{"id":1768,"date":"2019-07-11T18:13:41","date_gmt":"2019-07-11T18:13:41","guid":{"rendered":"https:\/\/albanknews.com\/?p=1768"},"modified":"2019-07-11T18:15:04","modified_gmt":"2019-07-11T18:15:04","slug":"1768","status":"publish","type":"post","link":"https:\/\/albanknews.com\/?p=1768","title":{"rendered":"Compliance Q&A: CD Early Withdrawal Penalty"},"content":{"rendered":"

Question:<\/strong><\/p>\n

Is there a regulatory requirement to charge a 7-day early withdrawal penalty on a certificate of deposit (CD)?<\/p>\n

 <\/p>\n

Answer:<\/strong><\/p>\n

In the first week after a CD is created, there must be an early withdrawal penalty of at least seven days’ simple interest on amounts withdrawn within the first six days after deposit In Reg. D. And Reg. DD provides that if the bank will charge an early termination penalty, the bank must disclose that in the TISA disclosure.  If a withdrawal is permitted without penalty, the account would no longer be classified as a certificate of deposit for Reg D purposes and could be classified as a savings or interest bearing transaction account.<\/p>\n

The commentary for \u00a7 1030.4(b)(6)(ii) provides two examples of early withdrawals penalties: \u201c$10.00\u201d or \u201cseven days’ interest plus accrued but uncredited interest.<\/p>\n

 <\/p>\n

Time deposit means:<\/p>\n

(i) A deposit that the depositor does not have a right and is not permitted to make withdrawals from within six days after the date of deposit unless the deposit is subject to an early withdrawal penalty of at least seven days’ simple interest on amounts withdrawn within the first six days after deposit.\u201d<\/p>\n

204.2(c)(1): https:\/\/www.ecfr.gov\/cgi-bin\/text-idx?SID=d9aba29c213758559a7a5f6f659f906a&mc=true&node=se12.2.204_12&rgn=div8<\/a><\/p>\n

 <\/p>\n

Early withdrawal penalties. A statement that a penalty will or may be imposed for early withdrawal, how it is calculated, and the conditions for its assessment.<\/p>\n

1030.4(b)(6)(ii): https:\/\/www.consumerfinance.gov\/policy-compliance\/rulemaking\/regulations\/1030\/4\/#4-b-6-ii-Interp-2-i<\/a><\/p>\n

 <\/p>\n

Examples of early withdrawal penalties are:<\/p>\n

    \n
  1. Monetary penalties, such as \u201c$10.00\u201d or \u201cseven days’ interest plus accrued but uncredited interest.\u201d<\/li>\n<\/ol>\n

    Comment 2 to 1030.4(b)(6)(ii): https:\/\/www.consumerfinance.gov\/policy-compliance\/rulemaking\/regulations\/1030\/4\/#4-b-6-ii-Interp-2-i<\/a><\/p>\n

     <\/p>\n

    \n

    Compliance rules and regulations change quickly! For timely compliance updates, subscribe to Compliance Alliance\u2019s email newsletters<\/a><\/strong>.<\/p>\n

    Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call (888) 353-3933<\/strong> or email info@compliancealliance.com<\/a><\/strong>.<\/p>\n

    Not a member? <\/u><\/strong>Learn more about membership with Compliance Alliance by attending one of our live demos:<\/p>\n