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A Big Credit Union Surprise, Or Why You Should Always Read Account Disclosures

I’m pleased to report that NASA Federal Credit Union has recently added full Truth in Savings Act disclosures with respect to CDs to its website (www.nasafcu.org).

I don’t know whether my post last month complaining about the absence of these disclosures – or a link to them – on the site had anything to do with this.

I just know I’m happy they’re now available to read before I open a NASA CD.

NASA’s disclosures contained surprising language, though – a clause demonstrating why it’s important to review this legally mandated summary of terms in advance of establishing an account with a new institution.

The disclosures state the following regarding CD rates: “The rate will not change during the term of your certificate unless the Credit Union notifies you at least 30 calendar days prior to any rate decrease.”

The implication is that NASA reserves the right to lower the rate on an outstanding fixed-rate CD without the consent of the member upon such prior notice.

When I inquired whether this language meant what it seemed to say, I received an email reply from a member services representative stating:

“Yes, technically we could change the rate on your existing certificate should there be a drastic change in rates. It is not something that is usually done to our CD’s (sic), unless it is one of the Bump CD’s (sic).”

The rep further said that a colleague had advised her that, in 24 years at NASA, she’d never seen it happen.

Frankly, I can’t remember seeing language quite like this in a bank or credit union account document describing a CD that is not explicitly called “variable rate,” “step rate” or something similar.

Although perfectly legal, it was still an eye-opener.

Now, I’m not claiming NASA is the only institution having such a provision.

I also don’t claim that no other institution would ever assert it could lower CD rates retroactively, using other account document language – such as a standard clause concerning amendments or early account closure.

Above all, I’m not saying NASA’s language is a conclusive reason to shun its CDs.

In fact, because NASA apparently has never employed this language to lower an existing CD rate, and because rates generally seem more likely to rise than to fall in the next several years, I may well open a NASA 49-month CD, treating the risk as minuscule.

But, at least having read a Truth In Savings Act disclosure, I can make that decision with full knowledge I’m taking that risk.

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