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Popular Direct Implements 60-Day Account Freeze On New Accounts

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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.

Related Pages: nationwide deals, Internet banks
Comments
FerrariOwner
FerrariOwner   |     |   Comment #1
2% on savings. Bye bye unPopular Direct.
Ann
Ann   |     |   Comment #57
The above comment seems to be throwing the rest of the page into italics.
ATTN: Ken
Timing belt adjustment
Timing belt adjustment   |     |   Comment #72
Does this 60 day freeze apply to "internal transfers" (example) a popular direct customer has the new 2% savings account, pulls from an external account and wants to use that to fund a popular direct CD?
RJM
RJM   |     |   Comment #73
ask. They are open 24/7.
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.
Timing belt adjustment
Timing belt adjustment   |     |   Comment #74
Got this reply from Popular

" 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.
Prometheus
Prometheus   |     |   Comment #2
With SO many other excellent opportunities and options out there, Popular Direct seems to me a really poor choice of a place to do business.
RJM
RJM   |     |   Comment #6
At the time, nobody had a better rate and how was I supposed to know they would freeze my account? I have had a lot of bank accounts and nobody ever froze one before.

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.
deplorable 1
deplorable 1   |     |   Comment #3
I can't believe they are sticking with this terrible policy after all the complaints they have received! Their savings account should match the highest 3 month CD rate with that policy then since by the time the 60 days has passed and they verify the external accounts it will be 90 days. I chase rates and will go with the highest rate 99.9% of the time even if the institution has complaints but this bank will not get my business again no matter what the rate is unless they change this strange policy. I seem to recall their advertised CD rates not corresponding to their stated APY's as well. Lots of strangeness with this bank.
DCGuy
DCGuy   |     |   Comment #4
Probably has experienced a lot of dubious financial transactions in the past. Heck, when your rates seem attractive and you are based in the Caribbean, that tends to attract tax evaders, drug dealers, and money launderers. Also, could be an issue with big inflows and outflows activity that they have experienced. That is why some banks (such as Morrill and Janes) which closed all out of state accounts in order to eliminate people who move large amounts of money in/out making for volatile bank balances (churning is not a good thing).
BAIL-IN
BAIL-IN   |     |   Comment #17
deplorable 1, we discussed the BAIL-IN issue some time ago, this is just a dry run to remind people that the money deposited at any institution belongs to them, unless they will allow you a withdrawal. Please read the BAIL-IN law, the money is not ours, it is assigned and on trust hold bases to any bank or credit union. Should a financial crises occurs, do not count on your money on deposit at any bank, it may be confiscated for good. The BAIL-IN law that Obama created, serves the government and the banks and not the people. Very interesting language in it, the BAIL-IN can be triggered by many events, including bank's insolvency, criminal charges, phony ledger books, embezzlements, national emergencies, financial crises, political unrests and many other causes.
Dfro
Dfro   |     |   Comment #20
I'm not sure how you can read the legislation and get the underlying meaning completely wrong. The Bail-in law mainly affects investors to a bank, not customers. Your funds in a bank are still protected by FDIC / NCUA up to 250k in case of a failure. Of course if you have more than 250k in a single bank, then you would also be affected which is why you generally split your assets among banking products to take full advantage of insurance, but that's a different topic.

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.
Dodd-Frank
Dodd-Frank   |     |   Comment #24
Dfro, Please read these:
‘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.
deplorable 1
deplorable 1   |     |   Comment #25
I see how you could interpret it that way but what would be the point of the FDIC or NCUA then? I mean if that were truly the law then why not just disband these two organizations? Now I would certainly take a pause before investing in a bank stock or keeping anything above $250,000 at one bank but I think our liquid cash up to the FDIC limits should be safe.
FDIC
FDIC   |     |   Comment #27
#25, The FDIC and DIF are not able to pay 100% of the depositors money, in other words, they can go as high as 70% in some case, but most likely the number is around 50% of your money at any bank in case of a major crisis. In case of catastrophic financial failure, nobody gets the money out, they will issue you IOU that may never be paid or paid in installments over a decade or more and then again, not at the original amount(s).
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
Ann
Ann   |     |   Comment #58
And then they had the nerve to respond to complaints with that snotty paragraph about how their fine print allows them to do this so they're within regulations.
Sam
Sam   |     |   Comment #5
Something tells me they are getting ready for mitigating a catastrophic "run on the bank", which will be caused by their own policies.
RJM
RJM   |     |   Comment #7
$9.2 billion in assets and $1.7 billion in equity tells me they will be fine.

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.
PopularAssets
PopularAssets   |     |   Comment #18
#7, What about if those assets are pledged or invested in losing instruments or hedge funds or are a long term investments that is creating short term insolvency?
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?
Nothing
Nothing   |     |   Comment #19
Won't collect $200...the beauty of America...do what you want and pay the price later!
RJM
RJM   |     |   Comment #23
Put all your money under your mattress, buy gold & silver and stock up on guns & ammo.

That approach has worked great for the last 30 years.
sar·casm
'sär?kaz?m/
#29 - This comment has been removed for violating our comment policy.
#8 - This comment has been removed for violating our comment policy.
tvholic
tvholic   |     |   Comment #9
I'm one of the people who went through this, so I'll add a few points.

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.
Bogie
Bogie   |     |   Comment #13
Good for you, tvholic, comment #9. Got to give you "credit".

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.
RJM
RJM   |     |   Comment #14
I was not charged a bounced ACH fee and I did not bounce a check or bill pay but it was close. I also filed a CFPB complaint but they never gave me the option of closing it early. All in all, I only lost access for 8 days I think. But it's alarming when you can't count on your bank sending your money when you ask for it. I have no problem leaving the $500 in there until 10/5.
Nothing
Nothing   |     |   Comment #10
Ken, how about some benchmarks/metrics on how "well" the CFPB/Fed is doing? My 2cents...CFPB should be dissolved if it is not going to do its statutory charter...look at the leadership now and who has been nominated? How many did not get a notice from Equifax on data breach...or had to go on line and save the company from having to provide direct notice? Think about it!!! And, the Fed...with all the noise lately from the lead Real Estate person on interest rates...does one "really" think the Fed is going to be proactive?
Ken, are you up to it?
Ann
Ann   |     |   Comment #60
"CFPB should be dissolved if it is not going to do its statutory charter...look at the leadership now and who has been nominated?"

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.
Rico
Rico   |     |   Comment #11
That savings account should be advertised as a 2 month CD. Terrible policy. They must have either been taking losses due to fraud, or are concerned about Patriot Act compliance, or both.
Who is running the show up there.
aaa
aaa   |     |   Comment #15
No. No Rico ... Not even that.

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.
John
John   |     |   Comment #16
I was grandfathered into the 2% rate before they lowered it to 1.85%, but looking at my statement, it doesn't look like I'm earning 2%. It's more like 1.92%.
Jay
Jay   |     |   Comment #21
Wonder how this practice affects quarterly reports to shareholders and regulators?
Anonymous
Anonymous   |     |   Comment #22
No this is their weasel-ly way of making the spread on 60 days of interest rate increases - they have locked you into a 2 mos CD essentially. They make the spread cause rates are going up more rapidly then they probably predicted. No other excuse, as I have never seen or heard of this happening (after the fact) with any bank or credit union I have ever worked with. These accounts are liquid by definition, period. I would never do business w them ever - even if they offered 100% interest they should go bankrupt and put their executives out of a job. Not with my hard earned money - you don’t.
RJM
RJM   |     |   Comment #26
What is interesting here is in my case, I opened the account in early April so I should have been subject to their 60 day thing. Except I did an ACH pull from another bank successfully. Then my 2nd ACH out is the one that bounced. Then they came up with this send proof of the funding bank account. So I did that and they said it would be 2-3 days. It turned into 8 days. And somewhere in there the 60 days passed too. So I guess they ran out of excuses for my account, I proved the funding bank account, the 60 days had passed and at that point, they had no choice but to give me access, I guess. I guess I am lucky in that I did not have a need for a large amount sooner. I did find myself low on cash because of the bounced ACH and I was flabbergasted when they could not release $500. But, I found my long lost brokerage account checkbook and i used the money in the brokerage account for my small bills.

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)
Your ACH
Your ACH   |     |   Comment #28
#26, In Dodd-Frank bill, it is specifically stated that all depositors are creditors and the banks owns your money, until or unless they allow you the access to them. I'm surprised that some people find this now, it will be the norm for the future. In my case, I never deposit more than $50k at any bank or credit union. I have accounts in over 40 institutions and at all local banks for liquidity.
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).
losingtrader
losingtrader   |     |   Comment #30
C'mon guys, a lot of this stuff is nonsense. We had a catastrophic failure of S&L's in the 80's where 30% of them closed and everyone covered by FSLIC insurance was paid. Back then there was no limit on what a failing institution could pay in interest to attract money. Now there are strict limits for risky institutions.


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.
Nothing
Nothing   |     |   Comment #31
Trust me! Where have we heard that before! The fact that some are expressing concerns...should be cause for YOUR concern. Give us an opinion of counsel (independent, not agency) that the quoted section 26 is not applicable! Give us some adequate assurances rather than "trust us!"
ReadDodd-FrankLaw
ReadDodd-FrankLaw   |     |   Comment #32
#30 and #31, Please find exert from FDIC web site about the insurance fund.
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.
losingtrader
losingtrader   |     |   Comment #41
"Trust me! Where have we heard that before"



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.?
Comment#30
Comment#30   |     |   Comment #45
#30, Not so, please read Dodd-Frank and go line by line, nobody is saying anything that is not there.
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
deplorable 1
deplorable 1   |     |   Comment #33
Well I can only speak from experience that during the financial crisis I was reimbursed over $250,000 from the FDIC after 2 banks failed where I held 2 CD's. It took me about 2 weeks to get my funds back and I think they actually paid most of the interest minus mailing time. My only complaint was that I had to wait for a check rather than have the funds sent electronically. I think Trump rolled back some of the Dodd-Frank regulations although I don't know which specific ones. Now that was the worst bank crisis that I have seen and the FDIC took care of me. I was a bit concerned about having more than $100k at one bank until they made the new $250k cap permanent. I'm not about to keep cash laying around earning 0% APY unless interest rates in the bank are negative.
ReadDodd-FrankLaw
ReadDodd-FrankLaw   |     |   Comment #34
#33, Dodd-Frank was not the law during that time and the $250K FDIC insurance was just introduced in the wall street regulation (bill) law few years later and FDIC or Dodd-Frank law are not obligated to service it as such. There is no written law for FDIC to honer the $250K insurance, just a guidance and peace of mind.
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.
alan1
alan1   |     |   Comment #38
Don't be fooled by the panicmongers. For example, Comment #34 claims: "There is no written law for FDIC to honer the $250K insurance, just a guidance and peace of mind."

There is a law re $250,000 deposit insurance coverage for banks -- it's 12 U.S.C. 1821(a)(1)(E)
Response to alan1
Response to alan1   |     |   Comment #39
alan1 #38, Dodd-Frank supersedes the FDIC insurance. If FDIC is exhausted ,which at the moment has around $100 billions reserves and around $7.5 trillions in liabilities, and the bail out is not allowed, BAIL-IN takes effect.
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.
ReadDodd-FrankLaw
ReadDodd-FrankLaw   |     |   Comment #35
#33, I forgot to tell you that you got paid from the TARP money that FEDs gave to the bank to pay the depositors and because of that huge cost to the taxpayers, Dodd-Frank was born to stop any future such bail outs.
deplorable 1
deplorable 1   |     |   Comment #36
Well I need to do some more digging that's for sure. You may be right as that was BEFORE Dodd-Frank. I did find this article that supports your claim:
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?
deplorable 1
deplorable 1   |     |   Comment #37
Actually I got bailed out 3 times if you count the GM demand notes! lol I need to learn as much as possible about this as it seems like I'm always putting my money at risk somewhere in order to earn the best yield. I'm not being paranoid I just like being well informed ahead of time.
BEFORE Dodd-Frank
BEFORE Dodd-Frank   |     |   Comment #40
deplorable1, Trump did some changes on the accounting practices and on the audit trail, Dodd-Frank used to require lengthly and detail accounting practices that the audit companies had no time to post the previous report because it was never finished on time, before the new one was due. That saved the banks lots of money and time and no second audit is required at the end of the year. Because of Trump, the banks have more money for the savers instead for the accounting firms and the auditors.
I read in some economic paper that the big banks are savings something in order of $20 billions per year, thanks to Trump.
deplorable 1
deplorable 1   |     |   Comment #49
As far as I was able to tell these **** bail-in laws are still in place! They seem to be intertwined with foreign banks and the brainchild of IMF Director Christine LaGarde in response to the EU's bank bailouts. I found yet another scary article about the bail-in laws:
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.
losingtrader
losingtrader   |     |   Comment #42
No.
He got paid by a special assessment on all insured depository institutions.
Common Cents
Common Cents   |     |   Comment #44
The current law is largely irrelevant during a financial crisis. In 2008, the limits insured by FDIC and NCUA were raised, and the government provided a new guarantee of money markets.

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.
Comment#44
Comment#44   |     |   Comment #46
#44, that is the most inaccurate statement so far. Obama added $10 trillions to the national debt, the unemployment was 20%, the hidden inflation was 8%+, welfare checks and food stamps took $300 billions per year, the banks stopped paying interest on the deposits and now we continue to pay $500 billions per year in perpetuity on the interest in the borrowed and printed money. If $500 billions is not enough per year than we continue to run deficits of $1,5 trillions per year for all of the other social programs and defense.
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.
deplorable 1
deplorable 1   |     |   Comment #47
Yes and the folks who cheered on Obama are now hammering Trump on the deficit which is largely composed of the interest we are paying on his added debt(at a higher interest rate than 0% now). I find this very ironic/hypocritical. Just as a hypothetical what would have happened had Hillary became president and ran up the debt even faster, crashed the economy and took interest rates negative. This would have caused a run on the banks necessitating the use of the bail-in law that two other Democrats designed. Just a coincidence or was this the plan that Trump foiled by winning the election? You decide.
Luvcd
Luvcd   |     |   Comment #48
Just luv debt no matter who/which party created it...really? All depends what the money was spent for...got it!

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!
deplorable 1
deplorable 1   |     |   Comment #51
Who loves debt? Certainly not me! I would love to see debt going the other way and getting paid down. But to ignore the extra 10 trillion that Obama added to the debt and the interest we now have to pay on it is partisan. I'm not ignoring Bush's debt that we are paying interest on either. The higher the debt gets the harder it will be to pay off particularly with higher interest rates. Obama doubled down on Bush's debt and Trump isn't responsible for any of it other than paying the interest on it. That's why the current deficit is so high not just because of tax cuts. I want higher interest rates which is why I was angry with Obama adding 10 trillion to the debt instead of trying to pay it down. Trump had better find a way to address the debt as well and not just let it keep growing indefinitely.
Luvcd
Luvcd   |     |   Comment #68
#51. Then we are to surmise you would not be in favor of current white paper/bill concept with Republicans/Brady showing over $600 in new tax relief/clarification w/o any source of funding, i.e. more new debt.

As to Obama..get over it! It’s history...we are where are!
deplorable 1
deplorable 1   |     |   Comment #71
Yes it is history and so was the last election if you get my drift. I would have to see what is in it and who would benefit from it and if it would have any economic benefits. Just off hand though I would say no I don't approve of adding and more unnecessary debt at this time. ****Breaking news***** Trump just got trade concessions from the EU! Now I think that may save just a bit of cash that could be used to pay down the debt.
Post#42
Post#42   |     |   Comment #50
#42, you are correct on your observation, I like to add to it about the FDIC insurance.
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.
#52 - This comment has been removed for violating our comment policy.
Ann
Ann   |     |   Comment #61
"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. ... The difference between 1.85% at SPRXX and 2% at AA is $1.50 a year assuming a $1000 average balance."

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.) :-)
vamai
vamai   |     |   Comment #43
I want to add a few points to Ken’s terrific coverage of this major issue with Popular Direct (PD). First, the process for me to get my money back took over 90 days from opening the account because they are not equipped to handle so many complaints in an efficient manner. During this process I called dozens of times, emailed 15 times, sent the fraud department verification information 2 times. This process to get your money out of PD is a sham and they don’t really seem to care because the delays actually help keep the money there longer. So a 60 day delay to get your money is a lie. Secondly, the sense I got from all the discussions is that this may be a first use by a bank of this loophole in their fine print to hold up withdrawals. So why is it that PD gets advertisers such as Money Magazine, Kiplinger or BankRate.com to promote PD’s leading interest rates. None of these companies really care to discuss the dirty little secret that PD is a black hole. I can’t believe that Kiplinger and Money lists just a few high yielding bank MM accounts and PD is right there among the more competent and honest banks. Maybe their editors should read this blog and look at cfpb complaints before they take money from PD for advertising them so heavily. Thirdly, I cannot emphasize how important this blog and the CFPB becomes for investors. The CFPB is helpful in registering complaints and it is an unbiased third party. But CFPB’s usefulness is limited. They say on their site that it could take 60 days to resolve an issue and that’s pretty intimidating if you need your money back sooner. Also, few people know about the CFPB (apparently Kiplingers and Money never heard of it). Plus the CFPB is loathe to take on any further protection measures for consumers. They have their hands full with limited budget and under fire from this administration.

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.
Write to FDIC
Write to FDIC   |     |   Comment #53
To all of you who blindly believe and trust FDIC insurance, please read the facts in post #50 and if you still not believe it, please write a letter to them and ask (they never give info over the phone):
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%).
#54 - This comment has been removed for violating our comment policy.
Luvcd
Luvcd   |     |   Comment #67
Who buys insurance for 100% coverage? The deductible is, in effect, 50%. I buy home insurance with a large deductible (called self-insured) since making a claim will almost always result in cancellation. There will always be some cash/assets that is on banks balance sheet and thus 100% coverage is overkill. If FDIC needs more funds, it can make an assessment
Luvcd #67
Luvcd #67   |     |   Comment #69
#67, you wrote: " Who buys insurance for 100% coverage? "
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.
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