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ProvidentNJ Direct's New Limit on External Transfers

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ProvidentNJ Direct has implemented a new very restrictive external transfer policy that limits external transfers to only $2,000 per day. In an email to customers, the bank claims that this new limitation was put in place "to protect your accounts from unauthorized activity." I have a copy of this email at the bottom of this post.

ProvidentNJ Direct is a new internet division of The Provident Bank of New Jersey. It attracted many customers in the last few months with its 3-month promo that had rates as high as 3.25% APY (see account review). With the 3-month promo ending for many customers and with a current standard rate of only 1.50% APY, many readers have questioned whether this was a strategy to reduce withdrawals rather than to improve security. Before this change, a reader reported that he was able to push over $100K out of Provident to his other bank account using Provident's own transfer service.

It appears that the limit does not apply to external transfers initiated from your other bank. So you should still be able to pull funds without limit using another bank's ACH system. Please leave a comment if this isn't the case.

External Transfer Security

It seems to me there are many ways to improve security without imposing such a drastic transfer limit. First, I would be more concerned about ACH withdrawals initiated from the outside. An unauthorized withdrawal using Provident's own ACH service would require a criminal to not only log in, but to also create a link to another account. If unauthorized withdrawals are the main concern, the bank could implement ways to ensure links are legitimate. For example, Ally Bank emails you when you add a link to another bank account. ING Direct requires you to answer verification questions before it initiates adding a link, and ETrade sends an activation code to your email address. So there are many ways to improve security that does not require a restrictive transfer policy.

  Tags: Sterling National Bank (NY), savings account

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Comments
15 Comments.
Comment #1 by Anonymous posted on
Anonymous
...obviously Provident doesn't trust it's own security system as much as other banks! Behind the thoughts/policy, of course, are that:
1. Make it difficult and maybe the funds will stay at Provident...

2. or the customer will be "forced" to use a costly wireout method.

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Comment #2 by Matthew (anonymous) posted on
Matthew
I think the change isn't so much to increase security but to increase stability of the bank. The previous transfer system was very good and included features that encouraged me (and probably other users) to use provident as a transfer "hub" - with both savings and checking, there is no limit on the number of transfers per month, there is no minimum on the amount of transfers (you can transfer $0.05 if you want to), it was also possible to transfer up to (and apparently over) $100k per transaction, funds were debited and credited on the same day (no loss of interest), and they were available for immediate withdrawal. I think Provident implemented this change to discourage behavior leading to significant daily fluctuations in available capital, given the relatively small size of the bank.

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Comment #3 by Anonymous posted on
Anonymous
It's a question of bank liability.

If a bank initiates an ACH credit to another bank, that ACH credit cannot be recalled. So if a bad guy somehow got into a Provident account and transfered all the money out, Provident would be liable to the account holder (assuming it was a consumer -- not a business -- account) and it would have no easy way to get the money back from the bank to which it was sent.

On the other hand, if another bank initiates an ACH debit from a Provident account, then NACHA rules allow Provident to reverse the transaction -- no questions asked -- for 60 days if they can produce a Written Statement Under Penalty of Perjury (WSUPP) from the account holder. They are under no obligation to investigate the legitimacy of the WSUPP.

Note also that Regulation E sets no time limit on a consumer claim of a fraudulent first electronic withdrawal from a consumer account that does not involve a debit card. There are limits on additional claims if the consumer does not timely report the first fraudulent withdrawal. Banks will give consumers a hard time about errors reported after 60 days because they cannot automatically reverse the transaction and may be left holding the bag themselves.

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Comment #4 by Anonymous posted on
Anonymous
I don't have problems with reasonable restrictions... but this $2k limit is a joke. Even though my promo is still in force, With September's interest credited, I've set up to remove most of my money to more accessible accounts.

1
Comment #5 by Tsunami Cid (anonymous) posted on
Tsunami Cid
What's next!? A savings account with an early withdrawal penalty? LMAO.

1
Comment #6 by Anonymous posted on
Anonymous
Oh please, y'all rip this small bank a new one,
Yet Citibank has a daily transfer limit of $1,000 for next day transfers, and a $2,000 daily limit for 3 day transfers.

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Comment #7 by Anonymous posted on
Anonymous
Can they legally make this change without any advanced notification, making it difficult to access OUR OWN MONEY?

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Comment #8 by flat broke (anonymous) posted on
flat broke
the small print always says: "subject to change without notice."

but hey, you can still make large transfers of money out of the account, you just cant initiate it from the provident over the internet.

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Comment #9 by Anonymous posted on
Anonymous
I have the "Power Savings" & "Green Checking" at Provident, which I maxed out to take advantage of their respective promos.
When the savings promo ran out in 90 days, I kept the max. ($1000) in the checking to continue earning 3.75%.
The savings now has $1.
It is obvious to me that these new restrictions have absolutely nothing to do with protecting customers, and everything to do with protecting the bottom line of the bank.
It is disingenuous and an insult to our intelligence to claim otherwise.
They have every legal right to protect their financial interests, but it can be done with integrity not BS.

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Comment #10 by Anonymous posted on
Anonymous
I got their odious email also, and I completely agree with the previous post. My Provident savings account also now has a $1 balance. I keep a non-trivial certain amount of funds in "liquid accounts", for several reasons. Therefore I try to keep my eye on liquid funds rates.

Several months ago Provident Bank had a promo rate of 3.5% for 90 days, so I put funds which needed to remain liquid there. In those situations, when the promo rate expires sometimes the bank immediately jerks the rate down to their “current” rate in one fell swoop and sometimes it gradually reduces it. I've seen in happen both ways. Provident fooled me by first reducing it to the same rate as Alliant (2%), BUT then just 1 WEEK LATER they further reduced it to 1.5%. Luckily, Provident AT THAT TIME (mid-September) had a good, fast, “honest” (no loss of interest) ACH capability, AND a high maximum $ limit in terms of what could be ACH'ed out. So I did not bother to set up a Provident linked checking account. When Provident reduced rates to 1.5%, I immediately used their system to ACH funds to Alliant who was (and still is) paying 2%.
Now, Provident has drastically changed their ACH capability, and I have to believe it's due almost completely to some decision they've made that they can no longer compete with the rate leaders. Fine, this is America, etc., etc., and they are free to do their own thing (within FDIC regs., etc,). BUT - they should not have jerked customers around, and they should not now be trying to hide behind “security” as a rationale for the jerking.

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Comment #11 by ctgottapee (anonymous) posted on
ctgottapee
it is probably a stability issue for them. with many people hitting the end of the promo rate, there are lots of $99,999 withdrawls. just ten people cause a million bux to get sucked out. with their quick ACH system, it may be taxing to manage with the whole bank book, unlike other banks that use both real and artificial delays to better manage the transfers.

i don't think it's fair to rip a bank for using or changing to use the same procedures other banks use.

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Comment #12 by Anonymous posted on
Anonymous
Is there any other bank with good ACH system like ProvidentNJDirect had before the change? Thx.

1
Comment #13 by Bob (anonymous) posted on
Bob
Ally has a good ACH system like ProvidentNJDirect had and serves an excellant feeder to a low paying checking account e.g. Case Bank

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Comment #14 by Anonymous posted on
Anonymous
I can confirm that large $ transfers initiated externally still work on this account. I just moved most of the funds out through ACH initiated from another bank.

1
Comment #15 by Anonymous posted on
Anonymous
Hmmm I haven't received the email.
Tom

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