Another poster today started a thread about US Bank increasing (and maybe even first implementing) an annual fee on a 5-year IRA CD. (I am including his post at the bottom of this. The original is at this link.) This is so much like the discussion we have had over the months about changes in early withdrawal penalties and other things on existing CDs that I thought it deserved taking the unusual step of starting another thread on it to put it more in the larger context that we have been discussing over recent months.
As the posting he made says (below), he was never notified of any fee when opening the IRA, but was hit with it at the end of his first year. Regardless of whether he was or wasn't notified of it, the bank is now increasing the annual fee -- and he can't close it to avoid that increase without paying the early withdrawal penalty. He's locked into a CD and they are now increasing fees on it unilaterally.
This is just like the discussion we have had over the months, most recently concerning the changes Fort Knox Federal Credit Union made to the early withdrawal penalty of existing CDs. So, we now have yet another institution unilaterally making negative changes to the terms of CDs after they are opened.
Except to my mind, this change is even worse than at Fort Knox as with this one, you are damned if you do and damned if you don't. That is, at least at Fort Knox, you have the option to see your CD through to the end of its term and so theoretically have no impact from the changed early withdrawal penalty; with this change at US Bank, you will be hurt whether you stay or go.
I suspect, but certainly don't know, that this is being done under one of those vague clauses I have mentioned in the discussion over the months that provide for changes after the CD is opened. The disclosures often have a vague reference to the fee schedule applying, and if you go to the fee schedule, you see it says it can change at any time. I still don't find such a fee change acceptable, but they might have legal cover for it. If it is legal, Congress should outlaw it.
The other poster's posting follows, or see it at this link:
Sunday, May 29, 2011 - 11:57 AM
New $30.00 Fee Imposed For Roth IRA Accounts By U.S. Bank
While I was a student I had earned enough to open a small Roth IRA with U.S. Bank. It was in the form of a 5-year CD opened in 2009 paying 4.00% APY. At no time was it disclosed to me that there was a fee associated with opening or maintaining a Roth IRA account. At the end of the first year I received a notice that there was a $10.00 fee imposed. I paid the fee under protest. Now during this second year U.S. Bank has sent a notice that the annual fee is increased to $30.00. I wanted to close out my account with U.S. Bank because of this unethical practice but I found out that I cannot close out account because U.S. Bank is imposing a very heavy early withdrawal penalty for closing out a 5-year CD. How is it that a Bank can change the terms and conditions mid-way, but I cannot close my CD without penalty, if I don't agree to the change? Essentially, it looks like they can just increase the fee each year to eat up the interest they are paying and I have no recourse. I am wondering if anyone else has encountered this problem and how you can go about resolving this. The CSR has basically said there is nothing I can do other than pay the fee or incur the early withdrawal penalty to close out the C.D. I had a checking account with U.S. Bank which I closed out based upon a notice that there would be a monthly maintenance fee of $6.95 for the checking account.