As a general matter, we do not believe that there are specific legal problems with increasing the early withdrawal penalty rate for new CD agreements (including renewals of existing CDs and new CDs), provided that the increased early withdrawal penalty is properly disclosed under Regulation DD.

To properly disclose an increased penalty, it must be disclosed in your prematurity notice for renewing CDs, which generally must be sent at least thirty calendar days before the maturity of existing CD accounts that automatically renew.

We believe that if you comply with the requirements of Regulation DD regarding providing prematurity notices for your CDs, the risk that increasing the early withdrawal penalty at the time of renewal would be considered an unfair, deceptive, and/or abusive act or practice is low.

For resources related to our guidance, please see:

• Regulation DD, 12 CFR 1030.5(b) (“For time accounts with a maturity longer than one month that renew automatically at maturity, institutions shall provide the disclosures described below before maturity. The disclosures shall be mailed or delivered at least 30 calendar days before maturity of the existing account. Alternatively, the disclosures may be mailed or delivered at least 20 calendar days before the end of the grace period on the existing account, provided a grace period of at least five calendar days is allowed.”)

• Regulation DD, 12 CFR 1030.5(b)(1) (“If the maturity is longer than one year, the institution shall provide account disclosures set forth in § 1030.4(b) of this part for the new account, along with the date the existing account matures.”)

• Official Interpretations, 12 CFR 1030.5, Paragraph 5(b)(1), Comment 1 (“Institutions need not highlight terms that changed since the last account disclosures were provided” for accounts with maturities longer than one year.)

• Regulation DD, 12 CFR 1030.5(b)(2) (“If the maturity is one year or less but longer than one month, the institution shall either:

(i) Provide disclosures as set forth in paragraph (b)(1) of this section; or

(ii) Disclose to the consumer:

• (A) The date the existing account matures and the new maturity date if the account is renewed;
   
• (B) The interest rate and the annual percentage yield for the new account if they are known (or that those rates have not yet been determined, the date when they will be determined, and a telephone number the consumer may call to obtain the interest rate and the annual percentage yield that will be paid for the new account); and
   
• (C) Any difference in the terms of the new account as compared to the terms required to be disclosed under § 1030.4(b) of this part for the existing account.”)

• Regulation DD, 12 CFR 1030.5(a)(2)(iii) (“No notice under this section is required for . . . Changes in any term for time accounts with maturities of one month or less.”)

• Regulation DD, 12 CFR 1030.5(c) (“For time accounts with a maturity longer than one year that do not renew automatically at maturity, institutions shall disclose to consumers the maturity date and whether interest will be paid after maturity. The disclosures shall be mailed or delivered at least 10 calendar days before maturity of the existing account.”)