Answer:
Sometimes. Reg D defines a Time Deposit as one in which a depositor does not have a right and is not permitted to make withdrawals within 6 days after the date of deposit, unless subjected to a 7-day simple interest penalty on the amount withdrawn.
As such, if you permit a withdrawal without penalty within the first week of CD opening, that account is no longer a CD, but a transaction account. So what? You have violated the reserve requirements for that type of account. Certain types of accounts must be held in reserve (i.e. held in cash and not lent out or invested). Getting that wrong puts you on the wrong side of the Federal Reserve Act of 1913, something that makes your Chief Financial Officer cranky, not to mention Safety and Soundness examiners.
Waiving a penalty AFTER that first week clears you of outright regulatory violations, but could still lead to a cranky CFO. Your customer signed a contract for the CD… it is best to hold them to it. You are giving up legitimate fee income! Moreover, you disclosed the fee. Failure to consistently uphold those disclosures could make your Compliance examiners wonder what you are doing. The Truth in Savings Act wants you to say what you do and do what you say. Don’t cloud that.
Did I lose you? Join Rebekah Leonard in her upcoming webinar “To Tell the Truth: TISA, Reg DD and Reg D” on January 17, 2024 to get more explanation.
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Learn more about Rebekah Leonard’s To Tell the Truth: TISA, Reg DD and Reg D webinar.
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