Popular 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.