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Update On Fort Knox FCU Changing CD Early W/D Penalty -- Changing After CD Open

Monday, October 25, 2010 - 1:44 PM
I previously wrote about Fort Knox FCU asserting that it can change the early withdrawal penalty applying to a CD at any time. This, of course, raises very serious questions about the idea of getting into a longterm CD with a short early withdrawal penalty, calculating that you can get more interest that way even if closing early and taking the penalty. If Fort Knox can do this legally, then so can all other financial institutions!

Since I posted, I further queried Fort Knox about this. I have my query and Fort Knox's reply below. I note, in summation, Fort Knox specifically states that it can change the early withdrawal penalty on a CD AFTER the CD is already opened and you are locked into the term! It says it merely needs to give 30 days notice, during which time you can choose to close the CD at the previous early withdrawal penalty (whether that is to your advantage at that particular time or not). So, it is asserting the saver's worst fears. 

My previous post was at:

Here is my query to Fort Knox and their reply today:

On 10/25/2010 08:18 AM, we wrote:

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.

On 10/22/2010 11:02 AM, you wrote:

Thank you for your response, especially adding in the second part. I must query, though. You say that AFTER I open a CD and establish that CONTRACT, you can change it at will to change the early withdrawal penalty?!

Please confirm. I guess I can't start asking for an entire legal basis for this, but I will say, as far as I know, once a contract is entered into, you can't change it (unless both parties agree, of course)! Are you REALLY saying that after I enter into a CD, you could change the amount of early withdrawal penalty that applies to it? Or, maybe you were saying that you could change it any time prior to me entering into it? Or??? I REALLY don't think you can do that legally once the contract is entered into.
me1004me1004370 posts since
Jan 16, 2010
Rep Points: 2,572
1. Monday, October 25, 2010 - 2:56 PM
I would think that this matter is very important to the people who frequent this website. Surely someone can find out if what Fort Knox CU is saying is correct. If it is, all of the posts about long term CDs and early withdrawal penalties have mislead a lot of the readers of this blog and forum.
mm308mm3082 posts since
Oct 25, 2010
Rep Points: 2
2. Monday, October 25, 2010 - 3:22 PM
Sorry. The "mislead" should have been "misled" and I 'm not saying anyone misled anyone intentionally.
mm308mm3082 posts since
Oct 25, 2010
Rep Points: 2
3. Saturday, November 20, 2010 - 4:23 PM
I posted this in another thread too since I think my experience could be useful to the readers. Instead of trying to get official legal answers, I ask CSR about this topic and their manager. Specifically, at Fort Knox, I did talk to a manager before opening my CDs there. I asked her to first send me an email confirming what I had asked her about, and did receive one from her, in case I need to refer to it later. The content of her email contains following words:

"Please be advised that the only time we (The Fort Knox FCU) would not give consent of the member to withdraw their CD is if they owe the Credit Union money. There is a penalty of 90 days of dividends if earned or not if funds are with drawn prior to the maturity date."

Other people may find it useful to receive similar emails or something in writing to prevent change of terms in the conditions. I have done the same thing with other institutions too - I first try to get something in writing from a CSR or a manager and then open my CD there.

Best Regards!
anon123anon1232 posts since
Nov 20, 2010
Rep Points: 7
4. Friday, April 8, 2011 - 5:53 AM
 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).
mvboschmvbosch7 posts since
Apr 5, 2011
Rep Points: 28