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Update on ACH Transfers at PenFed and the Issue of Restrictive ACH Policies


Pentagon Federal Credit Union
In September I described how I transferred funds out of PenFed when my PenFed CD matured. When my CDs have matured at other credit unions, I typically transfer the CD funds to my share savings accounts. Then I initiate an ACH transfer from my internet bank to withdraw the money from the credit union savings account. After the issue I experienced at Navy Federal, I learned to always check the credit union's disclosure about possible ACH restrictions. When I checked PenFed's disclosure, it appeared that they didn't allow outgoing ACH transfers from the share savings account. However, several readers have reported being able to withdraw funds from their PenFed share savings account when they initiated the ACH transfers from their other financial institutions.

I emailed my contact at PenFed for clarification. In summary, what's in the disclosure is intended to mean that ACH debits initiated at PenFed are not allowed. Here is the explanation I received:
PenFed does NOT allow the ACH debit to be initiated directly with PenFed to another banking institution. As stated, the member may conduct an electronic transfer by wire or Western Union as an option. However, a member may elect to initiate the ACH debit through their other banking institution if the ACH service feature is available.

So there appears to be no restrictions on using the ACH transfer service of your other financial institution to pull funds from a PenFed savings, money market or checking account. Update 10/20/09: I just confirmed with my PenFed contact that PenFed will allow funds to be pulled from all three types of accounts: Share, Checking and Money Market Share accounts.

PenFed does allow you to initiate incoming ACH transfers into your liquid PenFed accounts. This can be done for free via PenFed Online or for a $5 fee via the phone. You can also use ACH transfers to fund a PenFed CD. The PenFed rep described why they restrict outgoing ACH transfers:
At this time, PenFed's position on this policy is largely due to matters concerning fraud.

There is a high risk of fraud associated with ACH transactions - both incoming and outgoing. For outgoing electronic transfers, PenFed prefers to offer wire or Western Union services to our membership. Though not completely void of fraud, these services provide a higher level of security that greatly reduce the opportunity for fraudulent activity to occur.

Though restricting outgoing ACH transactions may seem limiting to some of our members, PenFed feels we offer many other avenues for our members to withdraw their funds. Besides offering wire and Western Union services, PenFed members may also withdraw their funds by writing a check, by Share Check withdrawal, ATM or Check Card withdrawals, or by visiting one of our branches.

ACH Transfer Restrictions

For those not familiar with ACH transfers, ACH is short for Automated Clearing House Network. The network provides an electronic funds transfer process between bank accounts. ACH is most commonly used for direct deposit. For internet bank accounts, ACH transfers are typically the main way that customers can make deposits and withdrawals.

PenFed is not alone in having a restrictive ACH transfer policy. Several online banks have low limits on the transfer amounts. The latest to implement such a policy is ProvidentNJ Direct which announced a $2,000 per day transfer limit. A commenter in that ProvidenNJ Direct post had a good explanation about why financial institutions have such restrictions on their own ACH service but not on ACH transfers made at other financial institutions:
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 transferred 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.

The above explanation is consistent with this consumer protection paper at the Federal Reserve Bank of Philadelphia website and with information at the NACHA website.
  Tags: Pentagon Federal Credit Union

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Comments
17 comments.
Comment #1 by Anonymous posted on
Anonymous
I maintain a money market account with PenFed. Any matured CD funds can be transferred into this account then a check be written for the desired amount and deposited into my local checking account. From that local checking account I can transfer funds, using ACH, for example to my Ally savings account.

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Comment #2 by Anonymous posted on
Anonymous
you can also deposit a check into Alliant cu/

1
Comment #3 by Anonymous posted on
Anonymous
So if someone fraudulently transfers your money into their account, go to your bank and ask, WSUPP, man?

1
Comment #4 by Anonymous posted on
Anonymous
Your comment:
"""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""",
does not make sense at all.

If the other bank can reverse the ACH, why provident can not reverse it with WSUPP??????

Someone is not telling the truth!!!

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Comment #5 by Anonymous posted on
Anonymous
There are two types of ACH transactions. One is a "credit" where one bank sends money to another bank (often called a "push"). The other is a "debit" where one bank takes money from another bank (often called a "pull").

NACHA rules require that if a bank receives an ACH credit from another bank, it has to be made available for withdrawal by open of business the next day. A credit ("push") that is sent from one bank to another is final.

If, on the other hand, a bank initiates a debit ("pulls" money out of another bank), the bank from which the money was pulled is given the opportunity to object and take the money back.

The idea is that whichever bank initiates the transaction has the burden to verify its authenticity.

The procedure to reverse an ACH transaction within 60 upon receipt of a WSSUP is available only for ACH debits -- where another bank has pulled money out of one of your customer's accounts. There is no corresponding procedure if a bank foolishly initiated a transaction that sent money to another bank. This is only fair to the other bank since it is required to make the money immediately available for withdrawal and had nothing to do with initiating the transaction.

Provident cannot reverse a credit sent to another bank using the WSSUP procedure. That is the way the system works. If you don't like it, become a member of NACHA and petition for a rule change.

0
Comment #6 by Anonymous posted on
Anonymous
I was able to do a recall of an ACH credit. I had my brokerage send funds to the wrong checking acct # at another bank, and the brokerage offered to issue a recall of that credit.

Difference may be FedACH vs. EPN.

-1
Comment #7 by Anonymous posted on
Anonymous
When I try to pull funds from my Penfed Share account from another institution, the transaction fails.

If I try to pull funds from my Penfed Money Market, the transaction goes through with no problem.

I would be careful trying to do an external pull from your Penfed Share account, as your external institution may charge you an ISF charge.

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Comment #8 by Anonymous posted on
Anonymous
Wait. If NACHA rules require an ACH push be available next business day, then why do (certain) banks hold funds? For example, American Express Bank has a 6 business day hold. See Bank Deals comment here (25 August 2009):
http://bankdeals.blogspot.com/2009/06/new-online-savings-account-and-cds-at.html

This is beyond float; it is a hold. If this practice is against the rules, why are they allowed to do this? What am I missing?

1
Comment #9 by Anonymous posted on
Anonymous
From this fatwallet thread:
http://www.fatwallet.com/forums/arcmessageview.php?catid=52&threadid=903858

***Pentagon Federal Credit Union does not authorize ACH or electronic debits from Regular Share Accounts. If you are interested in transferring funds to another institution via ACH debits, please consider opening either a PenCheck or Money Market Savings Account.***

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Comment #10 by Anonymous posted on
Anonymous
I regularly pull money from PenFed saving account every month with no problem at all. I can also send money via ACH in any amount and pull next day all of it of the available amount.
I also spoke with a CSR and he confirmed that I can use the saving account to pull any or all money out except the $5.00.
I have no idea why some are barred to do this, but if you call an verify your particular situation it might enlighten your problem to a specific reason.

1
Comment #11 by Anonymous posted on
Anonymous
I pull money from my Regular Share Account every month using Chase ACH with no problem at all, also I can push money into the Share saving account in any amount as many times as I want without restrictions.

1
Comment #12 by Anonymous posted on
Anonymous
If you call PenFed, they can ACH out of your saving account for a fee.
I think the limit is $10K per day.
But from outside bank's ACH pull of push, there is no limit and you can use your share account for that.

1
Comment #13 by Anonymous posted on
Anonymous
Its much easier to just get a checking account at Penfed. Instant transfer from Share to Checking then onto external bank. Also look at Penfed's cash rewards visa card, best in the business imo.
I too have moved a recently matured CD due to PenFeds low CD rates, why so low? I wish they would match Ally Bank.

1
Comment #14 by Anonymous posted on
Anonymous
"Wait. If NACHA rules require an ACH push be available next business day, then why do (certain) banks hold funds? For example, American Express Bank has a 6 business day hold. See Bank Deals comment here (25 August 2009):
http://bankdeals.blogspot.com/2009/06/new-online-savings-account-and-cds-at.html"

That post says that if you initiate a transfer from another bank into your AMEX account using the AMEX transfer system, there will be a six day hold.

When AMEX sends a request to another bank to withdraw funds from the other bank, that is an ACH debit, not an ACH credit. The next-day availability rule applies to ACH credits, not debits.

If you used another bank's ACH system to send money to your AMEX account (or your employer used their bank's ACH system to make a direct deposit of your paycheck), that would be an ACH credit and should be made available by the next business day.

1
Comment #15 by Anonymous posted on
Anonymous
"When I try to pull funds from my Penfed Share account from another institution, the transaction fails."

Make sure you specify that the PenFed share account is a savings account, not a checking account. Some banks (like ING Direct and Emigrant) don't let you specify account type when you set up an external link and assume you mean checking.

Also, leave the dashes out of the account number.

Remember that there is a hold at PenFed on the first $5. Make sure you leave at least $5.01 cent in your account after the withdrawal.

1
Comment #16 by Anonymous posted on
Anonymous
This maybe why AMEX dropped the $15.00 fee for outgoing wire transfers. Thus eliminating the three day or more lag and security problems?

1
Comment #17 by Kirby (anonymous) posted on
Kirby
So there is no way to withdraw the $5.00 out of my Regular Share account?

1