I had opened a number of long term CDs with Signal Financial Credit Union which had an add on feature. After business on Friday, without any prior warning, we got emails saying that the add-on feature had been discontinued and that the credit union will no longer accept additions to the CD. This is shocking. To whom do we complain? I remember a similar situation had arisen with Valor Federal Credit Union and then after complaints they had allowed one more add-on.
Answers
Complaints should be filed with the National Credit Union Administration. Information re the complaint process can be found at https://www.mycreditunion.gov/consumer-assistance-center
As to Valor: initially Valor offered a one-time opportunity to make one add-on deposit (subject to a maximum amount), only for those members who had filed complaints with the NCUA. However, the NCUA matter was ultimately resolved, by Valor mailing out notices to all owners giving them thirty days to make additional deposits without a maximum. It took several months for the NCUA matter to be concluded.
GTE recently tried the same thing as Signal. GTE rescinded its termination of the add-on clause after a few days.
By all means, file a complaint with the NCUA. Based on the statements in your posting, my _guess_ is that if Signal does not reinstate the add-on provision on its own, the NCUA will get them to send out thirty-day letters, giving you an opportunity to make additional deposits.
In addition to Valor, which took place more recently, back in 2007 or 2008 USCU went through a process similar to the one described by alan1. There were complaints to the NCUA. Ultimately USCU was forced to open a 30 day window, a notice window if you will, during which account holders were, once again, allowed to increase balances in their add-on CD accounts.
Signal Financial clearly is unaware of the rules. Their account holders need to file complaints with the NCUA. Then you wait, and it might be rather a long wait. But remain alert and ready. Eventually the 30 day window will open. The bad news is that, following closure of that 30 day window, your add-on privilege will be permanently gone. And, yes, Signal Financial can do that to you . . . . . but only after providing you 30 days of notice.
A final comment on detail:
The 30 day notice period is NOT 30 business days. It is 30 calendar days. Weekends and holidays count. So if Signal Financial follows the timing scheme adopted by Valor, you might end up with many fewer than 30 business days to accomplish your add-ons. Valor was pretty sneaky the way they did it, making matters as difficult as they could for us to add funds which, of course, they did not want at all.
Time for me to eat crow. I was wrong. So, next question. Can banks and CUs terminate existing CDs? I have CDs without add-on provisions in the 4% range. Can they just wake up one day and say it’s time to terminate them because they made a bad deal? Do you know if any bank or CU has actually done this? I would imagine it would significantly mar their reputation as they would hear it from all sides. I would also imagine they would subject themselves to costly litigation even if the small print was in their favor. I, for one, would sue them in small claims court. Look forward to your thoughts.
As for your question, I'm unable to answer. My knowledge of the 30 day rule with add-ons came only based on my own actual experiences. I have no experience with any financial institution ever having lowered the interest rate on a CD or terminating a CD as you describe.
I can address the issue in theoretical terms, but remember actual experience counts for a lot more. It is my best understanding that for any credit union no promise they make to a depositor is a suicide pact. I have seen these terms from time to time, published in individual credit union disclosures. Usually it states something like "credit union is not required to pay interest in excess of earnings" . . . or something like that. I do not have the exact words. But the gist is that if the credit union is unable to pay the agreed-upon rate of interest without going belly up, then they are released from the obligation of doing so.
But again, I have never actually encountered this myself personally. If other posters here have, then their input is worth more than mine. When something actually happens to you personally, with money on the line, that is more illuminating and memorable than merely a lot of talk.
Of course, some CDs are callable CDs -- watch for that in the fine print, too often that is not obvious. Those can be closed by the bank before the CD term ends, which are the terms of the contract entered. I have seen others that give variable interest rates, often pegged to a certain index. Again, that will be in the terms of the CD contract. Of course, there also are "bump up" CDs, which obviously provide for changing the interest rate, although typically only upward.
In the end, the answer to your question is it depends on the CD contract you entered, and you better read the fine print in the disclosures of the CD and the overall disclosures of the financial institution – they two need to be read together – before opening the CD. But most CD contracts do not provide for the interest rate to change.
Question: If Signal Financial Credit Union with a B + rating and only 441 million in assets feels the need to cut off their add on terms for their financial health does that make Signal credit union mnotva stable credit union to have your mone?
Signal Financial Federal Credit Union
Supervisory Committee
P.O. Box 344
Kensington, MD 20895
[email protected] "
Ken, why not try to interview the Chair of the Board? “Your” readers would appreciate it! And that includes other CUs. Want some suggested questions especially from those that were close to DotCom and the GreatR debacles?
Meanwhile the Fed cut another 50 basis points....
for 24 m i'd say dump what you can into this deal while they
give you the time. My best 24m is only 2.70 with no adding to it.
not counting older offers.
wait i know the stock market
“I asked my NCUA contact about this and he sent an Office Staff Interpretation of a NCUA regulation which stated: Credit unions are cautioned that unless credit unions have reserved the right to change terms in the account agreement or disclosures, a change in terms notice may not be sufficient to amend terms under applicable law”. Ken then wrote a generic clause allowing the institution to make changes is probably common in member agreements or disclosures
Regarding my specific add on cd agreement there is no reserved right to change terms. However, I don’t have any paperwork from becoming a Member
Does any Signal member have paperwork and can you check your membership agreement for the reserve the right to change terms clause
I feel in these incidents, the power is one sided toward the credit unions and banks
Although I was told the FDIC has stricter rules than the NCUA......but then there was Wells Fargo, so who knows
"ACCOUNT DISCLOSURES
7. Transactions Limitations - For all accounts, your ability to make deposits to your account and any limitations on such transactions are stated in the Rate Schedule. Additional deposits are not allowed for IRA Share Certificates and Coverdell ESA Certificates. For other share certificates, you may make unlimited additional deposits to the account during the term. After your account is opened, you are allowed the option to conduct one withdrawal up to 50% of the balance without penalty ('option"). ..."
https://www.signalfinancialfcu.org/wp/wp-content/uploads/2019/02/Membership-Disclosure-Packet-2019_Feb.pdf
A bait and switch?
We apologize for any inconvenience; all members will be sent a letter with the final date additional funds feature will be discontinued on existing share certificates. As of 3/2/20 all existing share certificates remain with the service of “add-on” funds
I checked online for Signal’s Membership Agreement and Disclosures. On page 8 is Notices part b. Notice of Amendments. Except as prohibited by applicable law, we may change the terms of this agreement at any time. We will notify you of any change in terms, rates or fees as required by law. We reserve the right to waive any terms of this Agreement......
I forwarded this to a lawyer friend of mine and waiting to hear a legal opinion but my guess is this is the “reserve the right to change terms” which legally covers Signal for the add on change.
Maybe they’ll hold off sending that notification letter and we’ll have more time to add funds
"Effective 04/10/2020, additional deposits will not be allowed during the term."
