Since my first post on Ally Bank's 60-day early withdrawal penalty, many readers have received conflicting information from Ally's CSRs. The issue is whether there's a possibility that the 60-day early withdrawal penalty can be increased on existing CDs. I decided it was time to seek someone higher up at Ally. I found Travis Parman, Director, Public Relations listed at GMAC's media contacts page, and I sent him an email explaining the conflicting information that we have received. He looked into this issue and replied with the following email. I've highlighted the important sections.
Hi, Ken. Thanks so much for giving us the opportunity to respond to your readers' inquiries about our early withdrawal policy. We did set the 60-day interest penalty to be customer-friendly and to be competitive with other banks. I think the customer representatives your readers spoke to were offering a friendly tip in the spirit of being straightforward. While it's true that at some point the terms could change, customers who had invested in a CD under the 60-day terms would continue to enjoy that benefit until the CD matures. We do not anticipate changing the 60-day terms but that always is dependent on the competitive environment and market conditions. If the terms were to change, customers still would get a 30-day notice of the change to make appropriate decisions regarding future CD purchases. Please let us know if we can follow up with any further questions. We look forward to the dialogue.
Director, Public Relations
GMAC Financial Services | Ally Bank
In summary, the early withdrawal penalty on an existing CD should not increase during the CD term. An increase in the penalty should only affect new CDs or CDs that have matured and are renewed.
Travis also informed me that they're updating their CSRs on this policy so your future correspondence with the CSRs should confirm this.
With the recent news about GMAC and Ally, readers have asked what would happen if Ally Bank fails. I don't think this is likely, but a failure is possible with any bank. I did not ask Travis this question since once a bank fails, the failed bank no longer has any say. Federal regulations allow a bank that assumes the deposits of the failed bank to make any change to existing CDs. As we've seen many times, this includes rate cuts, and it likely also includes changes to early withdrawal penalties. However, if the assuming bank makes changes, the bank is required to allow a penalty-free early withdrawal.
To see how the small early withdrawal penalty impacts your effective CD rates if you should close the CD early, please refer to my review of Ally Bank's CD and early withdrawal penalty. Please note that the 5-year CD rate has gone down a bit since January.
You can see how this penalty compares with the penalties of other banks in my Survey of CD Early Withdrawal Penalties from Internet Banks.
Ally also offers a 2-year CD that allows a bump-up in the interest rate. I reviewed this CD and compared it with the 5-year CD in this post.