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ProvidentNJ Direct's New Limit on External Transfers
POSTED
ON BY Ken Tumin
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.
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.
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.
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.
Yet Citibank has a daily transfer limit of $1,000 for next day transfers, and a $2,000 daily limit for 3 day transfers.
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.
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.
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.
i don't think it's fair to rip a bank for using or changing to use the same procedures other banks use.
Tom