WALLINGFORD MUNICIPAL FEDERAL CREDIT UNION
SHARE CERTIFICATE POLICY
EFFECTIVE August 2012
POLICY DESCRIPTION, AUTHORITY AND SCOPE:
· The Wallingford Municipal Federal Credit Union (WMFCU) realizes the importance of providing our members with competitive dividend rate Share Certificates (CDs). It is the credit union’s intent that it may offer this service to retain and attract members, generate additional credit union deposits, and provide a competitive dividend-earning term product to meet the needs of our members.
· Changes to this policy require approval by the Board of Directors for the credit union. Changes in operating procedures, standards, guidelines and technologies, provided they are consistent with this policy, may be authorized by the Manager/CEO. The Board of Directors has the authority to approve this policy, and annually approves the merit thereafter. Management is responsible for ensuring the directives are implemented and administered in compliance with the approved policy. No part of this policy or its supporting operating procedures should be interpreted as contravening or superseding any other legal and regulatory requirements placed upon the credit union. Protective measures should not impede other legally mandated processes such as records retention or subpoenas.
· The primary responsibility for enforcement of this policy and its operating procedures rests with the Manager/CEO and the employees of the WMFCU. Requests for exceptions to this policy must be very specific and may only be granted on specific items, rather than to entire sections. Credit union personnel with exceptions are to communicate their requests by completing an internal memorandum to the Manager/CEO for consideration.
PRODUCT DEFINITION:
· A Share Certificate (CD) is a non-negotiable receipt for funds deposited in a dividend–bearing account for a specific period of time. The Certificate (receipt) stipulates the terms and conditions of the account agreement. Additional funds may be deposited only at maturity. Withdrawals prior to maturity are permitted only with a substantial dividend penalty as specified by Federal Reserve Requirements of Depository Institutions (Regulation D), except in cases where the depositor is deceased or has been declared legally incompetent by court order.
· The WMFCU offers Six month, Twelve month, Eighteen month and Twenty-four month fixed rate Certificates. Interest is calculated by the credit union computer system using the daily balance method and is payable at maturity.
DIVIDEND RATES AND MATURITIES:
· The duration and amount of the deposit determines the dividend rate paid. Generally, higher rates are paid on Certificates than on regular share deposits because of the commitment of funds for a fixed period of time. The dividend rate is constant for the maturity period for which the funds are committed. New dividend rate sheets and disclosure statements will be made available whenever the Manager/CEO or the Head Bookkeeper change rates.
· Occasionally, it will be necessary to calculate dividends manually by using the following formula:
Principal x number of days through yesterday x rate of dividend being paid/365 days = dividend earned.
MATURITY NOTIFICATION:
Maturity date of the Certificate will be shown on the Certificate. Certificate owners will receive notification approximately two weeks prior to the maturity date of the Certificate. If contact by the owner is not made within the two-week notification period, the Certificate amount, including the accrued interest, will revert to his/her share account.
DISCLOSURE REQUIREMENTS:
At the time a Certificate is opened, the member will be given a receipt which clearly states that he or she has contracted to keep the funds on deposit for the stated maturity period. The receipt also describes penalties that will be imposed in case of early withdrawal of funds. The policy of the WMFCU is to obtain the member's signature on the Certificate acknowledging receipt of this statement.
EARLY WITHDRAWAL PENALTIES:
· Federal regulations prohibit the payment of any portion of the principal balance of a Certificate prior to maturity unless an early withdrawal penalty is assessed, except in instances where an owner is deceased or declared to be legally incompetent by a court or other administrative body. Any amendment of a Certificate contract that results in an increase in the rate being paid or a change in the Certificate amount that results in a shorter maturity period constitutes payment before maturity and an early withdrawal penalty must be assessed. The WMFCU does not have the authority to waive an early withdrawal penalty. If there is an irresolvable dispute with a member concerning a misunderstanding of instructions, the penalty must be applied and charged-off as a credit union expense if approved by the Manager/CEO or Head Bookkeeper.
NOTE: Depository institutions are required to invade the principal of the account, if necessary, to impose the early withdrawal penalty.
· If a time deposit Certificate is paid before maturity, a depositor shall forfeit an amount equal to three months’ (92 days) dividends earned, or the amount that could have been earned on the amount withdrawn at the simple dividend rate being paid on the deposit, regardless of the length of time the funds withdrawn have remained on deposit.
Principal x 92 days x % rate of dividend being paid / 365 days = Early Withdrawal Penalty
EXCEPTIONS TO EARLY WITHDRAWAL PENALTIES:
As stated above, an early withdrawal penalty is not assessed in instances where an owner is deceased or declared legally incompetent. Neither is a penalty assessed if a member wishes to change a name on the account. In the latter case, the existing deposit may be redeemed and reissued as a new time deposit provided that:
· The reissue is in exactly the same dollar amount;
· The dividend rate on the reissue is the same or lower; and
· The reissue matures no sooner than the original time deposit.
DIVIDEND PAYMENTS:
Dividends will be paid at maturity into the member’s existing regular demand share account.
OPENING A SHARE CERTIFICATE:
· All fields of a staff–prepared worksheet must be completed. The required information includes the following:
o Issue date;
o Duration of deposit;
o Original maturity date;
o Name(s) of owner;
o Primary taxpayer identification number (TIN);
o Dollar amount; and
o Dividend rate.
· The Certificate worksheet must be reviewed for accuracy and signed by the Manager/CEO or the Head Bookkeeper. Staff will then enter the information supplied into the credit union’s mainframe computer system and print a Certificate, which must be signed by the member.
· Per federal regulations, each time a new Certificate is opened, the owner of a Certificate must be provided with a written disclosure statement, which clearly defines the penalty a depositor will suffer if such funds are withdrawn prior to their maturity.
· The member will then receive the original Certificate and the credit union will maintain a file with a copy of the signed Certificate and worksheet.
CHANGING OR CORRECTING ACCOUNT INFORMATION:
· The WMFCU mainframe computer system is to be used to change or correct Certificate account information using established procedures.
· According to Regulation D, ownership of a Certificate may be changed without an early withdrawal penalty if the principal amount, maturity date and dividend rate remain unchanged on the replacement instrument.
· The procedure to add or delete a signer requires closing the original Certificate and issuing a new one that reflects current ownership. It is recommended that this type of change be done at maturity if the member is agreeable. However, if the member insists that the change be made prior to maturity, any accrued dividends must be paid to the member in order to preserve the same principal amount on the replacement instrument and thereby avoid an early withdrawal penalty.
o Obtain the ORIGINAL Certificate from the member and have it endorsed; cancel the Certificate;
o Issue a new Certificate; check the appropriate box to show that the Certificate has been reissued; and
o Use the credit union’s mainframe computer system to set up the new Certificate using established procedures. The Certificate amount as reflected in the current balance must be entered in the original amount field. The dividend rate and balance on deposit must remain the same.
CLOSING A SHARE CERTIFICATE:
· A member must provide the ORIGINAL Certificate at the time the Certificate is to be closed. If the member has lost the Certificate, refer to "Lost Time Certificates of Deposit" in this policy.
· Review all available information on both the original Certificate and the WMFCU file copy to make sure no holds or pledges are in effect. Obtain the member's endorsement on the Certificate and verify the signature(s) to the signature card on file. Once the member has been properly identified and it has been determined that there are no holds or pledges on the funds, the Certificate may be closed.
· When a Certificate is being closed during the grace period, the current balance represents the amount to be paid to the member. Payment to the member will be made in the form of a credit to the member’s primary share account. The original Certificate should be documented with date closed and amount paid, and then placed in the WMFCU Certificate file.
· When an early withdrawal penalty is involved, review all available information on both the original Certificate and the WMFCU file copy to make sure no holds or pledges are in effect. Obtain the member's endorsement on the reverse side of the Certificate and verify the signature(s) to the signature card on file. Once the member has been properly identified and it has been determined that there are no holds or pledges on the funds, the Certificate may be closed. The original Certificate should be documented with date closed and amount paid, and then placed in the WMFCU Certificate file.
LOST CERTIFICATES OF DEPOSIT:
· When a Certificate is reported lost, stolen or destroyed, a staff member must make a thorough investigation of the circumstances. The Certificate may have been pledged as collateral for a loan at the WMFCU or may be held as assignment for another entity.
· Investigating personnel are to review all available information to make sure no holds are in effect. Search the member's loan portfolio, if any, to further verify that the Certificate is not pledged as collateral for a loan.
· After staff determines that the Certificate has not been pledged as collateral and is not being held as assignment, the following procedure must be followed:
o A notation must be placed on the WMFCU copy of the Certificate stating that the original Certificate has been lost.
o All payees must sign the WMFCU copy of the Certificate stating that the original Certificate is lost.
RETENTION OF DOCUMENTATION:
Closed Certificates, documentation and reports contained therein are to be retained in the permanent Certificate files of the WMFCU.
