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How to Write a Check: Your Step-by-Step GuideCredit Union Says It Will Honor the Terms of Existing Add-On CDs
On Monday it appeared that GTE Financial Credit Union had decided to unilaterally change the terms of existing promotional share certificates that had been opened in 2018 and 2019. That decision became official yesterday based on an email to members which described the change. The relevant excerpt of the Wednesday email reads as follows:
GTE Financial has updated the terms of its Add-On Certificates effective 9/29/2019. You can now utilize the add-on feature to deposit up to $6,000 per year, per certificate, for each year of the term. Your rate and term will remain the same.
I have good news to report. GTE Financial decided against this change. Today they sent out a new email to members with the subject “Please disregard our previous email regarding your share certificate.” The relevant excerpt of this email reads as follows:
While the promotion is no longer being offered for new share certificates, GTE will continue to honor the terms of the share certificates that were opened by members during the applicable promotional period and allow for additional unlimited deposits.
In summary, members who opened those promotional share certificates will be able to continue to make unlimited additional deposits as specified in the original disclosure and in the original terms that were listed on GTE Financial’s website. The original terms of these promotional certificates included the sentence, “Add-On option available in deposits of $20 or greater throughout the term of the certificate with no cap.”
When news of this issue first came up on Monday, I immediately attempted to contact GTE Financial management for information about their decision and to remind them about how serious of an issue this was. I did not receive a reply until this morning when I was first told of the good news that they changed their minds.
Past Cases of Credit Unions Changing Terms on Existing CDs
Long-time DA readers will likely remember the many past cases of credit unions that have tried to change terms on existing CDs. Unfortunately, most of these past cases didn’t have outcomes favorable to the members. Past examples of credit unions which changed terms on existing add-on CDs by not allowing additional deposits include United Services Credit Union in 2006 and Valor Credit Union in 2015. In addition to changing terms on add-on CDs, credit unions have changed terms on existing standard CDs by increasing the early withdrawal penalties. Past examples of credit unions include Fort Knox Federal Credit Union in 2011 and CEFCU in 2012.
Another case of a credit union that changed terms on existing CDs by not allowing add-on deposits was Achieva Credit Union. This case was detailed by this 2014 Tampa Bay Times newspaper article. I have a summary of this article in this 2014 blog post.
The article described how the Achieva member persevered for many months to try to get Achieva to honor the terms of his two add-on CDs. The Achieva member spent many hours corresponding with the NCUA and with the Florida Office of Financial Regulation. Eventually, the NCUA’s Office of Consumer Protection declared that Achieva’s disclosures were “not clear and conspicuous - a violation of the Truth in Savings Act.” Achieva was also instructed to work with the Achieva member “to reach an amicable resolution.” Unfortunately, the NCUA provided no promise to enforce the ruling. Achieva didn’t agree to honor the member’s reimbursement request for lost interest until the member sought help from the Tampa Bay Times.
As I described in 2014, this Achieva case is a disturbing example of the risks of relying on CD terms. The institution can decide to use legalese to change the terms of the CD before maturity, and the customer will have an uphill battle to change the institution’s mind.
My Take
I’m relieved that GTE Financial Credit Union decided not to go down the road that Achieva took. I’m not sure what happened to convince GTE Financial management to reverse its decision. I think our efforts to contact GTE Financial and inform them about the seriousness of this matter helped to change their minds.
One thing that I plan to do is to include links to this blog post any time I mention an add-on CD. This will be intended to provide warnings about the risks of add-on CDs. The add-on feature can be very useful for savers as a hedge against falling interest rates. It can be a big win for savers when there’s a large drop in interest rates. However, that big win for savers becomes a big loss for banks or credit unions. If the institution doesn’t take into account the worst case scenario, the institution may find itself in a difficult position when large add-on deposits are made after major declines in interest rates.
The wise institutions typically limit add-on deposits to some maximum level to limit their potential loss. Of course, this limit on add-on deposits should be clearly specified in the disclosures before the CD is opened by members. Those institutions that are not wise are more likely to be the ones that think it’s okay to change terms on existing CDs. In summary, be cautious of institutions which offer CDs with unlimited add-on deposits.
Fortunately, GTE Financial is a fairly large credit union with close to $2 billion in deposits. They will likely be able to handle a large rise of deposits that earn over 3% even if we return to a zero-rate environment. That possibility will be costly for them, but they can take comfort that they did the fair and right thing. Plus, they will save a lot by avoiding the bad publicity and the years of fighting with regulators and members.
Thanks to all DA readers who shared their experience on this issue by posting in the DA Forum and by emailing me. There is definitely strength in numbers, and by working together we can help ensure institutions honor their agreements with their members and customers.
Maybe it is time for a Congress to codify this very simple concept that if a bank takes your money under certain conditions - bank cannot change those conditions after the fact.
The 30 day notice rule is pure garbage. If the rates went to zero 2 years from now and GTE decides to lower the APR to 0.1% - I don't think anyone will be happy they got 30 days notice about the change even if you are given an option to withdraw your money penalty free.
Contract means contract and government should make sure all participants are held accountable for what they agreed to. And any footnotes declaring that the terms of the contract can be changed unilaterally should be considered unlawful and void.
Sneaking a right to negate on the terms in fine print on page 15 should constitute an attempted fraud and such clause should be disregarded. If that is still legal, doesn't mean it is right. And if it is not right, it should be made illegal.
Personally, I'm leery of adding to my existing GTE certificates. I've had so many problems with them (incompetent representatives, GTE website glitches, and more) that I've gotten fewer CDs there than I would have opened had they been minimally competent.
But the outcome is good news, though I would not be shocked if GTE, at some future point, limits add-on contributions (after providing notice). That's what happened at Tobyhanna/Valor Credit Union, and the NCUA was fine with it.
And that would still be illegal. Despite the idiocy of the masses.
1. If it came down to a choice between bankruptcy and changing the terms, they would change the terms.
2. GTE Financial needs new management.
If any of you read the disclosure statement, you would know the terms which you accepted. GTE's was and is very clear. They tried to pretend their website took precedence and that is clearly illegal, and downright silly.
Don't presume everyone is ignorant.
The problem with that strategy is that if you raise fees you become less competitive and it can potentially make the problem even worse because you won't be attracting new funds at the lower rates and you'll tend to lose customers except for those to whom you're paying the higher rates. Offering unlimited add-ons exposes you to unlimited risk. Market constraints won't allow you to fee your way out of it. GTE won't be in the clear for 5 years unless rates start to go back up again which they may.... So I'm not saying they're doomed, I'm just saying there's going to be some nail biting going on there for quite some time until rates start to go back up again. In the meantime, they are going to be dealing with even lower rates and probably much bigger inflows to the existing add-ons. We'll see how they fare under the pressure.
While it is true financial regulators are captured and have shown they will not enforce the law, and a lazy, apathetic population would rather bail out a big company then help their neighbors, that does not mean they are acting legally.
you think Regulation DD and possibly Regulation E don't apply? why?
This is a contract between a bank and a human.
https://www.depositaccounts.com/blog/2011/09/ncua-rules-in-favor-of-credit-union-that-raised-early-withdrawal-penalty-on-existing-cds.html
The NCUA decision stated:
"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 earlier postings re GTE, I cited Sections 707.4 and 707.5 of the NCUA's "Truth in Savings" Regulations.
Now, the NCUA's interpretation of the applicable regulations (and my interpretation of the applicable regulations) may be incorrect. It doesn't matter how I interpret those regulations, but it certainly matters how the NCUA interprets and _applies_ them.
It's the NCUA interpretation that matters.
As to the poster who claimed (in an earlier thread) that Sections 707.4 and 707.5 of the NCUA regulations have nothing to do with an institution's right to alter the terms of the certificate, after giving proper notice -- that's not a disagreement concerning interpretation. That's a disagreement concerning basic literacy.
Finally, the NCUA is a regulator, not a court. They issue opinions, not legal rulings.
Terms and Conditions
Upon your receipt of this disclosure, you agree to abide by the GTE Federal Credit Union DBA GTE Financial bylaws and any amendments thereof. You also agree to the terms and conditions of any account that you have in the credit union now or in the future and agree that the credit union may change those terms and conditions from time to time.
[end of quote]
https://www.gtefinancial.org/File%20Library/GTE/PDFs/Account-Disclosure.pdf
Sam Kiggle: I don't think this is a matter of our having differing interpretations; it's a matter of reading comprehension.
There would be just about zero lawsuits if and when GTE illegally changes its terms. How would you calculate the damage from refusing additional deposits? Have you ever hired a lawyer for anything? It won't be worth the cost. And yes, a smart local depositor could win in small claims court, it won't be worth it for anyone else.
And if GTE does change its terms, it will be to protect its solvency. So, there won't be damages, because GTE wouldn't allow add ons when it is bankrupt, anyway.
Using "add ons" as a core personal finance strategy is silly.
For future CDs.
It is literally hard to comprehend that people are so quick to agree a bank can sell a CD, and then literally change any of the terms.
Act 1:
Scene 1:
Exit: Stage (in the) Right
Also, I worry about GTE’s financial stability. They totally ****ed up their exposure with this UNLIMITED add on offer. Were they speculating that rates would not drop or were they just incompetent? I, certainly will not be depositing more than the $250k (including expected accrued interest) insured balance.
Ken commented that GTE seems able to absorb the loss from keeping the add-on feature, but I hope Ken continues to give updates, particularly about their ability to stay in business and pay members, on this dysfunctional credit union.
I don’t believe in conspiracy theories, generally, but that was a conspiracy.
Watch the Frontline episode, “The Untouchables” and make up your own mind.
The episode is about why the Obama Justice Department didn’t prosecute the 2008 criminals that wrecked the global economy that we are still experiencing.
"
CDmanFL | Oct 2, 2019 | Comment #22
I agree, where is Ken? We need your help! GTE has defrauded and misled your readers! And it seems they don’t care one bit. I called 3 times today and the brain dead reps were helpless and clueless. I only knew about GTE because of this forum and Ken’s post on GTE. Ken should use the weight of this community to make GTE abide by the terms of the add-on agreement."
Can’t we ever lose just once in awhile?
Deplorable 1 | Oct 2, 2019 | Comment #40
I'm not going to broom them one way or another. If they don't honor the terms I'll just put $6,000/yr. in there and open multiple 6 mo. CD's with a 2-3% credit card and earn a higher rate anyway. This is why I opened several add-ons because you never know what's going to happen.
Your predictions are fascinating, as always.
You are repeating what Alan1 wrote and he is wrong. You are therefore also wrong.
Are you sure about that Sam?
https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/
Regulation DD
§ 1030.5 Subsequent disclosures
(1) Advance notice required. A depository institution shall give advance notice to affected consumers of any change in a term required to be disclosed under § 1030.4(b) of this part if the change may reduce the annual percentage yield or adversely affect the consumer. 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.
and Regulation E
"§ 1005.8 Change in terms notice; error resolution notice.
(1) Prior notice required. A financial institution shall mail or deliver a written notice to the consumer, at least 21 days before the effective date, of any change in a term or condition required to be disclosed under § 1005.7(b) of this part if the change would result in:
(i) Increased fees for the consumer;
(ii) Increased liability for the consumer;
(iii) Fewer types of available electronic fund transfers; or
(iv) Stricter limitations on the frequency or dollar amount of transfers."
both would require a proper written notice be given in advance of change of terms. It seems it is you who is wrong here Sam.
(i) Increased fees for the consumer;
(ii) Increased liability for the consumer;
(iii) Fewer types of available electronic fund transfers; or
(iv) Stricter limitations on the frequency or dollar amount of transfers."
Nope, none of that refers to add on deposits. Try reading some more regulations.
Green Dream, you are citing regulations, not laws. And your regulations cite other regulations, which you ignore.
For people who prattle on about individual liberties, kaight and the others sure do lack any self esteem.
Any FI giving such notice is in trouble and is seeking to limit add-on deposits. With mailed notice the 30 day clock commences to run with the date of mailing. This is an advantage for the FI. There is another wrinkle:
The 30 day requirement means 30 calendar days, NOT 30 business days. Hence, we account owners can expect notice to be issued forth in such manner as to include the most holidays and non-business days possible. For example, our next 30 day interval of highest jeopardy encompasses the upcoming celebration of Thanksgiving. After that, smart FI management in trouble would seek to use the Christmas/New Year holiday period to give their notice, decreasing as best they are able depositors' ability to add funds during those 30 days.
As a final consideration, in order more protectively to time the required 30 day notice interval, the FI can be anticipated first to do an "illegal" shutdown of the add-on privilege. By "illegal" I do not mean against the law, but rather contrary to NCUA rules. Candidly, that is what I thought GTE was doing earlier this week. I now think that is wrong. GTE acted solely out of management incompetence. However:
This has been a learning experience for that same GTE management team. I seriously doubt they will make the same error twice.
I'm not a member of GTE, so someone else would have to check the terms for them.
It is always available before becoming a member, and in GTE's case, is listed on its website.
"
Electronic Signature in Global and National Commerce (E-SIGN)Disclosure and Consent to do Business ElectronicallyAgreement: By selecting the “I Accept” box below, you agree to be bound by the terms and conditions of this Agreement. GTE Federal Credit Union DBA GTE Financial (“Credit Union” or “we”) may modify this Agreement from time to time in its sole discretion, and such modifications shall be effective immediately upon delivery to you in electronic format. You specifically consent and agree that we may, in our sole discretion, provide all disclosures, agreements, contracts, periodic statements, tax documents, credit card and mortgage statements, receipts, modifications, amendments, billing statements and all other evidence of our transactions with you or on your behalf electronically (hereinafter all such documentation is referred to as “electronic record(s)”).
"
That does not mean that any communication sent electronically is legal.
If the credit union sends you an email telling you to burn your house down, do you consider that legal?
I pointed out that the general notification method of an FI can be unexpectedly included within the agreement to accept electronic statements.
Then I pointed out that I would not intentionally make a statement on the legality of things, at least, because I am not an attorney.
That's it. I substantively addressed method of notification, and not being a lawyer. The rest of your statement towards me is grafted together by you.
who broke the news of the Dirty Deed
I'll include Zemo999 and Sylvia
Anyway bottom line Bill Barr is right: paying huge tax on inflatodollars is just stupid!
if a saver has $100, inflation is zero and interest is 1%, their money would grow in to be $101 (since no inflation real value is also $101) for an overall increase in real value of $1
now image a saver has $100, inflation is 2% and interest is 4%. their initial $100 is now $104, however real value of that money is $101.92 in pre-inflation dollars, that's a real value increase of $1.92 nearly twice as much as the original scenario.
increasing inflation alone would be bad, no argument there. increasing inflation with interest rate increasing to more than offset the increase in inflation would be good for savers.
2. It's a mistake to only consider the things that immediately affect savers when formulating economic policy. Even savers who only advocate for policies that narrowly take into account the interest of savers are not doing themselves a favor. Your savings mean nothing if the economy around you collapses. A moderate but not zero rate of inflation that remains stable is desirable for everyone including savers, because that's the environment that's conducive to economic growth.
What we really need to do to keep rates at a higher level is to start paying down the debt. Neither party seems to want to tackle this issue because it would involve stopping the handout programs which is what got us in all this debt in the first place.
What's important in terms of the national debt, is not it's absolute size, but it's size in relation to GDP. So if you can find a way to grow the GDP the debt becomes less of a problem. I believe that the current president is doing the best that can possibly be done in that regard, slashing regulations, and lowering the tax burden. The best that can be done that is in the current political environment. If he were to get some cooperation however I think we would already be well into the strongest economy the country has ever seen. That would make the debt less onerous to bear.
National debt while too high in relation to GDP is not the real problem, the real problem is the unfunded liabilities, in the main Medicare and Social Security, that are children and grandchildren will have to fund.
Politicians have been skilled for a couple of generations now in how to use unfunded liabilities to prophet politically now and have someone else have to pay the bills later. The problem is, it's now later.
That slip of the tongue has much more true meaning in reference to Politicians
I'm glad GTE decided to do the right thing.
They may get more funds than they want at 3%, but GTE is big enough to survive. (Even with a $250,000 cap per person, Sharonview must have received literally millions in deposits at 4%, and they still have an "A" health rating).
In the end, it was the only thing GTE COULD do if they wanted anyone to have any faith in them as an institution. After all, a depositer wouldn't be allowed to (sucessfully) demand that GTE allow them to close a CD early without penalty, because, for instance, their work hours got cut. Contracts need to mean something. In the future, if they re-instate Add-On Promo CDs for more than $6k/yr again, they will likely put a balance cap on Add-Ons -- which is fine. As long as everyone knows the conditions going in -- and honors those conditions.
Glad GTE did the right thing. I feel better about using them more now.
#16 Sharonview was a limited time CD with no add on feature (Connexus had a 4% 5 year CD recently too with no add on).
GTEs problem is that have an open ended add on in a declining rate environment. They may be overwhelmed if they have a large inflow of funds. The Treasury 10 year note yield is 1.594% today.
If Penfed didn't take them over they would have failed.
No way would I ever do business with them.
That GTE considered this maneuver so early in the promotion's long life, I don't consider it all that unlikely that they will be searching for some other mechanism to limit their potential losses.
Thank you Thank you Thank you. I don’t know where I would be without your outstanding website. More so I am not sure they would have capitulated had you not gotten involved. I can’t thank you enough - always sticking up for the the little guy and doing thorough research on many subjects that may impact us financially. Thank you - you are always much appreciated
From a hard working investor just trying always to get the best return on the money I work hard to make every day
Have you checked out Bankrate.com, the site that is always referenced by the press?
The site is offensively devoid of thorough information!
Be realistic, I respect Ken, but he did not reverse the CD rules.
This is just a theoretical question. I keep reading people saying that they can "change anything they want" with 30 days notice, etc. Are they allowed to lower the rate by giving notice?
A FI wanting to lower an existing CD interest rate probably has too much money in its coffers for its current economic circumstances. I would expect, therefore, the FI offering a penalty-free withdrawal option as an alternative to our accepting the lower rate.
But aside from that, I see no regulatory impediment to a FI lowering a CD's interest rate but only after offering proper notice. Of course there would be a HUGE public relations penalty for them to endure. That's probably the principal reason such rate reductions almost never happen.
How about if they say they can't change the terms, then send you a post card saying they can change anything they want.
If a credit union notifies you it wants your baby, do you consider that proper notice?
I hope that GTE can continue to operate. If rates continue to go down their finances will come under pressure if they have to accept deposits that pay high rates. But if rates go up in 2021 like D1 predicts if his cousin Trump wins the 3% may be a good move.
Similarly, there's a process for financial institutions to change certain terms and it involves more than just unilaterally declaring at a moments notice that they're changing the terms effective immediately (unless they've said upfront that those terms are subject to such immediate changes, such as rates being variable for instance).
Also. you can just payoff your mortgage if you no longer like the terms. I did that on a mortgage that I had previously.
depends on the CD. If the CD has a adjustable rate, they can change the rate as specified in the agreement (for example if they specified that the rate is indexed to Treasury rate + 0.50% evaluated quarterly, then if the rates go down, come the next quarter they can lower the rate). But if it's a fixed rate, I don't think they can change the rate willy-nilly. They could choose to close out the CD (and if you read the fine print they usually have wording to along the lines of reserving the right to do so at anytime) but they can't just change the agreed upon fixed rate (If they could it wouldn't be fixed, now would it)
If a CD disclosure states it is a variable rate, it is not a change of terms to apply that variable rate.
Silly nonsense.
But what about regulation D and regulation EE? Please Green Dream, what is it?
Credit unions and banks are subject to federal regulations, state regulations, FDIC or NCUA rules, and the policies and documents of the institution itself. Anyone who speaks with certainty with regard to the legality of what GTE Financial may or may not do is a fool. Even if they had the requisite legal ability to interpret the facts, no one here knows enough facts to be able to draw such conclusions. The discussion is entirely speculative.
Not complicated, complex or multi dimensional.
Of course, we live in a country where Americans are lethargic and would rather prattle on the internet than read a piece of paper.
What aspect of it do you think is illegal? Or violates any regulation?
After waiting about a week to complete an external acct to transfer the funds (they take up to a week at GTE, not 2-3 days like most FIs I've worked with), once the funds were there, I tried to transfer them into the 0 balance certs. It wouldn't work. So after another Live Chat, I was able to have GTE transfer the two $500 amounts into the two certs, and they said that when you add into the certificates for the first time, GTE has to do it, but after that the customer should be able to do it themselves online. Seems weird to me, but that was what I was told. I have yet to add add'l funds in the other three certs I have with them, but just wanted to let people know they may experience problems initially trying to add-on. Or maybe I got bogus information from GTE, again.
I cannot say I am happy with their competency, and I am nervous about what they will do in the future. My hard-copy certificate papers I rec'd in the mail do say that the Promo CD add-ons have no cap, which is what I went to when I rec'd that first email. I had thought at that time that they were referring only to their existing add-on certificates and was surprised to see the second email saying to disregard the first one.
You might want to go out and get some exercise.
I do admit this most recent flap was handled a bit hamfistedly. But this incident is very much an exception to an otherwise sterling track record. I will not condemn GTE for a single mistake amidst excellent performance regarding every other aspect of my business relationship with them. GTE is a good outfit and I wish them well.
While I in no way want to be seen as defending GTE's behavior, I was told that when the FED started lowering rates, GTE had several members who had recently opened add-on CDs add huge amounts to their CDs – I was given the figures of $2 million, $7 million and $10 million. This seems crazy to me given the insurance limits. In any case, this whole fiasco could have been avoided if GTE had just put a reasonable per person cap on their add-on CDs at the start.
So it becomes magically ethical to change the agreed terms as long as you're only ****ing a few wealthy people? As long as it's only ****ing somebody else and not me I'm fine with it?
Let them eat cake
But when humans want to engage in the same behavior he resorts to expletives.
I'm glad they changed it back. But whether that was in good faith or after realizing they were in real legal trouble, I'm not so sure. At any rate, they clearly demonstrated they were willing to do it, thought it was OK. And that is not the kind of people you want to rely on. You want people who would never consider that something reasonable to do. So take this incident as a warning of who you are dealing with there -- you might be wise not to deal with them any more - until they change the people in charge.
Only GTE knows how many CDs they have with add on and the possibility of what funds my flow into the CU. Many here opened many bare minimum accounts of $500 that have the potential of being 250k insured accounts and all insured if titled properly. If rates go down to near 0 like we had a few years ago people will be adding a lot of funds to their add ons to make over 3% which is a great strategy. I maxed out my MACU 3.51% to the max 100k less the $10 a month required deposit.
If the impact is so small to them like you observe, why would people with expertise in the field want to cap the open ended add on feature and cause people to complain to regulators and get bad publicity? Why do most other institutions put caps on add ons?
Also, D1 may be right that in 2020 rates fo up?
I don't think GTE will go under but you have to take the information here into account.
Another strange thing is that when I do any transfers to my CD initiating from MACU and specifying the CD the funds go to the required savings account. So I just do the transfer from savings to CD which happens instantaneously.
I opted for the 4 longest duration add-on offers from MACU so as to be best positioned for a variety of future market rate possibilities. Losing 4 Reg-D transactions each month would have left me having to keep a closer eye on things with MACU.
The only sillier discussion on here I can recall is whether FDIC / NCUA cover accrued interest
Is it just a way to justify lethargy and apathy? Do you feel that supporting big companies which treat you badly somehow makes you less a victim?
find posts leading to the CC Funding College Seminar ;)
Based on many manic posts, you should take the time to learn how to do a bit of basic research. Teach yourself to fish, in a figure of speech.
https://www.doctorofcredit.com/does-funding-a-bank-account-with-a-credit-card-count-as-a-purchase-or-cash-advance/
scroll down to GTE.
Why would any bank or credit union be willing to pay an interchange fee?
Also, thanks to GTE management flexibility to revert their own decision at least for now.
IMHO, as for a marketing genius, a Term Certified Deposit Account sounds much better than a Saving Account with early closing penalty