Topic: Certificates of Deposit (CDs)
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Regarding unclaimed property, what is the dormancy rule for automatically renewing certificates of deposit (CDs)? Are they considered dormant if there is no contact for three years after the initial renewal? If a customer receives interest checks that are being cashed, is that considered “contact”? Also, would individual retirement accounts (IRAs) be considered dormant three years after the first required minimum distribution if there has been no contact?
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Unclaimed Certificates of Deposit Absent any qualifying activity for the account, an automatically renewing time CD must be treated as unclaimed property once three years have passed from the first renewal date. The Illinois RUUPA does provide that automatically renewable accounts will not be considered unclaimed property if “3 years after its initial date of…
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Our bank is purchasing the custodial rights for a portfolio of brokered certificates of deposit (CDs) from a bank that previously was the deposit broker for the CDs. Our bank will become the deposit broker and custodian of the CDs, which have individual owners and are deposited at a separate bank. However, the CD accounts at the depository bank will be held in our name with our EIN, and we will receive a percentage of the interest from the CDs. Along with the portfolio, we will receive one year’s worth of physical records for the CDs and all prior records for the CDs in electronic form. The records will include the identifying information for the owners of the CDs that the selling bank obtained as part of its Customer Identification Program (CIP). We will not conduct our own CIP for these accounts. What are the record retention requirements for these documents?
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Disclaimer: The Electronic Commerce Security Act (ECSA) was repealed and replaced with the Uniform Electronic Transaction Act (UETA), effective June 25, 2021. Please note that this change may affect the continued accuracy of this guidance as it pertains to the ECSA. We believe that your bank should retain any identifying information for the individual owners of…
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We have a customer that, to our knowledge, does not have a will. This customer has a CD with five people listed as payable on death (POD) beneficiaries. Among the beneficiaries the are two couples and one individual. Upon their death, this customer would like the proceeds of the CD to be divided into thirds between the two couples and the single person. If one of the members of the couples dies before the customer, the customer would like the surviving member of the couple to receive one third of the proceeds. Is this possible, or would the proceeds have to be divided equally among the remaining beneficiaries when the customer dies?
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We believe it is possible for your bank to set up an account with POD beneficiaries as you described, but your bank will have to enter into an amended or new CD account agreement with the customer that makes this intent clear. In general, the Illinois Trust and Payable on Death Accounts Act (“POD Act”)…
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We would like to advertise certain deposit account products (such as CDs and rewards checking accounts) on the radio. What information about such accounts must be disclosed in a radio ad, and what information can be omitted?
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When an advertisement for a deposit account states a rate of return, it must state the rate as an “Annual Percentage Yield” – using that term. However, the abbreviation “APY” also may be used in the advertisement, provided “Annual Percentage Yield” also is stated at least once in the ad. The advertisement may not state…
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For loans that are secured by savings accounts or certificates of deposit held in joint tenancy, can only one of the joint owners sign the security agreement or must all joint owners sign? If the signature of all owners is not required, does the bank need to send a certified letter to the other owners to notify them of the security interest?
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Generally, the Illinois Supreme Court has held that a joint deposit account is subject to the provisions of the contract between the bank and its depositors, and one joint depositor may unilaterally pledge the interests of an entire joint account if allowed by the account agreement. Whether all joint depositors must be notified of such…
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We have an individual customer who would like to pledge a certificate of deposit (CD) issued by our bank as collateral for a commercial loan. The CD is held in joint tenancy. Do all of the CD’s owners need to sign a security agreement pledging the CD as collateral for the loan?
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Generally, the Illinois Supreme Court has held that a joint deposit account is subject to the provisions of the contract between the bank and its depositors, and one joint depositor may unilaterally pledge the interests of an entire joint account if allowed by the account agreement. Specifically, the Illinois Supreme Court has recognized that jointly…
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Our bank offers 30- and 90-day variable rate CDs that automatically renew. Our account agreement states that we may change any term of the agreement and that the interest rate is provided on the CD. On the face of the CDs, we state that the interest rate will be based on the 91-Day U.S. Treasury Rate. We want to change the account terms for all CD customers to provide that we will set the CD rate at our discretion, subject to change at any time with notice to the customer. Can we make this change by sending out thirty days’ advance written notice under Regulation DD? Under the new account terms, would we have to send out a thirty-day notice before decreasing the interest rate?
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Generally, we recommend waiting until any existing CDs renew before changing their interest rates or the methods for calculating them, rather than imposing such changes midstream. In addition, we note the following: 30-Day CDs For consumer savings accounts, Regulation DD generally requires depository institutions to provide at least thirty days’ notice of a change in…
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We have a deceased customer who had held a CD and an IRA with three beneficiaries, two of whom have come to the bank to open inherited IRAs. The third beneficiary lives out-of-state and does not want to travel to the bank to set up his inherited IRA in person. This beneficiary’s attorney told us that all he must do is provide the bank with a notarized letter of direction. Is this accurate? The CD also has a payable on death (POD) beneficiary who lives out-of-state and does not want to travel to our bank. What are our options for these beneficiaries?
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We are not aware of any laws or regulations that would prevent your bank from remotely opening an inherited IRA or remotely distributing the proceeds of a POD account. Since the out-of-state IRA beneficiary will be a customer of your bank, you should follow your customer identification program (CIP) procedures for verifying the identity of…
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We would like to create an account that provides customers with a special rate on a certificate of deposit (CD) when they open a new checking account and a CD. Customers with existing checking accounts would not be eligible to open a CD with the special rate. Does offering this type of product pose any problems?
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We believe that offering a special rate on a CD to customers who simultaneously open a checking account and a CD presents a relatively low risk of being considered an unfair, deceptive or abusive act or practice (UDAAP). However, the characterization of an act or practice as a UDAAP violation is highly subjective and sometimes…