Three years ago our bank set up a CD for a customer for 28 months. This company now has new auditors and want the CD set up for 24 months. All correspondence with this company must be done by mail as they are not local. Is there a way to modify the term without cashing in the CD and reissuing?

Are you talking about at renewal? If not, there is no way to modify a CD in mid-term - you have a contract with the customer. If it is at renewal, send them a new disclosure prior to renewal describing the new renewal terms and what they need to do if they don't agree.

Randy, if we no longer offer a particular term CD (other than, maybe, for a promotion where there are other requirements to get that term), can we just renew the CD for a term that we currently offer? If so, would we just state the new term on the renewal notice or would we need to give more advance notice? FYI, our account agreement says that CDs will renew for a "similar term."

I think you need to give longer notice and offer options, the term "similar term" is certainly open to different interpretations and whilst one client might opt for a slightly shorter similar term another might opt for a slightler longer term with a higher rate.

If you want to do this automatically in future I think you need to make it very clear at opening what "similar term" means ie: the closest available term not to exceed the original and now discontinued term.

I can see no way to justify increasing terms, without a specific agreement made both at the time of the original sale and then again immediately prior to maturity, that would not be open to possible legal challenge. The longer the term the more important the second agreement becomes, in my view.

I agree - and especially if this is just one customer, you should be able to easily contact them, provide disclosures and their options. We just discontinued a product and sent letters to all affected customers together with new disclosures and several options for them to choose from. The low amount of affected customers allowed us to give very personal follow-up service. (Told them the product would be discontinued at the maturity of their current CD.)

One thing you might do to allay customer concerns if you're moving to longer terms is to provide a one-time "early out" option that makes a new longer term more like a current (shorter) term. For example, if you want to change an 18-month CD into a 24-month term, you could include in your letter of explanation an agreement to waive any penalty for a withdrawal made after 18 months. You could limit that agreement to the first longer term.