Meanwhile, during this discussion over the months, market conditions have changed so that the more immediate danger that this could have become a more widespread action by the banks has greatly diminished. There had been real expectation that interest rates would be rising by the end of this year or turn of the year. Now, Bernanke says nope, not at least until the middle of 2013 -- if then, if ever. Rising interest rates is what would have/will put very serious pressure on the banks to change the early withdrawal penalty or otherwise try to thwart early withdrawals -- althogh, as Fort Knox, they still might choose to do so at any time any way. It doesn't really matter whether most will; what matters is whether the isolated one you are with does. Don't forget, banks that are hurting and need to gather more capital on hand to avoid insolvency will still be under tremendous pressure to change EWPs to stop any outflow regardless of interest rate pressures.

Nonetheless and meanwhile, those who undertook the strategy of taking out a longterm CD with the expectation of closing it when interest rates rise have won out for now, but only thanks to a deteriorating economy. It was and remains a gamble, and that gamble should be weighed before choosing to take that risk. If you can deal with leaving the funds in the CD for the entire length of the term, and at that interest rate despite market rates rising, then going the longterm rate remains a reasonable strategy. You would look at any early withdrawal as something that MIGHT be possible at the time, not as something that necessarily WILL be possible. But you should not count on being able to take an early withdrawal, and certainly not as a profitable move.

I will say, this is one agency's opinion. But until someone takes the issue to court and manages to get a contrary order, this is the rule of the land. Still, lawmakers can change the law so it is actually fair -- so feel free to lobby your legislators. But do be wary about "experts" opinions, especially in the face of the plain language in disclosures -- experts can be right on, and they can be far off. "Experts" are not necessarily so expert as the word suggests, so you must exercise your own common sense too.

8
Comment #4 by mak1118 posted on
mak1118
Not a surprise at all exactly what I thought would happen and stated so back when first talked about.

1
Comment #5 by Anonymous posted on
Anonymous
Quite suprised to read that "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." This is so one-sided in that a credit union can do whatever they want anytime they want (as long as they give a 30 day notice) and the only recourse for the customer is to withdraw the funds within the older terms&conditions. What is there to stop a credit union by changing the interest rate/duration itself? I am not sure if some creative reading is going on here by NCUA to protect one of its members. It's hard to believe that any customer protection agency can allow such a verbiage. I must not be reading this right :-(

5
Comment #6 by Screwed by Fort Knox CU (anonymous) posted on
Screwed by Fort Knox CU
It is interesting that FKCU's only 'written notice' of this change was a comment in their glossy newsletter and not letters sent to their members.  Also, their phone reps consistently told callers that this would no be a retroactive change,  In fact, nothing verbal or in writing said this would be retroactive until long after the change was made!

 

FKCU should change their initials to FUCU.

7
Comment #7 by san (anonymous) posted on
san
This doesn't seem to be fair. If the bank/credit union can change the contract, then what is the purpose of a contract.

Like another poster mentioned above, what if they change the interest rate when the rates are going down? From NCUA's statement that seems OK too.

Would it be OK to close the account if the contract is changed?

 

1
Comment #8 by Who is protecting the customer? (anonymous) posted on
Who is protecting the customer?
This will blow back on FKFCU when they find they have to pay more than other banks to get deposits.  Who would ever again deposit money at this place?

8
Comment #9 by Anonymous posted on
Anonymous
This is why I am done with CDs. If I want to invest money for a term I will only buy bonds whose terms are clearly disclosed and cannot be changed later.

4
Comment #10 by Alan posted on
Alan
Re:  "If I want to invest money for a term I will only buy bonds whose terms are clearly disclosed and cannot be changed later"

This philosophy didn't work out too well for the GM bondholders, did it?

6
Comment #11 by What??? (anonymous) posted on
What???
I would seriously encourage the person who filed this complaint to pursue this matter with their elected officials or other government agencies.  Imagine; if one used the logic of the NCUA, a credit union or bank technically can changed all of their CD’s into a 10 or 30 year term, with a 2 to 5 year early withdrawal penalty.  By just using the wording “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” such a thing could be done!  However, common sense and the intent of the CD contract should show that this can NOT be done.

In my opinion, the NCUA greatly erred in its decision.  Banks/credit unions should not have a one-way contract ticket.  If one cannot lock into a specific rate, for a specific time, with a specific penalty what is the point of a having a CD???

For all of us, please continue to pursue this matter and to keep us updated.

9
Comment #12 by shinoby posted on
shinoby
Boy this is a kick in the head.  And it's just the beginning, paving the way for future such unfavorable decisions.    Ally Bank CD account owners beware!

4
Comment #13 by The end of CD investing (anonymous) posted on
The end of CD investing
This could be the beginning of the end of all CD investing if any bank or cu can retroactively change important terms by just having vague language in their terms.

Again, the guberment protects banks everytime, never the customer!

4
Comment #14 by Anonymous posted on
Anonymous
I think this is so wrong. And it also makes me worry(somewhat) about my existing CD's that still have high rates on them for the next 2-3 years.......if they can do this......who is to say that they could reduce my interest rate???

6
Comment #15 by Anonymous posted on
Anonymous
If a bank or CU wants to change their terms for future CD's.....I have no problem with that. But on existing CD's that (at the time) had a certain penalty?????  Makes me wonder what is coming.  I find it actually terrifying that these CU's specifically targeted existing CD's. There is a reason.....and it scares me what it is.

5
Comment #16 by Anonymous posted on
Anonymous
Any Bank any CU can change any rules in their favor at any time, I have posted before and I told you the same thing before.
Your CSR confirmation or branch manager assurances of grand fathered early withdrawals penalties are farce and are for your ego only.
Ally can do the same thing should a need arises to do that, don’t be fooled by “I was told by CSR it will not apply to me”.

15
Comment #17 by pearlbrown posted on
pearlbrown
@#11:  I heartily agree that the NCUA erred in its judgement and the matter should be pursued vigorously. 

@#16  Assurances from a branch manager or CSR are not binding as they are not authorized to set policy for the institution.    The issue here is a legally binding contract between the institution and its accountholder. 

4
Comment #18 by Anonymous posted on
Anonymous
Talk about a double kick in the teeth!  In years gone by when I purchased a CD I was always given what I thought was a contract between myself and the CU/orBank.  Now a days I am told they stopped giving those out and what I get is called a "receipt" for money given.  NOW I understand why!  We have no contract between us which we can call upon to protect us.  However.....it seems once we take that useless "receipt" for money given, we are basically giving them all rights to do to us and our hard saved money whatever "they" want!  Talk about changing horses in midstream!  There MUST be someway to put a stop to this before it gets worse.  We need our interest to live on so we can't just afford to tuck it under our mattrasse!  We must have some brainy lawyer like posters out there who can give us advice as to whom we should address our concerns about this. 

Bernanke's "Twist" may just turn him into a bowl of butter and I hope spins him off our Federal Reserve!  We need someone in there who gives a rat's **** about the "savers" .  My letters have gone on deaf ears but if someone will advise better people I can write to, I am willing to type till my back screams with pain.  We can't sit back and pretend it won't get worse.  Read between the lines!  THEY have given us a message and are letting us know what to expect.   What a sad day for our country and US!

6
Comment #19 by Anonymous posted on
Anonymous
BTW, I just sent an email to the CEO of the NCUA.  His email address can be found on their  site or it is: oedmail@ncua.gov.  One never knows "who" will be the right person to take concern for us so why not write anyone we think may listen.  Do your part.  Get involved!

7
Comment #21 by Anonymous posted on
Anonymous
I just saw that Susie Ormon was recommending Credit Unions as an option on her website.  Well I just emailed her about what is going on.  Seems to me she should know all the facts so she can forwarn people what to expect.  BTW,  "the sky isn't falling", it ALREADY FELL! 

5
Comment #24 by Anonymous posted on
Anonymous
hay 23 no mr ken bashing he is the best

3
Comment #25 by Anonymous posted on
Anonymous
Stop Dreaming! Interest rates will not "shoot up" because of inflation--You are dreaming!Rates are low and will stay low and even if we have inflation they will stay low--so low rates and high inflation----so who cares what the terms say----you are lucky to even get 0% interest and not have to pay the banks to hold youd money!!!

1
Comment #28 by mak1118 posted on
mak1118
#25  it would not surprise me if the banks did try to charge us to keep our money in their banks.

3
Comment #27 by Sherry (anonymous) posted on
Sherry
The best way to express your opinion to Fort Knox Federal Credit Union on this matter is to close your CD when it matures and cancel your membership. I almost joined Fort Knox Federal Credit Union about a year ago, but will NEVER join them now, no matter what CD rates they are paying! THIS WAS NOT A GOOD MOVE FOR Fort Knox Federal Credit Union, AND WILL COST THEM IN THE LONG RUN! 

 

 

13
Comment #30 by Anonymous posted on
Anonymous
I have never seen an advertisement on national T.V. concerning Fort Knox Federal Credit Union.  However, big national banks like Ally have been advertising a lot the last few years.  If they change the early withdrawal penalty, I think their core business would suffer greatly which they might not recover.  Just my opinion at the moment.   Maybe Fort Knox did this change when it appeared rates appeared to moving up just a few months ago but not so much now.

1
Comment #31 by shinoby posted on
shinoby
Only a complete idiot would join Fort Knox now.  And anyone who fails to resign their membership at the earliest possible moment, without hurting themselves, is a fool richly deserving the fate which surely awaits them.

Fort Knox has blacklisted itself!  Shun them!

14
Comment #32 by Bozo posted on
Bozo
I guess we have learned a good lesson. When the Truth in Savings Disclosure says "may" or words to that effect, assume the financial institution will do what is in its best interest, not yours. In addition, if a CSR says something he or she is not willing to confirm in an e-mail, it's just so much happy talk. Bottom line: if you buy a CD, assume you will hold it to maturity. Do NOT assume early withdrawal penalties in effect at the time you bought the CD will be honored, unless you "get it in writing" (good luck on that). Am I suggesting all those folks who bought Ally 5-year CDs are in for a rude shock should interest rates spike? Draw your own conclusions.

5
Comment #33 by Bancxman (anonymous) posted on
Bancxman
I'm fairly familiar with the NCUA and it's regulatory agenda. Since no specific federal statute or regulation has been impinged upon here, the NCUA didn't have any business interpreting the FK FCU membership agreement.  In other words, the opinion is worthless. The appropriate procedure for resolving this issue would be for a depositor to petition a court to have Section 29 of the membership agreement invalidated. The problem with Section 29 is that, when construed literally, it provides FK FCU with absolute discretion to do whatever it deems appropriate with any CD at any time. That conflicts with the terms of the CD agreement itself, especially those sections of it pertaining to duration, rate of interest and penalties. In other words, for you whose early withdrawal penalties have been retroactively increased, this clause is probably unenforcable because of the inherent conflict it creates. Now that this problem has been exposed, I wouldn't recommend opening  a new CD or renewing one at FK FCU if Section 29 remains in the membership agreement. On the other hand, for the adventurous depositor who retroactively incurs the enhanced early withdrawal penalty, this would present an opportunity to file a really interesting lawsuit. 

9
Comment #34 by Anonymous posted on
Anonymous
If rates spike, and they will at some point, there will be a rush to the Ally exit door and Ally would not have nearly enough liquid assets to convert to the cash necessary to pay the CD holders trying to reach the exit, nor would Ally be able to borrow the cash needed. Result?....Ally would bar all the exits shut either by raising the EWP, or by prohobiting an early withdrawl period, or a combination of both, and I would be among those trapped in the building. A similar result would be experienced by CD holders in other banks and CU's also....and you don't need a crystal ball to reach this conclusion, just a bit of common sense. Hindsight is a wonderful thing.

3
Comment #35 by cactus posted on
cactus
Ken posted yesterday about good rates from Firstmark CU in San Antonio. Their agreement is pretty clear about early withdrawals...

"You may make withdrawals of principal from your account before maturity only if we agree at the time you request the withdrawal." https://www.firstmarkcu.org/Info/TIS_091806.pdf

 

 

2
Comment #36 by mvbosch posted on
mvbosch
FKFCU did not send me written notice that my  5 year CD, opened February 9, 2011, would have its EWP changed from 90 days to 180 days.  What I stated in back in April here is still true:

"I contacted FKFCU regarding the EWP on my IRA term certificate which I opened on February 9, 2011, six days before the effective date of the February 15, 2011 change to the EWP from 90 days to 180 days. FKFCU assured me my EWP remains 90 days.

It makes sense. Under federal regulation 12 CFR 707.5, credit unions like FKFCU must give 30 days written notice to a term certificate holder of an EWP change. All of these banks, including the hallowed ALLY, give themselves the right to unilaterally change terms of their CD's, but 12 CFR 707.5 requires them to give 30 days written notice to the certificate holder."

I am quite confident that my EWP is still 90 days, but I will contact FKFCU on Monday just to confirm that I did not receive a 30 days written notice of an EWP change on my CD.  If FKFCU were to send me such a notice, I would close it down in a heart beat.

1
Comment #37 by mvbosch posted on
mvbosch
BTW, all the banks have this language giving them a right to modify the terms of the CD as long as they comply with the law, including the beloved Ally Bank.  Ally Bank could raise the 60 day EWP if it wanted, provided it gives CD holders 30 days written notice.  If they were to do this, then there would be a mad exit for the doors.  I think FKFCU did not send out 30 days written notice to existing CD holders and only enforce the EWP prospectively on new CD's opened after February 15, 2011. 

1
Comment #39 by Anonymous posted on
Anonymous
The best way to avoid having this happen is NEVER to open a long term CD with any bank or credit union.  Let me repeat NEVER, NEvER, NEVER!!!!  You are going to have your money stolen from you by the Federal Reserve's money printing policies, whereby they dilute the value of each dollar by printing new ones, taking value of Mom & Pop's CDs and giving it to Goldman Sachs and JP Morgan Chase.  Or, in the alternative, the bank you have the CD with is going to **** you directly.

U.S. Dollar CASH IS NOW TRASH!  The best thing to do is to take advantage of the current short-seller attack on the gold, silver and platinum markets, and BUY BUY BUY.  The precious metals are now on sale, and they are the only real money.  US Federal Reserve Notes are a travesty, and have been irredeemable in gold since 1933, when Franklin Roosevelt unconstitutionally confiscated gold belonging to the American people.

Gold is down almost $300 from its high of $1,917, and so is platinum.  Silver is down almost 25% from its highs.  These takedowns are accomplished at the futures markets, where corrupt international banksters like JPM print futures contracts they don't have even 1% enough gold to fulfill, in order to cause a price collapse.  A fake supply creates overwhelming price pressure that could never exist in real markets that require delivery of real gold.  But, people all over the world have been respecting the New York "spot" price for so long, they go along with it, and start selling at lower prices. 

What I just said requires many pages of explanation for you to understand, but it is true, and you can read more about it by googling "gold manipulation" or searching Seeking Alpha or other websites.  The bottom line, however, is that precious metals have been made artificially cheap, temporarily, by JPM whose proprietary trading software is filled with newly printed dollars from the Fed.  The powers that be do not like rising gold prices because it embarasses them and shows clearly that central bank policies are not only corrupt, but do not work.

So, use this opportunity to buy gold, silver and platinum, and wait for the continued crash in equities markets to play out.  Once it has, use the majority of the remaining cash to buy stocks.  Transfer any cash you want on hand into demand deposit accounts denominated in foreign currencies from nations that are fiscally sound, like Swiss francs.  Forget about the US dollar and American banks.  Although the dollar is temporarily going to rise substantially, in the long run it is the fiat currency issued by a badly mismanaged government, and it will eventually collapse under the weight of Ben Bernanke's printing press as soon as the current 3 inflation hawks on the FOMC rotate off the committee in January 2012.

Savers are the best people in America.  The salt of the earth.  But, we are all in the process of being mugged by our own government.  Over the next several weeks, we will have an opportunity to save ourselves.  Let's take it!!

3
Comment #40 by moneysaver posted on
moneysaver
I don't agree with the NCUA's decision, the same as many posters above...

But I think it's important to point out, that the NCUA based their decision, at least nominally, on the specific language in that particular credit union's membership/account terms that allowed them to make certain changes... though clearly not explicitly stated as relating to early withdrawal penalties per se.

Sometime back when this issue first arose, I went back and reviewed the terms and conditions I have with Pentagon FCU for my CDs with them. And I could find no comparable language in my PFCU TandCs, like that quoted from the Fort Knox document, that would provide cover for that kind of a change...

So rather than making blanket pronouncements about "never open CDs" and such, I'd say the better advice is to read carefully just what your member agreement or account agreement says...and see if it includes language that would allow a decision like occurred in the case of Fort Knox FCU...

1
Comment #41 by Anonymous posted on
Anonymous
#40  Your advice seems on par but what does one do if one sees a good CD interest rate at an out of town bank or CU and won't get to see the actual CD until purchased?  Is there a way to see their CD info before doing business with the institution that you know of?  Thanks!

1
Comment #43 by norman ok (anonymous) posted on
norman ok
i wonder if there is any corellation between how much one has and how much they complain  i would say affirmative  as they approach 1 mill they become impossible  i for one am very content on my meager fixed income and a portfolio of approx 650k have n othing to gain by giving false numbers and by the way live and fully enjoy life in NEW YORK

1
Comment #44 by Anonymous posted on
Anonymous
Norman:  Aren't you breaking some HIPPA money law by disclosing your financial worth on the computer to virtual strangers?  I can't get the doctor's office to give me any info on my adult daughter no matter what but I can come on here and find out what Norman is worth and how well he is surviving in New York! What a weird world we live in.

2
Comment #47 by Screwed by Fort Knox FCU (anonymous) posted on
Screwed by Fort Knox FCU
to mvbosch - #36,

I opened my fkfcu cds the same day you did.  I was told by their phone csrs on 5 phone calls earlier in February that 'they would never do this retroactively".  I could not get their supervisors to put this in writing.  Then, 1 month later I found out that they did this retroactively.  I never received a 30 day written notice either, but they said their January glossy mailed newsletter served that purpose.

I sent a letter to NCUA in early April protesting this retroacive change and also asked them to address the lack of written notice.  I have not heard a decision from NCUA but they are reviewing my case and the written response by FUFCU. 

I don't expect anything different than what happened here.

2
Comment #48 by mvbosch posted on
mvbosch
to ****ed by Fort Knox FCU:

 

Did you call and speak to the bank about your particular CD?  I am familiar with the flyer of which you speak, and it is not the notice required in the Federal regulations.  When I spoke to the CU about my CD, I was told that my CD still had a 90 day EWP.  I think you will find if you call the CU that you still have a 90 day EWP.  The flyer is insufficient notice.

1
Comment #50 by mvbosch posted on
mvbosch
Post #47:  Did you get a copy of FKFCU response to your complaint?  If  you did, could you post it?

1
Comment #52 by Anonymous posted on
Anonymous
to 44 no  hippa has to do with medical records

1
Comment #53 by jshannon posted on
jshannon
I just hope this bank ends up on the failure list.

2
Comment #54 by Anonymous posted on
Anonymous
Failure list?...you bet, I agree. But somehow, it seems as though the D-bags such as FUCU, er, ah, hmm, FNCU, always seem to land on their feet, even though the small guys like you and me end up hosed....and, as  pracital matter, there is nothing that we can do about it.

3
Comment #55 by usdpennies posted on
usdpennies
As I recall, all banks & CU's are required (by federal law) to provide every customer holding an account a copy of the corresponding "Agreement" or "for CU's "xx Certificate Account Disckosure".  In general the courts have upheld that (rightly so) such "agreements" constitute a legal contract between 2 or more parties.  Some bank/CU disclosures or agreements I have seen, often incorporate (by reference) other rules, proceedures, by laws or even "whims"!  For the most part banks/CU's are not required to supply such "incorporated-materials" to customers...but should make them available upon request.  Read ing FN;s "member agreement" would lead one to the section that sates:



3.



Your Agreement With the Credit Union.

All accounts and account services are governed by the terms and conditions in this Booklet and the Schedule; your Account Card(s), account receipts, and certificates; any other application or agreement we require; together with the Credit Union's Bylaws, policies and procedures, which are herein collectively referred to as "Agreement". This Membership and Account Agreement governs all your accounts and services, except as may otherwise be specifically provided in this Booklet or other agreement(s) with us. Your Agreement may be amended or revised by us at any time, and any change in the Agreement shall be effective at the earliest time allowed by law. This Agreement is binding upon all parties hereto and their heirs, successor, assigns and any other person claiming any right or interest under or through said parties. (bolding is mine!)

To be fair, this detail should be on Page One of the agreement & not buried 35 pages later.  My opinion is that Fort Knox CU  is legally able to change the penalty-but to apply this retroactively to existing acounts indicates a poorly applied policy...both for the CU and the customer.

 

 

2
Comment #56 by Anonymous posted on
Anonymous
#55  & others - With "FUCU's"  exculpatory language, it appears to me that there was never a "meeting of the minds" regarding a contract and certainly no intent of "mutuality of obligations".  Thus, legally, it may not be an enforceable agreement.  I smell a class action lawsuit in the making.

1
Comment #58 by mak1118 posted on
mak1118
#56  If a class action lawsuit is needed it is needed against Bernanke and the FED they are the real crooks here.

3
Comment #57 by mak1118 posted on
mak1118
I have 5 year cds at FKFCU and was the first one to bring this to the site and everyone said I was wrong, FKFCU gave me a chance to cash them out at a 3 month penalty because of my constant ****ing but when I thought it over they were raising it to a 6 month EWP which is a fair EWP even lower then a lot of them. I agree that what they did was crooked and unfair and I personally have not opened another cd with them,do what is right for yourself if they were to have the highest rate when I am looking for a cd I would open it with them. Remember no loyalty open the highest rated cd you can.

2
Comment #59 by Greg (anonymous) posted on
Greg
Once again, we all owe a debt of gratitude to Ken for helping to focus and highlight this issue.  Also, Ken's writeup was a sober and thoughtful analysis, in my opinion.

This was an appalling and shortsighted ruling by the NCUA.  The premature withdrawal penalty is very much a material term of the certificate for even reasonably sophisticated investors.  If that provision can be changed at the unilateral whim of the institution, why not also reduce the interest rate to 0%?

If other credit unions and banks try to follow suit, there will most likely be pressure on the regulatory front and a rash of class-action litigation.

 

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Comment #60 by Anonymous posted on
Anonymous
Yes, thanks Ken!

This is an issue for the new Consumer Financial Protection Bureau. The NCUA is only worried about having to bail out credit unions that go under.

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Comment #61 by Anonymous posted on
Anonymous
Anony #60:  Thank you so much for bringing the Consumer Financial Protection Bureau to our attention.  I had no idea such a bureau existed.   I was telling someone today that we "savers" need "mystery savers" (you know like mystery shoppers) to go into banks and credit unions and get copies of their Disclosure forms and read them for other savers.  I think most savers don't bother to read these but today when I read the forms given to me with my new CD, I was appalled to read it gave the bank the right to CALL the CD anytime at it's own discretion!!  I ended up on the phone with the bank and got my concern through to the President of the bank who insisted they put in a new program into their computers and they had NO idea this was in it and automatically checked for all CDs!  Well I told them I wanted a NEW copy sent to me without that statement in it because I was not informed ahead of time that the CD could be "callable".   I was told I would get another corrected copy in the mail and thanked for bringing this to their attention.

People, I think we are going to find a LOT of banks and credit unions putting new CD programs into their computers with such wording to protect themselves.  Read your CD Disclosures!!  If they try to skunk you, let them know you will get the word out to millions of savers about their actions.  We have the internet these days so a few clicks can do a lot of work for us! 

If that President of my new bank doesn't keep his word, he may be getting a personal visit from me after I contact that new group I just found out about on here.  I particularly asked if there was anything different about their CDs than the ones I normally buy and was told no by the person.  I think a "Callable CD" is quite different!!  Maybe one day we will see "mystery savers" in the banks to catch all their tricks!

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Comment #62 by mak1118 posted on
mak1118
Sure thing.

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Comment #63 by lou posted on
lou
I am not sure about relying upon this new Consumer Protection Agency. I don't know if I want them dictating to banks and credit unions how to structure their CD's. It is a slippery slope, where they might start telling them what interest rates they can provide for depositors. Instead, we need to be better consumers. It is incumbent upon us that we read all the disclosures, and not purchase CD's from institutions that have language in their agreements that allow for this to happen. If we voted with our feet, we could have much more influence than we currently possess.

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Comment #64 by James (anonymous) posted on
James
I've got several Fort Knox CD's, and I thank Ken for running an EXCELLENT site with very useful info. I'm wondering if any other lawyers out there are thinking of the illusory contract doctrine: if a contract's terms are so spongy or undefined that it really can't be said that we've agreed to anything, then we have, in fact, not agreed to anything. Hence, we have no contract. Ergo, give me my money back.

This is also sometimes thought of a "Mutuality of Obligation." See, e.g., Johnson v. Oconee State Bank, 226 Ga. App. 617 (1997) (no meeting of minds on essential term of the renewal contract, making it unenforceable). This defense usually is raised where, on the face of the contract, one party is free to walk away with impunity while the other party remains bound to perform (hence, the lack of mutuality). See e.g., Ponce Development Co. v. Espino, 449 So.2d 317 (Fla. DCA 3 1984).



Class action plaintiff's lawyers take note, OK?



Meanwhile, I think I'll be emailing this particular website to my Fort Knox representative.  Surely this much bad P.R. ought to give management pause.

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