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Early Withdrawal Penalties

Tuesday, March 29, 2011 - 3:41 PM
Ken,check out fort knox credit union today I called them and was told they raised their EWP on 5 year cds from 90 days to 180 days on all cds ,whenever opened. 
4
MakMak12 posts since
Mar 29, 2011
Rep Points: 298
1. Tuesday, March 29, 2011 - 7:03 PM
Based on the comments in the CD blog post, there appears to be some conflicting information. I've emailed the Fort Knox FCU marketing VP to ensure the new penalties were indeed applied retroactively. I'll post an update when I receive a reply.

I was able to find what appears to be the new Fort Knox FCU account disclosure. Here's what is listed for the early withdrawal penalty:
Unless stated otherwise, the owner shall forfeit an amount equal to 180 days dividends whether earned or not on certificates with maturities greater than 24 months. The penalty on certificates with maturities less than 24 months is 90 days dividends whether earned or not.

 
1
Ken TuminKen Tumin5,441 posts since
Nov 29, 2009
Rep Points: 123,675
2. Tuesday, March 29, 2011 - 7:04 PM
From the October 2009 Membership Agreement, "By signing a Membership Application or Signature Card or your use or continued use of any account or account services after receiving this Booklet . . . agree that you understand and agree to the terms and conditions stated in this Booklet, and the Schedule, as amended from time to time (emphasis added)."  At the time of the October 2009 Membership Agreement the EWP for CDs was 90 days interest.   The February 2011 Membership Agreement (currently posted on the Fort Knox FCU website) specifies a 180 day penalty for 24 month or longer CDs and a 90 day penalty for less than 24 months.
2
AlanAlan32 posts since
Jun 7, 2010
Rep Points: 202
3. Tuesday, April 5, 2011 - 12:30 PM
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.
2
mvboschmvbosch7 posts since
Apr 5, 2011
Rep Points: 28
4. Tuesday, April 5, 2011 - 2:33 PM
I opened an IRA cd at Fort Knox credit union in 2010 and was just told that I have until tomorrow at 6:00 p.m. to close my cd and receive a 90 day EWP after tomorrow they will charge me 180 day EWP. They said we are gaming the credit union by trying to close a cd early to which I told them when I opened the cd in 2010 I could have gotten a higher rate from pen fed but because their EWP was 90 days and pen feds was 180 days that is why I opened it with them, I told the rep when I opened it I was planning on closing it early in 2013 and if that was a problem to which she said no the EWP will still be 90 days. You tell me who is gaming the system the customers that agreed to the 90 day EWP or Fort Knox who sucked in their customers with the 90 day EWP and then retroactively changed it to 180 days. Anyone that thinks they are not having their EWP raised to 180 days has a shock coming when they try to withdraw their funds.

The person who e-mailed me goes by the name Linda Dahldauser email is lmdahlhauser@fortknoxfcu.net
4
MakMak12 posts since
Mar 29, 2011
Rep Points: 298
5. Tuesday, April 5, 2011 - 2:35 PM
 Linda Dahlhauser is the corrected spelling.
1
MakMak12 posts since
Mar 29, 2011
Rep Points: 298
6. Friday, April 8, 2011 - 5:57 AM
mak1118, did you receive any written notice of the change to your EWP?
2
mvboschmvbosch7 posts since
Apr 5, 2011
Rep Points: 28
7. Friday, April 8, 2011 - 8:49 AM
mvbosch, no I never received any notice. I sent off an e-mail to the ncua consumer protection and I suggest anybody that thinks this stinks should do the same.
1
MakMak12 posts since
Mar 29, 2011
Rep Points: 298
8. Friday, April 8, 2011 - 8:52 AM
I also asked Fort Knox if the 6 month EWP is safe to which she said that the ceo can raise or lower it whenever he decides to. What a joke !
2
MakMak12 posts since
Mar 29, 2011
Rep Points: 298
9. Friday, April 8, 2011 - 8:56 AM
mak1118, I think that FKFCU can raise or lower it whenever it decides to.  The Membership Agreement allows them to do this.  However, FKFCU must follow the law when it does it, and the law says 30 days prior notice.  If I were you, I would provide FKFCU with the following credit union regulations:  12 CFR 707.4 which deals with required initial disclosures; and 12 CFR 707.5 which 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).
1
mvboschmvbosch7 posts since
Apr 5, 2011
Rep Points: 28
10. Friday, April 8, 2011 - 9:15 AM
By the way, 12 CFR 707.2(x) defines "term share account" as follows:

(x) Term share account means any share certificate, interest-bearing certificate of deposit account, or other account with a maturity of at least seven days in which the member generally does not have a right to make withdrawals for six days after the account is opened, unless the account is subject to an early withdrawal penalty of at least seven days' dividends on amounts withdrawn, offered by a credit union to a member or potential member.
1
mvboschmvbosch7 posts since
Apr 5, 2011
Rep Points: 28
11. Wednesday, April 13, 2011 - 4:55 PM
This guest blogger  ( http://www.depositaccounts.com/blog/how-much-does-fdic-insurance-cost-consumers.html   ) posted about agfinancial cds.  I found their early withdrawal policy interesting, given the recent posts on the subject

 

http://www.agfinancial.org/investments/faq/ag-loan-fund-certificates/



What is the penalty for redemption before maturity?

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Our current policy is to impose an early redemption penalty of 2% of the principal amount redeemed prior to maturity. We may change this policy at any time without notice or consent from any investor.

1
MikeMike327 posts since
Feb 22, 2010
Rep Points: 875
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