Topic: Certificates of Deposit (CDs)
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When a certificate of deposit (CD) holder dies, are we required to charge an early withdrawal penalty? What if the holder withdraws money for a medical emergency? Should we be documenting every instance of a waived penalty?
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You may waive the early withdrawal penalty required by Regulation D when a CD owner dies or is declared legally incompetent, but you may not waive the required early withdrawal penalty for withdrawals related to a medical emergency. Of course, early withdrawal penalties are required only for withdrawals within the first six days after the…
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Do we need to require customers to bring in a physical copy of a certificate of deposit (CD) receipt if we have switched to book entry CDs?
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Typically, “book-entry” CDs do not require physical presentment to the issuing bank. However, your bank’s book-entry CD agreements and your written policies for them should address the procedures for redeeming these CDs. As you have indicated, your bank has switched from traditional CDs to uncertificated CDs that are labeled as “non-transferable” and “non-negotiable.” These CDs…
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Should CDs and IRAs ever go into dormancy status?
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The timing and application of your bank’s dormancy policy to certificates of deposit (CDs) and Individual Retirement Accounts (IRAs) is a decision for your institution. Of course, these types of accounts must be reported to the State Treasurer once they are deemed abandoned under the Uniform Disposition of Unclaimed Property Act [Repealed effective 1/1/18]. The specific…
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We want to increase our early withdrawal penalties for our CDs that will be maturing in more than thirty days. The new early withdrawal penalty will be effective before any of the CDs mature. Can we send a mass mailing notifying our CD customers of the change?
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First, we believe it is possible to raise a certificate of deposit (CD) early withdrawal penalty before the CD matures, provided that you comply with Regulation DD’s notification requirements (described below). However, we recommend checking your CD agreements to ensure that the terms of each agreement permit your institution to raise the early withdrawal penalties…
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We are offering special features during the first term of our CDs, such as early withdrawal privileges, and these special features will not apply after the CD’s first automatic renewal. Do we need to send a change in terms when each CD renews, or will the initial notice suffice?
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If you draft the account opening disclosures correctly, a change in terms notice will not be necessary. Because the certificate of deposit (CD) account terms will automatically change when the CDs mature, you do not need to send an advanced notice of the changes that occur on maturity, provided that you clearly describe the conditions…
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We are changing how we calculate the penalties we charge on CDs, which will result in higher early withdrawal penalties. Should we notify existing CD customers in their prematurity notices?
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Yes, we recommend notifying your existing CD customers of the change in their prematurity notices, and not with change-in-terms notices. Whether you need to highlight or point out the change in the calculation method for early withdrawal penalties depends on the type of CD, as we detail in the bullet points below. Regulation DD requires…
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Two of our customers have IRA CDs that have matured (without automatic renewals) and are currently earning 0% interest, and despite several phone calls and letters from us, the customers have not renewed the CDs. Without contact from the customers, are we required to do anything with the CDs?
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We are not aware of any laws that would require your institution to take any actions as to the matured certificates of deposit (CDs). If the customers choose not to renew the CDs, and the original agreements did not provide for automatic renewals, then you have no obligation to renew or pay interest on the…