from Birch Gold Group:
From Peter Reagan at Birch Gold Group
We’ve already reported that your bank could fail at any time thanks to the Fed’s fight against inflation. Banks adapted to a near-zero interest rate environment over the last two decades, and today they’re in bad shape overall.
Today, many are offering tempting yields on savings accounts. (Because it’s cheaper to borrow money from you, the customer, than from the Federal Reserve’s emergency funding program. I cannot stress this enough: no bank is truly safe.
Now, so long as your deposits stay under the FDIC’s insurance limits, a bank failure might be little more than a temporary inconvenience. When a bank does fail, the FDIC generally creeps in on a Sunday and makes sure everything is open for business as usual Under New Management the following morning.
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Sometimes, though, banks can fail individual customers…
Say you’re standing in line at the grocery store, swipe your debit card to pay. Then you swipe again. After an embarrassing exchange with the cashier and an irate phone call, you’re astonished to learn that your bank has closed your account?
No warning. No notice. Simply cut off from your deposits…
Why would a bank do this? “We’ll do whatever we can to fix this”
These sudden bank account closures happen a lot more often than you might think. Recently, the issue came to the attention of The New York Times:
…they discover that their accounts no longer work while they’re at the grocery store, rental car counter or A.T.M. When they call their bank frantically, representatives show concern at first. “Oh, no, so sorry,” they say. “We’ll do whatever we can to fix this.”
But then comes the telltale pause and shift in tone. “Per your account agreement, we can close your account for any reason at any time,” the script often goes. These situations are what banks refer to as “exiting” or “de-risking.”
For some unspecified reason, the bank decides a customer is “too risky” and cuts them off.
This would be completely understandable if the customer were engaged in fraud, money-laundering or wiring money to a North Korean or Iranian bank account.
That’s not what’s happening in these cases.
Rather, the source of the problem might be something as simple as a software bug, according to Aaron Ansari, a programmer who helped develop banking risk algorithms:
There is no humanization to any of this, and it’s all just numbers on a screen. It’s not “No, that is a single mom running a babysitting business.” It’s “Hey, you’ve checked these boxes for a red flag – you’re out.”
In the criminal justice system, you’re famously innocent until proven guilty.
In the banking system, you’re only innocent so long as you aren’t suspicious.
So what constitutes “suspicious” activity, in the eyes of a bank’s risk-management algorithm?
How about a 10-year-old arrest?
Nick Seidel, 42, of Chicago, has had his bank break up with him three times. Chase dumped him first. Then, after an 18-month relationship with Fifth Third, it, too, shut down his accounts.
“I had never had any banking issues, no overdrafts or suspicious activity,” Mr. Seidel said. “Apparently some banks just run public searches of their clients and drop them if they are justice-impacted. It’s always a frustrating, inconvenient and embarrassing experience.”
The hilarious part of this story is, Mr. Seidel learned from his mistakes. He’s now employed by a federal regulator investigating securities fraud – he passed the background check to become a fraud investigator, but he can’t have a bank account!
Hopefully you’ve never had any run-ins with the criminal justice system.
But do you ever use cash?
That, too, is highly suspicious…
The owner of a bar used the same bank for years, depositing their profits on Fridays and Mondays. Then one day all their accounts were closed. Why?
Well, federal law requires depositors to fill out a form when depositing or withdrawing $10,000 in cash. Apparently, that’s not good enough any more:
The bank’s explanation is especially maddening, given that he and Ms. Maslanka had filled out plenty of the $10,000 forms over the years. “What’s to gain from not filling it out?” he said. “What’s the risk of filling it out? I’ve done both when deposits warranted that.”
“I’m still so confused,” Ms. Maslanka said. “Do you think I’m part of some underground Mafia, laundering money through my little beer bar?”
The point is, banks require compliance with a secret list of behaviors – and failure to comply with their unwritten rules gets your account closed.
It’s infuriating!
One such member of Chase named Naafeh Dhillon tried to pay for dinner in December and had both his credit and debit cards declined.
When he called the bank, a support agent said Chase had let him go, and a notice should be in the mail. The cause? “Unexpected activity.”
When he visited the bank, Chase cut Dhillon a cashier’s check for his balance with no further explanation.
Like most honest people, you could break the secret rules without even knowing it, without engaging in any illegal activity. Suspicion is sufficient evidence for banks to close your accounts.
Surely all this time and effort is making the nation safer from real criminals, right?
