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Concerns about E-LOAN’s Connection with Puerto Rico
E-LOAN continues to offer very competitive CD rates. As I mentioned in the blog post earlier this month, E-LOAN’s 5-year and 3-year CDs are clear rate leaders for nationally available CDs. For those considering opening an account with E-LOAN, there’s an important thing to know about E-LOAN. Its parent bank is Banco Popular North America which is under the Puerto Rican bank holding company, Popular, Inc. (Popular). With the news about the Puerto Rican government defaulting on its debt, there are concerns about opening an account at a bank with Puerto Rican connections. Here are two basic reasons why I’m not concerned.
First, deposits held at E-LOAN are FDIC insured under Banco Popular North America, which is a New York state chartered bank. Its sister bank is Banco Popular de Puerto Rico, which is an FDIC member based in Puerto Rico. Since Puerto Rico is a U.S. Commonwealth, Puerto Rican banks are FDIC-insured just like banks based in any of the 50 states.
Second, Banco Popular North America is financially strong. It has a Texas ratio of 2.61% which is considered excellent. In addition, its bank holding company, Popular, is considered healthy. According to this 24/7 Wall St article, Popular "did not make the mistake of buying too much government debt like Greek banks did. Its non-performing loans are only 3.2% of its assets, which puts it in very decent shape for being on an otherwise insolvent island."
A large bank that was based in Puerto Rico did fail this year. That bank was Doral Bank which had almost $6 billion in assets. The FDIC arranged for Banco Popular de Puerto Rico to acquire the banking operations, including all the deposits, of Doral Bank. Consequently, no one lost any of their deposits, even deposits that were over the FDIC limits.
Even though your deposits should be safe at E-LOAN, there are other reasons to avoid opening an E-LOAN CD.
First, E-LOAN’s early withdrawal penalties are harsh. As stated in E-LOAN’s Terms and Conditions page, the Early Withdrawal Penalty reads as follows:
Original term of 12 months up to 36 months: 270 days simple interest
Original term of 36 months up to 60 months: 365 days simple interest
Original term of 60 months or Greater: 730 days simple interest
Another downside with E-LOAN is possible complications with closing a CD. Several readers have complained about problems they had closing a CD and transferring the funds back to them. I did not experience any problems when I closed two E-LOAN CDs in 2009 and 2012. Before my CDs matured, I logged in and specified to close the CDs at maturity and have the funds transferred to my linked checking account. That took place without any problems. I was told by an E-LOAN CSR that instructions to close a CD can also be made during the grace period (which is 10 calendar days).
You could lose the higher rates once they go under, even if they are FDIC insured....so what's the point?
In 2016 I tried to open a CD account with them, but because their website was so cumbersome, I decided not to go through with it, they kept sending me emails that please verify the amount of the test deposits so that they can establish the account, which I did not do. But a week later I found out that they had withdrawn the amount from my Bank, so that was when I called them and the fun began. Whenever I called them it became a total frustration.
The people who answer the phone are in Porto Rico and some of them with very poor English. They are not supposed to provide their last name and a manager or supervisor is never available.
The gist of it, that they are not going to be able to return my deposit until it has been there for 3 months. After this I went to my Bank and asked them to get my money back which they did.
Now they sent me a 1099 form for over $100, and I have never received any money from them and naturally I don't have an account with them. Their response is you had an account for a few days and that amount of interest was generated but since the account was closed, they took that as penalty. I told them send me a letter to that effect, he said that we cannot do that over the phone. I have to send them a request in writing.
They are the lowest of the lows, don’t ever deal with them.