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May 2024 Fed Meeting: Key TakeawaysPopular Direct Implements 60-Day Account Freeze On New Accounts
Popular Direct has a new policy that prevents new customers from accessing money in their accounts for 60 days. This is an account freeze that prevents customers from withdrawing their funds, either by Popular Direct’s ACH transfer service or by ACH transfer services of other banks. This policy is now listed on Popular Direct’s website, but it’s not easy to find. You can view it when you move your mouse over the “apply now” button of Popular Direct’s website. The policy reads as follows:
Your security is important to us. That’s why, as of March 15, 2018, there will be a 60-day freeze on withdrawals for new accounts, starting with the date of account opening. Please note, your account will continue to earn interest during this time. Once the 60-day authorization period is complete, you may withdraw funds as needed.
Popular Direct has informed customers that they can remove the freeze before 60 days by sending in to their Fraud Department proper documentation for proof of ownership for their linked external accounts. For proof of ownership, they want to see a copy of an account statement or voided check reflecting their name/title, address and full external account number.
Many DA readers have reported being hit with this freeze in this DA forum thread. DA reader, tvholic, reported how the freeze was affecting him:
Popular Direct just rejected an ACH debit that I initiated from an external account. My Popular Direct account was (is) more than 60 days old, and I've previously performed ACH debits to the same external account. I just called Popular Direct and they said I need to provide proof of ownership of the external account before I can use it for ACH transactions.
DA reader RJM reported that Popular Direct is being slow in the processing of proof-of-ownership documentation:
I gave them exactly what they asked for June 2nd at 9:25 pm. 3 FULL business days and NOTHING.
Yesterday I called & asked for $500 availability for my 6 figure account. NO.
Could I speak to a person in the fraud department? NO.
Could I speak to a supervisor? "I am the highest person you can speak with".
My account is 60 days old today.
Two days later, RJM, reported receiving an email from Popular Direct informing him of the lifting of the freeze:
Thank you for contacting Popular Direct Customer Service. We gladly assist you with your inquiry. After reviewing your account information, the restriction on your account has been removed. Transfers will process as normal.
It appears Popular Direct did a poor job at notifying their customers before they implemented this new policy. DA reader, capitol, made the good point that, “Such a major and lengthy hold of customer funds should have been better explained in an official letter to customers!” Many DA readers have filed complaints with regulators, but Popular Direct has defended their action based on obscure details in the account disclosure. DA reader, johnnyz, reported receiving the following message from Popular Direct:
Although you have reported the issue to FDIC and CFPD, there were terms and conditions that you agreed to, involving possible restrictions, at time of application. To refer to this disclosure, please visit www.populardirect.com, scroll all the way to the bottom and select Site Map. Next select Savings Disclosures, then Personal Banking Disclosure Agreement for Popular Direct Products. Page 6 includes subtitling Restrictions on Accounts and Services/Right of Refusal and Termination of Account.
My Take
This 60-day account freeze is highly unusual for internet banks. Popular Direct claims that our security is important to them, and that’s the reason for this policy. Other internet banks have been taking customer security very seriously for much longer than Popular Direct has, and they have never implemented such a policy. A few internet banks place holds on deposits, especially on new accounts, but these hold times are generally 10 business days or less.
I thought the trial-deposit verification was done to prove ownership of your linked accounts. This is a common step at most internet banks when you open an account. When you provide the internet bank the routing and account number of one of your bank accounts, the internet bank makes small trial deposits to that external account. Before you can make deposits and withdrawals from that external account, you have to verify the trial deposits that the internet bank made to the account. This process has long been used by internet banks to prove ownership of an external account.
As readers have described, the account freeze prevents customers from withdrawing funds even when the ACH withdrawal request is done by using the ACH system of another bank. Most internet banks don’t block or place dollar limits on ACH transfers that are initiated by another bank. The reason is that liability falls on the other bank that originates the ACH transfer. The rules that govern ACH make it much easier for the banks that receive ACH debits to reverse the transaction. I’ve come across only a few internet banks that don’t allow ACH withdrawals that are not initiated from their own system. One example is Emigrant Bank and its three internet divisions.
The other issue is how Popular Direct implemented this new policy on new and existing customers. Such an extreme policy should have been clearly communicated to both new and existing customers. Also, Popular Direct seems to be slow in verifying proof of ownership for those who want to have the freeze lifted before 60 days.
In summary, this is another strike against Popular Direct. Popular Direct had already annoyed customers by its practice of creating new savings accounts with higher rates rather than just raising the rate on one savings account for both new and existing customers.
If you’re considering closing your Popular Direct savings account or leaving it idle, please be aware of these potential fees:
- $4 monthly service fee if the balance on any day is below $500.
- $25 early closing fee if account is closed within 180 days of opening.
- $5 monthly dormancy fee if there has been no activity for 12 months.
For more details, please refer to the Popular Bank Product Guide for the Popular Direct Plus Savings Account.
Filing a Complaint with a Regulator
If you feel that Popular Direct has been unfair and/or misleading in this new freeze policy and its implementation, you may want to file a complaint with the Bank’s regulators. Popular Direct is a division of Popular Bank. To find a bank’s primary federal regulator, search for the bank at DepositAccounts.com. Once you arrive at our overview page for the bank, click on the health tab. On the left side of the health section is the field “Primary Regulator.” For Popular Bank, the primary regulator is the Federal Reserve. Here’s the Federal Reserve page that describes the process of filing a complaint against a bank. Popular Bank’s secondary federal regulator is the Consumer Financial Protection Bureau (CFPB). Here’s the link to the CFPB’s complaint submission page.
ATTN: Ken
My impression was this was about knowing their customer and making sure their customer was real and not a scammer. I would wager you could transfer within popular for a CD.
I asked them to remove my first link but I did not ask if I would have the same 60 days with my 2nd link. I assumed not. But, I have also decided against any of their offerings right now because they are just not enough of a premium for me.
My MMA pays 2.26% and my 9 month pays 2.75%. I am willing to go 12-18-24 months but right now, the sweet spots for me are 3%, 3.25% and 3.50%.
I am confident at least one of them will appear by year end. And year end thru feb is when I have other CDs maturing too.(2 and 2.25% ones)
I might just leave my popular account open with the $500 past my 6 month date in Oct to see if they come up with something else by early next year. Because i should have no problem going to my savings to a new CD. And the lost interest on $500 is just 11 cents a month compared to 2.26%. There is some value in not having to open yet another account. But Popular needs to be near the top at that time. Ideally .20-.35% above a brokered CD rate. They are currently only .15% over on the 2 year.
" For each open product with Popular direct you will receive 2 test deposits to your external account even if the external account was already on file.
Once you verify the test deposits your account will have a 60 day hold before you can do internal or external transfers.
To be able to transfer funds immediately and open a new account you will need to send us proof of ownership for your external account."
Did the test deposits and they are pulling $5000 into savings the same day verification was made. Uploading proof of ownership might resolve the issue with the second verification. In any event Popular Direct has been much more responsive than my 9 month CD offer which has been sitting in pending status for 13 days.
Luckily, Northern came around about the same time I wanted to move over 99.5% of my money out of Popular. I did it piecemeal because I still was not sure they would not come up with another reason to reject a transfer. But all the later transfers went thru without a hitch.
Now, I have my calendar marked for 10/5.
The Bail-in law states that if a bank is on the brink of failure, they have to cut payments and dividends to investors before looking for bailout money from the public. This was to prevent tax payer bailouts of banks that were too big to fail. Thus the bail-in terminology. Again, unless FDIC and NCUA both become insolvent, your money in the bank is guaranteed up to 250k.
Now if you are an investor, then it's a totally different ball game. Also if you have greater than 250k in a single account type in a single bank, but most people who get up to that range keep money in excess of FDIC insurance in bonds or a brokerage money market fund like VMMXX or VMRXX.
‘Legalized’ G20 Bank Bail-In Laws
Since the end of 2014, new G20 Bank Bail-In Laws have been put into place.
This means that bank depositors are now legally treated as unsecured creditors in the largest economies in the world.
G20 - (n) the world’s largest 19 national economies, including the USA, and the European Union together, a group of 20. Additionally there are representatives of the International Monetary Fund (IMF) and the World Bank. The G20 finance ministers and central bank governors began meeting in 1999, at the suggestion of the G7 finance ministers in response to various financial crisis in the 1990s.
Bail-In - (n) to restructure a financial institution that is on the brink of failure by forcing its creditors and depositors to take a loss on their holdings. Regarded as a rescue of last resort to help a troubled financial institution's ability to attract future business. A bail-in is different from a bail-out, which involves the rescue of a financial institution typically by government credit extensions into the failing private sector.
https://sandiegofreepress.org/2015/01/the-bail-in-how-you-and-your-money-will-be-parted-during-the-next-banking-crisis/
Most people ignore the perils of giving the money to the bank under Dodd-Frank because now it is an international law signed by all G20 members too and yes the DEPOSITORS are treated as creditors.
Please read this:
https://www.fdic.gov/news/board/2017/2017-03-21-notice-dis-a-mem.pdf
and this:
https://www.fdic.gov/bank/analytical/qbp/2017mar/qbpdep.html
Both FDIC and NCUA consider capitalization levels of banks and credit unions to be of high importance. Higher capitalization allows for a greater buffer when cover loans that may fail in the future. Popular Direct has $9.23 billion in assets with $1.73 billion in equity, resulting in a capitalization level of 18.71%, which is excellent.
What about if they count the money deposited as assets instead of liabilities?
What about if the money were sent out of USA to finance a foreign project(s) and it turned out to be a fraud?
That approach has worked great for the last 30 years.
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Their regulator is actually the Consumer Financial Protection Bureau. If you file complaints with the Federal Reserve or FDIC, they will get forwarded to the CFPB.
Popular Bank seems to be counting the 60 days from the day that the initial account funding cleared, which may be a few days later than the day you think the account was opened.
Per their account disclosures, they will reimburse for fees charged by external banks due to ACH debits that Popular Bank improperly rejects, but you might get the runaround. Their online rep told me I needed to email them a copy of my bank statement showing the fee I had been charged, but when I sent it to the email address she specified I received an email back saying they couldn't receive or process any sort of account-related correspondence via email. I relayed this information back to the online reps, who said they would look into it and get back to me, but they didn't.
I filed a CFPB complaint, seeking reimbursement for the returned ACH charge, as well as for the accrued interest I had forfeited when Popular Bank pressured me to close my account mid-statement cycle (they made it sound like it was the only way I was going to see any of my money anytime soon). And the result of my complaint was that they paid up.
Instead of just complaining about problems like so many do, you took it upon yourself to action and have the discrepancy resolved. And in you favor, too.
Ken, are you up to it?
It has helped many people, despite the current administration trying to undermine it. If we shut down every imperfect regulatory group, we'll be left with no regulations at all. If you think it should be doing more, advocate for it to do more, advocating for it to shut down is asinine.
Who is running the show up there.
Why? That's because a CD can be closed early by paying-up the applicable penalty. Looks like with Popular (Are they really?) there's no way induce a thaw before 60 days.
I experienced something similar with a prior account at All American. They have some crazy limitations like asking permission for a transfer over a certain amount and so forth. And even smaller ones are put inexplicable holds of varying durations. I am still not thrilled with that at all. I have always kept my brokerage account money separate sort of and never used it to pay bills or anything but I think I am going to start doing that and replenishing the brokerage account from my outside savings account. When i set up billpay at my broker, it will make All American obsolete for me. The difference between 1.85% at SPRXX and 2% at AA is $1.50 a year assuming a $1000 average balance. And I can see myself not needing an actual checking account whatsoever. Everything AA offers, my fidelity account offers and more. No limit of 6 transactions per month.
Unlimited transfers & check writing. ($100k limit on ACH transfers so if you need more, you have to do another transfer but it can be the same day)
You can never trust FDIC or NCUA should a major financial crises occurs. The banks are allowed to issue you IOU instead of your own money, remember, they own your money in a trust for, not you specifically (legal jargon).
Having been involved as an investor in a perfectly well-capitalized local bank, what happens when the FDIC fund is depleted is an assessment on all the other banks in the system. FDIC has a $500 billion borrowing limit with the Treasury and a full faith and credit guarantee.
Your insured funds are safe.
There's zero chance of loss of insured deposits, and even uninsured deposits take precedence over other unsecured liabilities.
Of course depositors are creditors. That's why when you make a deposit the bank debits cash and credits deposit liabilities.
This is an example of how far the Fed has gone to prevent bank runs: In the 80's after Henry Gonzales made a comment about the possible failure of a San Angelo, Texas institution, the Fed flew $1 billion in cash to DFW just in case of a bank run.
I have no idea what ACH is talking about when he references "#26" in Dodd Frank. READ TO ENTIRE STATUTE.
I won't Gertrude to the possibility of you getting your money but it being devalued by hyperinflation as that's the point people are trying to make.
You can absolutely trust FDIC and NCUA
Too many people think they are internet lawyers because they read one part of a complex law or even just read some scare-mongers blog.
After the Dodd-Frank law, the FDIC is off the hook to pay the depositors the full amount, now the depositors are called creditors to the bank and must stay in line to get paid (if ever).
The FDIC’s website gives information regarding the current amount of deposits the FDIC insures and the total amount of funds the FDIC has to cover those insured funds. As of December 31st, 2016 the estimated insured deposits (including U.S. branches of foreign banks) totaled $6.917 trillion. The very next paragraph states the Deposit Insurance Fund (DIF) during that very same quarter totaled $83.1 billion or $.0831 trillion. Do the math. Take $.0831 trillion and divide by $6.917 trillion. You get 0.012013878. That’s just above 1%! Simply put for every $100 of insured deposits the FDIC has $1 to “insure” those funds.
Many of you do not like to hear the truth, continue to believe so, FDIC is just for peace of our minds, not a real protector. Read Dodd-Frank law, the BAIL-IN is in, bail-out is out (not allowed) to bail the creditors and now the depositors (which are classified as creditor) are on the hook.
I have a suggestion for people worried about the ability of FDIC and NCUA to cover insured losses: Invest in riskier assets than CD's if you think CD's have risk.
What other point is there in buying insured products than 100% safety of principal.?
Please do some research, trusting blindly someone or something is also in not my book. Main thing to remember is that the depositors are now classified as creditors to the bank. That changes the whole ball game, please provide proof of opposite.
https://www.moneymetals.com/news/2015/04/15/fdic-plots-a-bank-heist-involving-your-accounts-000694
You are smart guy, do some digging, you will be amazed how it is written (nobody will force FDIC to pay that amount, since the depositors are creditors to the bank.
There is a law re $250,000 deposit insurance coverage for banks -- it's 12 U.S.C. 1821(a)(1)(E)
Please read the Dodd-Frank, the FDIC is just subservient law and not the main payout under it. The creditors and depositors are first held liable before the insurance kicks in.
Furthermore, the FDIC relies on DIF for payments of the insurance premiums. FDIC uses those premiums as safety net only (last resort).
According to Dodd-Frank, FDIC is obligated to recover the money back from the failed institution by going after the creditors and the depositors (as indicated as creditors).
Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the FDIC also manages the Orderly Liquidation Fund (OLF). Established as a separate fund in the U.S. Treasury (Treasury), the OLF is inactive and unfunded until the FDIC is appointed as receiver for a covered financial company. A covered financial company is a failing financial company (for example, a bank holding company or nonbank financial company) for which a systemic risk determination has been made as set forth in section 203 of the Dodd-Frank Act.
The Dodd-Frank Act (Public Law 111-203) granted the FDIC authority to establish a widely available program to guarantee obligations of solvent IDIs or solvent depository institution holding companies (including affiliates) upon the systemic risk determination of a liquidity event during times of severe economic distress. The program would not be funded by the DIF but rather by fees and assessments paid by all participants in the program. If fees are insufficient to cover losses or expenses, the FDIC must impose a special assessment on participants as necessary to cover the shortfall. Any excess funds at the end of the liquidity event program would be deposited in the General Fund of the Treasury.
The Dodd-Frank Act also created the Financial Stability Oversight Council (FSOC) of which the Chairman of the FDIC is a member and expanded the FDIC’s responsibilities to include supervisory review of resolution plans (known as living wills) and backup examination authority for systemically important bank holding companies and nonbank financial companies. The living wills provide for an entity’s rapid and orderly resolution in the event of material financial distress or failure.
Look for the sentence "solvent depository institution", if they are not, Dodd-Frank has priority over FDIC/DIF obligations and they can deny payments to the depositors. It is not spelled out for the people to read it and panic, it is a chain event that opens subsection of the law to deny insurance payments at first.
Another thing people miss out is that 42% of all deposits are in the four big banks, because you bank at a local bank or CU, you may ignore the fact that all of the smaller and really small banks deposit or buy instruments at the big four banks from our deposits there and that is how we and every bank is connected to Dodd-Frank.
https://sandiegofreepress.org/2015/01/the-bail-in-how-you-and-your-money-will-be-parted-during-the-next-banking-crisis/
That was a scary article and it suggested that this wasn't just going on in foreign countries but right here as well. Now that was from 2015 and I frankly have no idea which banking regulations Trump has rolled back or when they take effect. I know that Trump was a big critic of Dodd-Frank but I'm unsure if the bail-in laws were part of his criticism. Do you know if the bail-in laws are still in effect?
I read in some economic paper that the big banks are savings something in order of $20 billions per year, thanks to Trump.
http://www.publicbankinginstitute.org/a_crisis_worse_than_isis_bail_ins_begin
My major problem with all of this is that the depositor would be considered a unsecured creditor to the bank!?! and third in line to collect funds! To my mind this is pure theft and criminal. It doesn't help matters that much of this information is on websites that hawk gold or other commodities that try and scare people into buying what they are selling. Obviously these laws would only take precedence in a worst case scenario of a global financial crisis and only if the U.S. decides to allow it. But never the less the fact that these laws exist at all is pretty unsettling for a saver with large deposits.
He got paid by a special assessment on all insured depository institutions.
The US has a lot of problems, and a run on the banks will make any other problems infinitely worse. Even the most uninformed seem to understand this.
There are no real guarantees in this world, but worrying about bank holidays in the US is about the bottom of the list for me. The greater risk is the US prints money to bail out banks. Whoops, that already happened, and instead of hyper inflation, we had zero inflation.
The hyper inflation is hidden and with Dodd-Frank, the US government got itself off the hook to bail out the financial institutions and put the burden on the savers, who are now classified as creditors to the bank. In case of a major financial crisis, FDIC will not pay the full amount of the depositors.
Children and grandchildren don't care which policies were the flavor of the day...only that "we" created that debt in the name of party loyalty!
As to Obama..get over it! It’s history...we are where are!
Most people do not realize that the banks do not insure 100% of the money from the depositors, example:
BofA insures only 39%, Chase insures only 34%, WellsFargo 49% and the average bank, small or big only insures up to 50% of all depositors funds.
This is due to the fact that Dodd-Frank treats the depositors as creditors and the FDIC is just an additional safety option and is not mandatory. In order to use the logo "FDIC insured" on their web site and ;letterheads, they must report and become members and pay some insurance money, but not necessarily the true amount of the customer's deposits.
FDIC last year sued BofA for $542 millions and the BofA claims in federal court that they owe FDIC nothing. I'm following that development and will post of the findings when available.
Sounds like you're talking about All America Bank, aka Redneck Bank. (Rather than All American, which at first I thought was another bank I hadn't heard of.) :-)
So in conclusion, this web site is terrific but doesn’t help the hundreds of consumers and retirees that got caught in this mess. This blog is the only real way to get the word out fast enough so that promoters and advertisers become more cautious when promoting PD or other banks that have taken advantage of consumers.
WHY THE BANKS DO NOT INSURE 100% and or pay 100% premium to DIF insurance fund on all deposits of the depositor's money (the nation average is about 50%).
The answer is, the banks do, otherwise, they will have to keep liquid assets at a level of the deductible (50% in your example), which does not make sense from the economic point of view. First of all, no banks keeps more than 10% in cash or cash equivalents and no bank is allowed to issue its own cash equivalents unless they invest the cash at another institution for safe keeping where there will be almost no return on those assets, losing proposition.
What about the managements makes a bad decision (bad loans, fraud, embezzlements and so on) and loses the cash overnight and the bank is taken over by FDIC, who will pay the difference in the DIF insurance fund from that bank and the payout by FDIC.
FDIC must recoup those loses by law and who will they go after, the creditors of the bank and today's law states that the depositors are also creditors to the bank.
I believe this enlightens some of your thoughts.