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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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ING DIRECT's Merger into Capital One Will Cause FDIC Coverage Changes


ING DIRECT has sent emails to customers who have accounts at both ING DIRECT and Capital One. The emails are intended to notify customers of upcoming changes to FDIC coverage. There appears to be two versions of this email depending on which Capital One Bank holds your money. Both emails have the following excerpt which explains the changes:

Last February, ING DIRECT became a part of the Capital One family, but there's still some official stuff we have to tidy up, like consolidating our legal structure. What's that mean in real life? It just means that on November 1, 2012 (subject to regulators giving us the final go-ahead), ING Bank, fsb (that's ING DIRECT's official name) and Capital One, N.A., will legally become one bank—and unless you hear from us, assume they gave us two thumbs up. It also means that the FDIC coverage on your deposit accounts will stay as is until 6 months following that date (or May 1, 2013). Then, your FDIC coverage will be based on your total combined deposits at Capital One, N.A., and ING DIRECT up to the FDIC max of $250,000 per depositor - or $500,000 for joint depositors. If you opened CDs with ING Bank, fsb, and Capital One, N.A. , before November 1, 2012, they'll stay separately insured until the 1st maturity date after May 1, 2013. Keep in mind, these coverage extensions won't apply to deposits made after November 1, 2012.

One thing that's confusing is that there are two types of mergers. The first one occurred when the Capital One bank holding company (Capital One Financial Corp.) officially acquired ING DIRECT on February 17. After this merger, Capital One Financial had three bank subsidiaries:

  • Capital One, N.A., FDIC Cert. # 4297 (mostly held deposits from branches)
  • Capital One Bank (USA), N.A., FDIC Cert. # 33954 (mostly held online deposits)
  • ING Bank, fsb, FDIC Cert. # 35489 (official name of ING DIRECT)

The February merger had no effect on FDIC coverage since ING DIRECT's FDIC status remained unchanged.

In November, another merger is planned which will merge ING DIRECT into Capital One, N.A. After November, Capital One Financial will once again have two bank subsidiaries: Capital One, N.A. and Capital One Bank (USA), N.A. ING DIRECT will no longer be a separate FDIC-insured entity. This merger will affect FDIC coverage.

ING DIRECT provided the following timeline explaining these mergers. This is from ING DIRECT's website:

ING DIRECT Merger timeline

So if you have deposits at both ING DIRECT and Capital One, N.A., you may lose FDIC coverage on deposits if you have over $250,000. If you had opened accounts at a Capital One branch, it's likely that your deposits are being held at Capital One, N.A. That's the case for me. The email that I received from ING DIRECT informed me of this with the following charts:

ING DIRECT Merger FDIC coverage changes

If you have deposits at Capital One Direct which are likely held at Capital One Bank (USA), N.A., this November merger may have no effect on you. In that case, the email sent to you was different. Jim at Bargaineering had opened an account at Capital One Direct. He reported receiving an email that had the following paragraph instead of the above charts:

Your current Capital One account is held in Capital One Bank (USA), N.A. (which is totally separate from Capital One, N.A.). This means your current ING DIRECT and Capital One accounts will continue to have separate FDIC insurance, and both accounts will stay covered up to $250,000 each. So really, there’s nothing for you to do but kick back, relax, and keep on saving.

So if you are affected by this November merger, you need to determine if this may cause some of your deposits to lose FDIC coverage. If your total deposits from ING DIRECT and Capital One, N.A. are way under $250,000, you don't have to worry about this merger. If your total deposits are over $250,000, you should then review the FDIC rules regarding bank mergers.

Below is an excerpt of page 102 of the FDIC Comprehensive Seminar on Deposit Insurance Coverage For Bankers which describes the rules of what happens to FDIC coverage when banks merge:

Basic rule - There is separate deposit insurance coverage (i.e., for deposits at each bank) for up to six months (starting with the effective date of the merger) if a depositor had funds in two banks that merged

Special exception for time deposits – For time deposits (i.e., CDs) issued by the assumed bank, separate deposit insurance coverage will continue for the greater of either six months or the first maturity date of the time deposit.

ING DIRECT describes these details in its merger legal Stuff tab. They are inline with the FDIC rules. Below are the ING DIRECT excerpts:

How does this change affect the FDIC insurance coverage on my checking and savings accounts?

FDIC coverage on checking and savings deposits made before November 1, 2012, will stay separate until 6 months following November 1, 2012 (or, May 1, 2013). Then, your FDIC coverage will be based on your total combined deposits at Capital One, N.A. and ING DIRECT up to the FDIC max of $250,000 per depositor — or $500,000 for joint depositors.

What about the FDIC coverage for my CDs (including IRAs)?

If you opened CDs with ING DIRECT and Capital One before November 1, 2012, they’ll stay separately insured until the 1st maturity date after May 1, 2013.

What if I roll over my CD?

If you roll over your CD with the same terms (same time period and dollar amount) between November 1, 2012, and May 1, 2013, then it’ll stay separately insured until the 1st maturity date after May 1, 2013. If you change the terms, add funds or don’t roll over during this period, then the CD will be separately insured until May 1, 2013.

My Take and My Questions

When the first merger became official in February, it appeared that ING DIRECT's banking entity was going to remain separate from the two Capital One banking entities. Since Capital One already had two separate banking entities (with separate FDIC coverage), it seemed an additional one wouldn't cause a problem. In addition that would have made things simple since there would be no FDIC coverage changes for customers. For some reason, Capital One has decided to consolidate ING DIRECT's bank entity into Capital One, N.A. I'm not sure why that decision was made. I guess it will save some money.

It's also interesting they decided to consolidate ING DIRECT into Capital One, N.A. instead of Capital One Bank (USA), N.A. Since online bank deposits were mostly held by Capital One Bank (USA), N.A., why not merge ING DIRECT into this entity? Perhaps Capital One Bank (USA), N.A. will eventually be merged into Capital One, N.A.?

There's another merger that might occur in the future. The accounts opened under Capital One Direct may eventually be moved under ING DIRECT (or whatever this will be called). A few months ago Capital One Direct stopped accepting new applications. Instead it just pointed new customers to ING DIRECT. So it does appear that Capital One Direct will eventually be merged into the new ING DIRECT. If Capital One Bank (USA), N.A. mostly holds deposits from Capital One Direct, this may allow the consolidation of the two Capital One banking entities into just one.

  |     |   Comment #1
I got the update on FDIC coverage via email yesterday.  I am not surprised that ING Direct is being "absorbed" into an existing Capital One operating division.  When one company takes over another one, you rarely keep the bought out one in the original structure indefinitely.  If the intent was to leave a company structure intact indefinitely, taking it over would not be the thing to do. You would let it be taken over by an entity not in the same line of business and not by a competitor.  With the many S&Ls and many bank mergers in my area over the several decades, none of the banks that got "bought out" had their names (or images) retained in the eventual bank structure by the takeover bank.  Bank of America is a classic example.  I see nearly a dozen former local banks "gobbled up" by BOA.
  |     |   Comment #2
I can think of two banks that kept the acquired bank name.

Chemical bank bought Chase.

United Jersey bought Summit bank. (Summit bank was bought by Fleet. Fleet was then bought by BOA).
  |     |   Comment #4
I don't think it is sounding okay from outside , bank selling itself to other bank ?
  |     |   Comment #6
I have had an account since ING first offered $20.00 for opening a checking account and they answered the telephone with "hello" when they were still setting up offices in the U.S.  Now the EU banking decided to force them to divest of all US holdings.  Too bad.  I loved this bank.  No nonsense.  No fees.  User-friendly website.  I'm so sorry to see them go.  I transferred everything out of ING today to my bank where I keep other accounts.  I don't like Capital One.  ING has offices all over Europe; I saw several in Krakow, Poland.  These litle orange offices.  ****.
  |     |   Comment #8
This is really a bad economy to take away free checking.  Many are without jobs and can't afford to keep hundreds of dollars sitting in a checking account just to keep from paying fees.  I guess the only thing to do is for them to look for a bank with the lowest fees.
  |     |   Comment #9
No such thing as a free lunch.  No such things as "free checking".  Someone is paying for it with fees, charges etc. 
  |     |   Comment #10
I have a Capital One Direct account (Costco) that is being held by Capital One, NA.  I guess not all Capital One Direct accounts were being held by Capital One Bank (USA), NA.  In any case, the Costco affiliation is ending at the end of the year so I'll need to consider pulling my money out of the Capital One Direct account if the rates dramatically drop.
  |     |   Comment #11
I got one of those messages about FDIC coverage because I have a brokerage account with ShareBuilder. Evidently even the cash balance held in the brokerage account shall be included in the total combined deposits at Capital One Bank, N.A. for purposes of FDIC coverage limits.
  |     |   Comment #12
I have two accoutns with Cap.One. Both were opened online. It turns out that High Yield Money Market belongs to Capital One and InterestPlus Online Savings is Capital One Bank USA.
  |     |   Comment #13
I like Capital One direct because they reimburse ATM surcharges for any ATM you use, anywhere in the world.  ING doesn't do that, they just have a network (Allpoint) and you have to stay in the network or you pay the surcharge.  If I lose my rebates, I am moving my money to Ally or Bank of Internet, which still have them.
  |     |   Comment #14
Anonymous #13: I think that the ATM reimbursement you mentioned depends on the account you have. For example, just based on my experience, the High Yield Money Market I have with Capital One Direct does not reimburse ATM charges, but the in-branch High Yield Free Checking I have with Capital One Bank, N.A. does (depending, however, on how non-U.S. banks "code" the transaction). Which account do you have? And have they actually reimbursed the ATM fees, including those of non-U.S. banks?
  |     |   Comment #15
Are Not Brokerage accounts , usually set up with funds that are traded, or mutual funds, UIT's, If they are than those  funds would be subject to loss depending on the market and also those funds are not covered under the FDIC limit, and are not allowed to be used towards that limit.  Maybe they just sent out a blanket form to everyone who holds any sort of account. 
  |     |   Comment #16

I have the Capital One Online checking account.  I have used my ATM card in both the US and abroad, and they have always rebated the surcharges.  In some countries it isn't automatic, you have to request the rebate through the online banking interface, but it is quick and efficient.

I don't understand why ING customers are upset about this.  Capital One's pre-merger online checking and savings accounts are far superior to what ING offered.  Perhaps their customer service isn't so great, but the account rules are better and the interest rates are better.
Joe Schmoe
  |     |   Comment #17
ING Savings rates stink.  They're at .75% now and have been on a monotonic decline.  You can get .90% at AMEX, among others.  ING could once be counted on to have the highest savings rates and the most user friendly website experience.  Those days are over.  The merger with one of the too-big-to-fail evil empires is just the final nail in the coffin.

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