Anyone else have this experience? The CD is with one of the largest banks in the world. I have escalated my concern to SCHWAB including someone who represented himself to be a manager in the Fixed Income department. No response and no interest. LOL I have been told by multiple parties at Schwab that multiple too big to fail banks are not making their interest payments in a timely manner of late. Schwab seems helpless and says all they can do is contact the DTCC, who apparently does nothing. My 26 year relation with Charles Schwab will soon be ending.
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Yes, I did one time, but at Fido not Schwab. It too was with a very large bank. It was in Jan 2023 and I discussed it in a thread on the Fido Investor Community board titled, "FDIC'd Brokerage CD - Late Interest Payment."
In case you don't have access to it (Invitees Only), here are some excerpted comments from that thread. All comments are mine except the one as noted. I bolded some of the most important points from that thread.
Summarily,
I have owned a CD ladder for 15 years with LOTS of CDs and a late interest payment issue has only ever happened ONCE. (Pretty remarkable!)
I spoke to very helpful FI guys at Fido a few times during the resolution of the issue and got great insights to it and help resolving it.
I also contacted the bank directly and spoke to a high level manger there who was extremely helpful and concerned.
The cause of the error was a system error on the bank's side after a recent merger.
I received my accurate interest payment 10 days after the scheduled interest payment date and have not had any issues since with this CD or the numerous others we own.
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(From that thread's OP:)
The bank on one of our CDs did not pay interest on the scheduled payment date. In conversations with Fido reps we've been told a couple of things:
(1) The interest payment is not yet overdue. It becomes overdue (mid-week, this week) at 10 days past the scheduled interest payment date.
(2) The bank has made its timely interest payments on all other CDs issued by it through Fido brokerage.
(3) Generally, if banks are untimely on their interest payments, it usually occurs at the beginning of calendar years, as is the case with this one.
(4) If not received by the overdue date, Fido initiates a "service request" at the request of the account holder and contacts the bank to inquire about the late payment and determine if/when it will be received by Fido.
(5) If there are unresolved issues with either the interest payment or the principal, the contract is between the account holder and the bank and any resolution of interest not received, or default on the principal payment, is between the account holder, the bank, and perhaps ultimately FDIC.
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Per the ever helpful and resourceful yogibearbull:
Hopefully this situation is resolved quickly and satisfactorily.
But Fido is only a broker/middleman here and can/will do courtesy follow ups.
As the matter is between the CD holder and the issuing institution, it may not hurt to file a delayed-interest report to the FDIC.
https://ask.fdic.gov/fdicinformationandsupportcenter/s/?language=en_US
https://www.fdic.gov/contact/
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UPDATE per Fido:
Fido is encountering a number of these situations with several banks at this point in time. A "service request" will be made tomorrow on the overdue date IF the interest payment has not been received by then.
Fido assures that rarely has an account holder had to resort to individually filing a FDIC claim and does not at all expect that will happen here. The likely cause of the delayed payment is a system issue of the bank that merged with another bank in 2022.
Interest payments can be put on hold for a month or even as long as a quarter.
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The Fido FI Rep I did speak to today stated what other reps have told me: A couple banks have not made their January interest payments due to either (1) system issues on the bank's end or (2) the normal, EOY/BOY delays.
I did also speak directly to a person at the bank who confirmed that this was in fact a system issue on their end that caused the interest payment to be made 10 days after the normal interest payment date.
If the bank has a problem that's the government's, perhaps FDIC's, responsibility. No broker is a banking regulator.
A more broader and fundamental question, “Is the brokerage an agent for the investor or for the issuer or not an agent for any?”
Are the brokerages supposed to form some sort of committee to deal with a bank? How would the degree of responsibility of any one brokerage be determined?
My answer to you would be "yes" to both situations.
Well, you shouldn't be surprised that the financial relationship is between you and the bank that YOU deposited money at. If it is FDIC insured (or even not) institution, you'll surely receive what you are due eventually. However, the smaller the bank and higher the rate, the more likely the bank has antiquated systems and annoyances like this occur. Sometimes it's worth actually computing the dollars and cents gained by chasing "opportunities" in the risk-free rate world versus a good old (floating rate) money market funds.
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I responded to Dick's post:
To dick's very worthy point about "chasing 'opportunities'":
Per Fido (bold added):
Fidelity offers a wide range of issues, rates, and maturities to help you find the certificate of deposit (CD) that fits your needs. If a fixed income security is sold or redeemed before maturity, it may be subject to substantial gains or losses. Your ability to sell a CD on the secondary market is subject to market conditions. Fidelity doesn’t decide the creditworthiness of the issuing institution.
Read: If the bank defaults on the interest or principal, it's the account holder's ultimate responsibility to do the FDIC filing.
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Dick's first comment should answer the question being kicked around here.
If it's me in the OP's position, I would ask Schwab if they have a policy like Fido does related to issuing a brokerage "service request" at the 10-day mark if the interest still has not been received.
I would also obtain the best phone number possible and speak directly to a person at the bank who is directly involved/has direct knowledge of the interest payment in question.
I would NOT blow this out of proportion and would NOT start to doubt CDs.
As Dick noted, you WILL get your principal repaid timely.
As my scenario played out, I learned that this is a possible issue at the BOY and the EOY, every year.
And if there is an issue, it is usually the normal, possibly slow payment cycling related to the BOY or EOY, or there is a specific reason why the interest payment was missed.
In my case, the bank manager I spoke directly to was very helpful, NOT aware of the issue yet and thanked me for calling it to the bank's attention. She also immediately remedied the issue. She even gave me her direct phone number in the event it was not resolved.
Add in that I am anal about this stuff and ALWAYS track EVERY interest payment is received. Meaning, you can take to the bank, so to speak, that this was in FACT the only interest payment issue I had in 15 years! My whole audit manager career thingie is hard to kick.
And hey @Derf, thanks for the kind words here and elsewhere on MFO. Very much appreciated!
But the broker is charging 25-50 bps to list CDs on its platform. Customers don't see this fee, but banks pay high prices to quickly raise funds via brokered-CD channel. Only the brokers have customers' info - banks and DTCC have no clue as to who these customers are.
IMO, the brokers should be more helpful to the customers when something breaks in this conduiting than they appear to be from what has been reported. Broker is the loser if a customer is frustrated and walks away or swears off the brokered-CDs entirely.
I have said elsewhere, report payment delays to the FDIC. While FDIC coverage won't kick in from delayed CD interest payments, it is valid to ask if the bank involved is in any kind of trouble. Both FDIC and the Fed watch banks who top the lists of banks offering top CD rates week after week as that is a typical pattern before the bank failures.
https://www.fdic.gov/resources/consumers/consumer-assistance-topics/complaint-information.html
Darned good advice.
So, I'm looking for an opportune moment to unload the sucker and redeploy the $$$. I deserve on-time payments of stuff promised. Granted, there are ultimately no guarantees. But dependability IS a priority for this investor.
PS - Come to think … those dates are also provided by your brokerage if you know where to look.
Looking forward to all of my ON TIME pay-outs in December, now: both stocks and funds. Merry Christmas to all!
I have no experience with ADR investing, but it sounds as if there may be different issues than with brokerage CD investing. Barclays is a London based bank, but has US branch offices, including the one in Delaware that was tied to this CD. Global investing is not uncommon with large banks, including Banks tied more to the US. I don't believe "the foreign government" (England) had anything to do with Barclays overdue CD interest payment. I never had any concerns about my initial investment in the Barclays CD, but did have concerns with the timeliness of its interest rate payments, but was confident I would get them eventually, although not as timely as with my other CDs. At any rate, I read your ADR related comments about this CD thread, and had a head-scratching reaction, wondering if ADR investing and CD investing were that similar. I have determined that Bank CDs and Brokerage CDs have more differences than I originally understood when I invested with a Barclays CD, and I will be shifting more of my Taxable Account CD assets from Schwab to some local bank CDs, as Taxable Account CDs mature.
I have never paid a tax on foreign company holdings or seen paperwork that one was withheld, but that could be because all my foreign investments (mutual funds, ETFs and stocks) are in tax deferred accounts.
Also, the write up talks about stock transactions. I don't see anything about CD income.
from Fidelity website: https://www.fidelity.com/learning-center/investment-products/stocks/understanding-american-depositary-receipts
BTW, you will see foreign tax withheld in your yearend brokerage 1099 that can be deducted simply on Form 1040 (simple situations) or via Form 1116.