AmTrust Direct Receives Cease and Desist Order from OTS

I noticed recently that AmTrust has significantly lowered its rates to the point that it has fallen off most of the rate tables. Then I received word of an email they were sending out. Now, it turns out they are being monitored by the OTS.

For awhile several years ago AmTrust was a leader in savings rates and in certain certificate of deposit terms.  But recently, they have fallen off the charts.  Two days ago, I was forwarded an email that one of our readers received from AmTrust providing them with an opportunity to redeem their CD.  In essence AmTrust was doing a voluntary recall of some of its high yield deposits.   It set off warning bells since this is generally not a normal bank business activity.  The email read in part:

"A special offer for our AmTrust Direct customers: With the holiday season approaching, AmTrust Direct is offering a limited time opportunity to our customers. Until December 5, 2008, you can close your CD without an early withdrawal penalty."

Then today I saw an article on BankDeals that points out the bank received a cease and desist order from the Office of Thrift Supvervision.  The order specifies that AmTrust must raise its capital ratios, not provide certain types of loans, limit golden parachutes, and also "shall not solicit deposits by offering interest rates more than 75 basis points over the local rates in the association's normal market area."

This explains AmTrusts's behavior.  The bank is taking steps to comply with the OTS provisions and to raise its ratios and soundness.  This includes calling back high yield certificates of deposit and lowering rates on new accounts.  For the moment, AmTrust is done competing in the high yield arena, although many would argue it hasn't been a credible competitor for some time.  Many customers were turned off by its 3 month bonus rates and the creation of new account types that paid high interest while leaving older accounts to earn less.

One has to wonder though if these actions will precipitate deposit withdrawals and impair its liquidity, the very thing the OTS is trying to prevent.

AmTrust is FDIC insured so if you have an account or money with them, you are covered up to $250,000 until December 31, 2009, at which point FDIC insurance drops back to $100,000 per account per person.

See the best online savings rates here.

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  • Kenneth

    December 07, 2008

    AMTrust is a bummer. Stay away.

  • Glenn

    February 28, 2009

    I have used AMTrustDirect for a couple of years with no problems. I too have been troubled by the lower E-money market rates. They now offer a premium EMM but you cannot just transfer funds. You have to open a new account. Given their lower rates and "punish existing customer" mentality, combined with the legal problems, I am now looking at GMAC Bank and Flagstar Bank.

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