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Synchrony Yanks Early Withdrawal ‘Perk’

A bank can giveth, and a bank can taketh away.

This thought occurred to me after I received amended account disclosures from Synchrony Bank in Saturday’s mail.

Last March, I posted favorably about the CDs being offered for Individual Retirement Accounts by Synchrony (then known as GE Capital Retail Bank).

I particularly liked the language in its disclosures permitting penalty-free early withdrawals “when an account is an IRA and the owner … reaches the age of 59 1/2.”

Then considering renewing an IRA CD, I was assured by a customer service representative that early withdrawals could be made for any purpose and in any amount, and that Synchrony considered this a key feature distinguishing its IRA CDs.

Although the post warned this right could be changed, I expressed the hope that any change would not be applied retroactively.

First, the bad news: In its amended disclosures, effective Nov. 13, Synchrony is revising its early withdrawal language to provide that “[a]n early withdrawal without penalty will generally be permitted … [f]or IRA CD account holders, if there is an IRS-mandated minimum distribution.”

That’s a major change, which Synchrony somehow overlooked mentioning in a transmittal letter itemizing “all” disclosure changes.

It effectively eliminates the privilege of penalty-free withdrawals for any IRA CD holder between the ages of 59 1/2 and 70 1/2 – like me.

And, for those remaining, it basically limits the timing, purpose and amount of penalty-free early withdrawals to those imposed by Federal tax rules.

But here’s the good news: A customer service rep knowledgeable about Synchrony’s IRAs has told me the bank will not apply this change retroactively to existing IRA CDs until they mature and are renewed.

For these CDs, the old language will apply.

Now, the amended disclosures don’t exactly say this anywhere, so readers may want to verify this for themselves – preferably before Nov. 13.

Personally, I plan to withdraw a sizable chunk of my IRA CD by moving it to a Synchrony IRA money market account, from which I will then transfer it to IRA brokerage accounts – perhaps to be reinvested in Synchrony brokered CDs,

This all confirms just how fragile key account terms contained in Truth in Savings Act and deposit contract disclosures are.

They can be changed.

Particularly early withdrawal provisions.

If there’s a rapid rise in CD rates, we can expect more institutions to tighten up early withdrawal terms.

And their solicitous and overly protective regulators will undoubtedly encourage them.

Hopefully, though, these institutions will follow Synchrony’s lead and not apply the changes retroactively to existing CDs.

It’s the right thing to do.

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