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  4. I Think I Was Overcharged On EWP From My Credit Union

I Think I Was Overcharged On EWP From My Credit Union

Confused1
  |     |   87 posts since 2018

I pulled $10K out of a 5 year CD and was charged $308 which I agreed to at the time. I have since pulled the CD paperwork which clearly states the penalty on CD's of greater than 1 year 180 Days of dividends on the amount withdrawn. It looks to me like they have pulled 365 days of dividends which is their current EWP on a 5 year certificate. My question is can they change the EWP terms of my CD legally after I have locked in the rate and terms? I used the CD calculator to estimate interest on a 6 months 10K CD

Rate is 3.08% APY 3.12% Amount withdrawn was 10,000.

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alan1
  |     |   877 posts since 2015
I think you are conflating two very different issues, and asking the wrong question.

You asked Question 1. "can they change the EWP terms of my CD legally after I have locked in the rate and terms?"
That is a general legal question. There are circumstances where a credit union can legally increase the early withdrawal penalty on an existing certificate. Fort Knox Credit Union did it, and the National Credit Union Administration upheld the credit union's action after a depositor filed a complaint.

However, I think the answer to Question 1 is unlikely to be of relevance to your situation.

I think it is likely that the relevant question is:

Question 2. Did the credit union correctly compute the early withdrawal penalty on your Certificate of Deposit?

I think it is likely that your case is one of miscomputation. The same thing happened to me. A credit union increased the penalty on new certificates, but not on previously-issued CDs. But no one told the computer; the credit union employees I dealt with did not know about the less stringent penalty applicable to older CDs. So, I had to show them my certificate and then they manually computed the penalty.

So, unless the credit union took the proper steps to change the terms of previously-issued CDs, the terms of your CD should remain in effect.
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Confused1
  |     |   87 posts since 2018
Thank you for your response, I will call them right now and see how it goes and report back.
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Confused1
  |     |   87 posts since 2018
Just an update on my issue. I called Alaska USA and was told that any changes to their CD disclosures also affected existing certificates. I argued and was bumped up to the next level service rep who basically told me the same and then agreed to send my complaint to their operations department with a case number and I've heard nothing since. I think I will take the paperwork into my local branch tomorrow and insist on talking to the manager. If that gets me nowhere then I will file a complaint with NCUA. and on their social media accounts.
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Sylvia
  |     |   389 posts since 2012
Fort Knox did something similar over 10 years ago. You may find the story useful, https://www.depositaccounts.com/blog/2011/09/ncua-rules-in-favor-of-credit-union-that-raised-early-withdrawal-penalty-on-existing-cds.html .
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alan1
  |     |   877 posts since 2015
The following sections of the NCUA regulations, read in conjunction, might be of some relevance.

Section 707.5 "Subsequent Disclosures" provides. in pertinent part:

(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.

The entirety of Section 707.5 can be found at
https://www.ecfr.gov/current/title-12/chapter-VII/subchapter-A/part-707/section-707.5

Section 707.4(b) provides, in pertinent part:
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.

The entirety of Section 707.4 can be found at
https://www.ecfr.gov/current/title-12/chapter-VII/subchapter-A/part-707/section-707.4

I think the above-quoted regulations might be of help to Confused1. I am not stating that they are dispositive of this matter.

Thanks for the update, Confused1. Good luck, and please keep us informed of the status of this matter.
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Confused1
  |     |   87 posts since 2018
I finally received a refund on January 13th of 1/2 of the EWP + interest with no contact whatsoever from their operations department. This after a trip to the local branch with my original paperwork to prove I was correct and they were wrong. What bugged me even more was that they had already closed the case and noted that they tried to call and no response which was a big fat lie, I gave them 2 different numbers and told them to leave a voice mail. The lady at the branch reopened the case and uploaded my certificate, she also provided me with a copy of what they claim was my original certificate except it wasn't since the Dividend Disposition and the Certificate Disposition terms were different from my original and I had only made these changes a few months ago. This time I asked to be contacted via e-mail for documentation purposes. I called back a week later and talked to someone in operations who also looked at the 2 different copies of the certifcate and agreed that they owed me a refund and would have someone call and still nothing. I checked my account every day and the day I planned to e-mail their president and demand an immediate release of the entire certificate due to their fraud a refund showed up. The certificate matures in a couple of months and I'm done with Alaska they'll never see another penny of my money for this shoddy treatment.
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me1004
  |     |   1,379 posts since 2010
Good for you. Just a tiny thing to add: When computing the penalty, it is not the APY you should use, it is the rate. The APY only comes into play because subsequent interest calculations will be on the higher amount of money. Each interest posting applies rate on the amount of money in the CD at that time. Not a big deal here, but it does come to a lower number. Related, when they calculate six months of interest on the amount being withdrawn, it will come to more than the last six months of interest posted, because of the compounding.
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