Bank has fixed rate CD product. If CD is opened for less than $100,000, customer can choose auto renew or non-auto renew. If CD is 100,000 or over, customer can only have non-auto renew.

Customer opens CD for $98,000 and chooses auto renew feature. Eventually, with the compounding of interest, CD balance exceeds $100,000, and bank changes the CD from auto renew to non-auto renew mid term.

Should a change in terms notice be issued in this case? Apparently, this change is necessary internally, due to the way the bank's main frame system works.

Quote:

---

bank changes the CD from auto renew to non-auto renew mid term.

---

I'll answer your question with a question. How did you change the term of the contract in mid-term? Either you contracted for this provision, or you will when the CD next renews. The latter is the way this is done based on my experience. You can't invoke unilateral changes in mid-term. There was no consideration.

The Bookkeeping Department went into the account set up mid-term and made a maintenance change to make the CD non-auto at the upcoming maturity. This was found during a recent audit, and the question is...would this be considered a change that is adverse to the customer, thereby requiring an advance change in terms notification?

In order to dispose of the distraction, I will say, "Yes, it's a change that the consumer should have been notified of."

Now, to return to the point Andy is making: Regardless of Regulation DD's notice provisions, your bank does not have any right to alter the terms of a time deposit prior to maturity. Your customer could/should contact your state's attorney general and complain about an unfair and deceptive practice.

This may have been addressed in a previous post, but I can't find it. Can the bank offer a CD that is .2% higher than similar $$/terms if the customer maintains a checking account with us? If so, and they close the checking account during the term of the CD do we have any disclosure issues? Would our initial disclosure with the customer (for the CD) have to show the APY of both with and without the feature?

1. Yes.
2. No, as long as you clearly explained what happens in the initial disclosure. You couldn't do a change in terms/advanced notice cause you don't know in advance if they will close the checking acct.
3. No, just show the APY at the full rate.