Last month, I did a post on Citizens Equity First Credit Union (CEFCU) switching the early withdrawal penalty terms on its existing CDs. The story was first reported on DepositAccount.com.
Allan Roth of MoneyWatch dug deeper into this story and his February 14th commentary was not a love note to CEFCU. Roth ripped CEFCU over this practice, as well as Fort Knox FCU.
He wrote that the language allowing CEFCU to change the early withdrawal penalty for existing contracts was buried in section 14, page 22 of the 40 page deposit account agreement, which the credit union "knew few of their members would read and understand." Roth noted that inserting this language into the deposit account agreement made the terms of the CD a virtual etch-a-sketch for the credit union.
Read more of Allan Roth's commentary.
Again, a requirement of the Truth-In-Savings Act added to credit union compliance mandates when the banks needed billions in a bailout in the early 1990s under President George H.W. Bush. Thanks again, bankers!!!
ReplyDeleteThe new Consumer Financial Protection Bureau should be on this like a pig at the trough. A member signs a Share Certificate of Deposit for a rate and term & then the credit union unilaterally changes the terms. Can the member change the terms? No. Can the member extend the maturity date? No. Can the member reduce the amount of the early withdrawal penalty? No. But to be sure the credit union can increase the early withdrawal penalty. Of course they will only do this when it is to their advantage. Is this in keeping with the credit union philosophy of "not for profit but for service?" No. It's not Citizens Equity - it is more like the Credit Unions' Equity that is being protected. If it was a bank there would be a Class Action lawsuit against this type of criminal lawlessness. Where is the credit union Class Action lawsuit? When will the credit union members retain an attorney for a ripe Class Action lawsuit against Citizens Equity Credit Union Directors and Management?
ReplyDeleteTime for the membership to Recall the Board of Directors. Install a new Board and fire existing management. What a horrible self-serving/self-dealing credit union. RECALL THE BUMS
Doesn't matter to me if it's technically okay. It's wrong - and seems like something the CFPB actually should investigate.
ReplyDeleteOver the past couple of years I've had similar experiences where the terms and conditions of my CD's were changed midterm. As the result of several bank mergers, my CD's, many with maturity dates several years into the future, were repriced by the acquiring bank to below market rates. Although I was afforded the opportunity to redeem them, it did me no good as I had to reinvest that money at much lower rates. Funny how the acquiring bank didn't reprice any assets to market rates, only their liabilities. My point is, this isn't a credit union only issue and it's wrong regardless of financial institution type.
ReplyDeleteAs a Credit Union CEO I hate to agree with you, but it's a sleazy tactic.
ReplyDeleteThe motto on their building and their website is "Not a bank. Better."
ReplyDelete