What to do when bank CD rate is much lower than promised?

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Topic Author
anonyx
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Joined: Thu Apr 23, 2015 11:45 am

What to do when bank CD rate is much lower than promised?

Post by anonyx »

Hi,

What are my options when my bank opens a new CD for a lower rate than was promised, due to a delay in funds transfer?

About March 4, I sent the paperwork to Ally Bank to open a 2 year “raise your rate” Roth IRA CD at a 2.05% APY. The funds, about $22,000. were to be transferred from my Vanguard Federal Money Market fund.

There was a long delay in the transfer of funds. When I contacted Ally. they said transfers can take 6 weeks, so I waited.

After more than 6 weeks had passed, I asked Ally why I still wasn’t seeing the funds in my account. They told me to ask Vanguard why it was taking so long. I asked Vanguard and they said that they had sent me an email back in March that there was a problem with my Social Security number not matching. (They only sent me the one email, which I had not seen. They didn’t call me or write to me.)

It turns out that Vanguard, incredibly, had read the wrong line on the form and had thought that my phone number was my Social Security number (Even though phone numbers have 10 digits and SS numbers have 9, and they had my correct numbers on file, and both numbers were clearly in the correct places on the form.)

Vanguard said they’d send the funds, but there was another delay because they sent a check for the wrong amount and had to issue a corrected check.

Last night, May 28th, was the first time I saw any funds in my Ally account. The first problem is that it shows about $12 instead of $22,000. I’m presuming that the rest will appear soon.

The second problem is that, instead of the agreed upon APY of 2.05%, the account shows an APY of 1.35%. I realize that rates have plummeted since early March, but an Ally rep had told me on the phone that they could lock in rates for 90 days. This whole process has been less than 90 days, and it really wasn’t my fault that Vanguard was unable to read a Social Security number that was on the correct line of the form.


I don’t want a 2 year CD with a rate of 1.35. What are my options at this point?

Any suggestions greatly appreciated. Thank you!
jjface
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Re: What to do when bank CD rate is much lower than promised?

Post by jjface »

Contact ally. Not their fault though. Vanguard screw up. They may let you withdraw at least.without penalty?

I think ally only give a 10 day rate guarantee. 6 weeks is a long time. I would suggest next time you contact whomever if funds aren't transferred in a week. Got to keep on top of it.
Topic Author
anonyx
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Joined: Thu Apr 23, 2015 11:45 am

Re: What to do when bank CD rate is much lower than promised?

Post by anonyx »

Thank you jjface.

I thought 6 weeks was a ridiculously long time as well (The Pony Express used to deliver across the country in 10 days);

Here's a quote from one of Ally's messages to me:

"Please allow up to 6 weeks for this process to complete and the funds to transfer. If we require additional information, we will contact you within that timeframe as well."

And then the Ally rep had said they could lock rates for 90 days. I know you can't trust what people say over the phone, though.

I feel like I'm being penalized for being patient during a pandemic.
jjface
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Re: What to do when bank CD rate is much lower than promised?

Post by jjface »

I'd probably pester them trying to plead my case if I was you. Though it may be futile.

One of the cd gurus on here might have a better answer for you.
Topic Author
anonyx
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Re: What to do when bank CD rate is much lower than promised?

Post by anonyx »

Thanks again! :happy

I do have a lot of money (by my lowly small-time definition) in Ally accounts, so that might help.
Blue456
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Re: What to do when bank CD rate is much lower than promised?

Post by Blue456 »

jjface wrote: Thu May 28, 2020 11:57 pm Contact ally. Not their fault though. Vanguard screw up. They may let you withdraw at least.without penalty?

I think ally only give a 10 day rate guarantee. 6 weeks is a long time. I would suggest next time you contact whomever if funds aren't transferred in a week. Got to keep on top of it.
This. Ally is a good bank and they do give reasonable 10 day grace period but expecting them 6 weeks is kind of pushing it in my opinion.
hudson
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Re: What to do when bank CD rate is much lower than promised?

Post by hudson »

This what I would do.
I would be very humble and very polite on the phone and state my case. I would work on building a working relationship with anyone that I talked to.
I would admit to all of the mistakes and probably blame myself (over the phone) for not supervising Vanguard well enough
I would ask for mercy.
If that didn't work, I would humbly request an escalation to the next level person or supervisor.
If that didn't work I would use the same line and start communicating with the CEO or board of directors by letter or phone.

When that actually happened to me, at a credit union, I gave up on the spot and did nothing....I said to myself...NEXT TIME!
At the time, I had bigger fish to fry.
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tfb
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Re: What to do when bank CD rate is much lower than promised?

Post by tfb »

anonyx wrote: Fri May 29, 2020 12:41 am I do have a lot of money (by my lowly small-time definition) in Ally accounts, so that might help.
Because the delay was caused by Vanguard, you should ask Vanguard, not Ally, to make up the difference.
Harry Sit, taking a break from the forums.
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KingRiggs
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Re: What to do when bank CD rate is much lower than promised?

Post by KingRiggs »

In the future, Ally supports opening a CD with a mobile deposit of a check from an established account.

I transferred money from my Vanguard money market to my local brick and mortar bank (2 days to process), then submitted a photo of a check from my bank to Ally for mobile deposit (3 days for money to post into Ally, if I recall correctly). They will honor the rate on the date you make the mobile deposit, even though the funds don't clear until 3 days or so later.

EDIT: After reading OP's post and reply below, didn't realize this was a Roth IRA transfer/rollover. I doubt my solution would work for that. I was thinking of a taxable Vanguard account with purchase of a CD at Ally.
Last edited by KingRiggs on Fri May 29, 2020 9:28 am, edited 1 time in total.
Advice = noun | Advise = verb | | Roth, not ROTH
HomeStretch
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Re: What to do when bank CD rate is much lower than promised?

Post by HomeStretch »

+1

Request that an Ally supervisor listen to the recorded call where the rep promised a 90-day rate lock.
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HueyLD
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Re: What to do when bank CD rate is much lower than promised?

Post by HueyLD »

KingRiggs wrote: Fri May 29, 2020 7:38 am In the future, Ally supports opening a CD with a mobile deposit of a check from an established account.

I transferred money from my Vanguard money market to my local brick and mortar bank (2 days to process), then submitted a photo of a check from my bank to Ally for mobile deposit (3 days for money to post into Ally, if I recall correctly). They will honor the rate on the date you make the mobile deposit, even though the funds don't clear until 3 days or so later.
I did a mobile deposit recently and it took only one business day for it to show up. However, the official deposit date was dated as of the day mobile deposit was made.

Very efficient and I highly recommend it.

P.s. I think the OP should press Vanguard for lost interest income. Ally should not be responsible for another company’s fault.
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bottlecap
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Re: What to do when bank CD rate is much lower than promised?

Post by bottlecap »

All you can do is see if Ally will change your rate. Ask for supervisors. Explain what happened. Omit the part about Vanguard contacting you early on. If Ally doesn't help, you can always pull your money out.

In the end, remember you’re talking about $300 before taxes. This won’t break you.

JT
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AAA
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Re: What to do when bank CD rate is much lower than promised?

Post by AAA »

A while back my local institution was promoting a very good CD rate. I set up a transfer of funds from Vanguard into my savings account there. Unlike your experience, the transfer only took two days. But, like your experience, on the very day the funds arrived in my savings account, the institution lowered the CD rate. I appealed to a manager on the basis that I have been a customer there for > 30 years and the CD rate changed just on the day I was set to purchase one. He consulted with the higher ups but they didn't budge.
Topic Author
anonyx
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Re: What to do when bank CD rate is much lower than promised?

Post by anonyx »

First of all, thank you ALL for the comments!

KingRiggs, I've struggled with this issue before. I have a vague recollection that there's some IRS rule against receiving money, even briefly, during an IRA transfer more than once in 12 month period. Otherwise I would attempt to do something like that every time.

One thing I'm wondering now, if I end up getting Ally to just cancel the CD, what happens then? I get Ally to send me a check and then try to find a place to put it within an IRA somewhere within a certain amount of time so that it doesn't count as a distribution? Or I put it in an Ally savings account as an IRA for a while? Sorry, but I'm having some sort of a mental block over this thing at the moment.

Regarding Blue456'scomment: "Ally is a good bank and they do give reasonable 10 day grace period but expecting them 6 weeks is kind of pushing it in my opinion."

The thing is, it was Ally that told me to wait 6 weeks. They can tell a customer to wait for 6 weeks, but it's unreasonable for the customer to expect them to wait 6 weeks? If the deadline was in fact 10 days, I would have like to have been told that, rather than 90 days.

hudson and bottlecap, your comments were particularly helpful to me. Thank you!
Topic Author
anonyx
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Re: What to do when bank CD rate is much lower than promised?

Post by anonyx »

Update: Half my problem seems to have miraculously disappeared. I went back to my Ally account and the APY had been changed (at least for now) to 2.05.

I learned a lesson, though.

Now my only problem is that the balance is $12 instead of $22,000.
gch
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Re: What to do when bank CD rate is much lower than promised?

Post by gch »

Unrelated to your original question, but why do you have a Roth IRA invested in a CD? Assuming you’re not 100% in fixed assets, isn’t the general rule to invest your equity allocation in the Roth because you get to take all gains out tax free (once at an appropriate age of course)?
typical.investor
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Re: What to do when bank CD rate is much lower than promised?

Post by typical.investor »

anonyx wrote: Fri May 29, 2020 11:39 pm Update: Half my problem seems to have miraculously disappeared. I went back to my Ally account and the APY had been changed (at least for now) to 2.05.

I learned a lesson, though.

Now my only problem is that the balance is $12 instead of $22,000.
Sweet progress!

I’d think getting the rate right would be the more difficult of the two.

So no worries. This isn’t bitcoin. The money will show up after it settles and it’ll get tracked down if it doesn’t.
Grasshopper
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Re: What to do when bank CD rate is much lower than promised?

Post by Grasshopper »

I had something similar happen and nothing changed until my new statement.
mouses
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Re: What to do when bank CD rate is much lower than promised?

Post by mouses »

I haven't read all the replies, but Vanguard does not do transfers well in my experience. A transfer of an entire account from a small credit union hung up for a couple of months in Vanguard until finally I drove to the credit union, got a check, and hand delivered it to Schwab.

I have had credit unions promise to keep a rate while a transfer from any place was in progress, and they have done so. I don't think any took months, however.
mortfree
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Re: What to do when bank CD rate is much lower than promised?

Post by mortfree »

At this point things are finally progressing and it is a good sign that the rate reflects what you expected.

Is $22k at 2% vs 1.35% really a game changer money-wise?

Obviously the principal of what was promised is finally satisfied. But at the 2% rate you were just going to have that cash lose value anyways to inflation.
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