Customer files complaint with state over change in account with “guaranteed” 6 percent interest rate
A Northwest Bank customer is afraid he will be rooked by his longtime bank, but a bank official said customers can rest assured their interest rates will not decrease.
T. Lyle Ferderber of Middlesex Township said his wife invested in a Celebration Passbook Savings account at Northwest Bank in the 1990s.
The passbook savings account promotion guaranteed an interest rate of 6% for the life of the account.
However, the Ferderbers received a letter from the bank’s headquarters in Warren stating that all Celebration Passbook Savings accounts would be converted to certificates of deposit (CD).
The Ferderbers said they called the manager of their Northwest branch in Middlesex Township, who told them the rate would not change.
But a bank official at the corporate office in Warren, Pa., told the Ferderbers that the 6% rate will no longer be guaranteed once the passbook account is converted to a CD.
“As an open-ended CD, the interest rate on this account may change at any time at our discretion,” the letter states.
The Ferderbers filed a complaint two weeks ago with the state Department of Banking and Securities, and officials there promptly asked for copies of the letter received from Northwest.
The couple, who have both personal and business accounts with the bank’s Middlesex Township location, were told Northwest has 30 days to respond to the department regarding the Ferderbers’ complaint.
Ferderber had a simple reason for not throwing up his hands when he received the letter.
“I knew it was unfair and other people had this type of account, too,” he said. “Holding organizations accountable for the decisions they’ve made is something we can all do, and we did it.”
Ferderber said after interest rates plummeted in 2008, the bank’s branch manager would joke with he and his wife when they visited to calculate their interest on the account.
“He would say: ‘Hey, are you sure you don’t want to cash this in?’” Ferderber said. “It was all good-natured.”
Bank officials also told Ferderber the accounts were being switched over because the equipment used to service passbook accounts is antiquated and difficult to maintain.
Ferderber is not sure what will happen if the department finds that Northwest was in error when they decided to switch the accounts to CDs or whether they will advocate for customers.
“I hope the outcome is that (Northwest) honors their promise,” he said.
On Friday, Shawn Walker, Northwest Bank’s vice president of communications, told the Eagle that when they are switched to CDs, all former Celebration Passbook Savings accounts will continue to earn the 6% interest rate as promised.
“We have no plans to change the interest rate on the converted Celebration CD,” Walker said.
He called the language in the letter that states the interest rate can be changed at any time “standard disclosure” that appears on communications regarding all CD accounts.
He confirmed that the reason for converting the passbook accounts to CDs is antiquated equipment.
“It’s old technology and very expensive to maintain,” Walker said. “We can’t even find parts anymore.”
He said the Celebration Passbook Savings accounts were offered on a very limited basis in the 1990s, and not many of them remain in existence.
Walker stressed that the bank will honor the promise it made to customers three decades ago.
“That rate will not change,” he said.
