Early Withdrawal Penalty on CDs

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Question:

We are considering increasing the early withdrawal penalty on long term CDs (over one year). Is this dictated by a Reg? If so, which one? If not, are you seeing this happening in the industry and to what has the average increased?

Answer:

If these are automatically renewed, you can change the terms at the time of renewal to increase the early withdrawal penalties as long as you follow the renewal notice requirements found at 230.5(b)(1). For CDs that have not yet matured, you cannot change a fixed term contract in mid-stream.

First published on BankersOnline.com 10/25/10