October 20, 2020

Bucks Blog: Keeping an Eye on Savings Account Transfers

Back in January, I fulfilled a New Year’s resolution by setting up automatic online transfers for my children’s weekly allowances. So far, so good — or, so I thought.

Last week, I got a stern e-mail from Capital One 360 (formerly ING Direct), warning me that I was making too many withdrawals from my savings account. If I didn’t stop, they’d have to close the account, “since this isn’t your first offense,” the e-mail said. I could practically see the finger wagging.

What, I wondered, had I done wrong? I vaguely recalled another e-mail from the bank last month, but I didn’t open it. I don’t ever “withdraw” money from my account. Since I had previously set up a monthly transfer from my outside checking account into my Capital One account (actually, ING Direct, when I’d first done it), I’d simply set up automatic transfers of $5 a week from my savings account to the girls’ subaccounts, for their allowances.

The problem, according to the helpful representative I spoke to on the phone, is that federal rules (Regulation D, to be precise) permit just six withdrawals a month for savings accounts. Transfers out — even to “subaccounts” within the bank, like those I had created for my girls’ allowances — count as withdrawals. And I was doing eight a month.

So to solve the problem, I’d have to reduce the number of transfers — say, to twice a month for each girl — or have the weekly $5 deposits made directly from my outside checking account. (There’s no limits on funds coming in, just going out.) Or, I could open a new Capital One 360 checking account, which doesn’t limit withdrawals.

I chose the second option. The point of the online transfers is for my children to watch the balance grow week by week, and I fear I’d lose an incentive to discuss their money with them regularly if I reduced the frequency of deposits. As it is, I sometimes forget to show them their balances anyway.

The representative canceled the existing transfers for me, and then I went online and set up the new, weekly transfers from my outside account.

The switch was a minor inconvenience, and actually reminded me to be more active in discussing finances with the girls, so in the end it all worked out fine. At least, I think it did. We’ll see.

Have you encountered any glitches when setting up online accounts for your children’s allowances? Or have you had any problems in setting up transfers to or from a savings account for yourself?

Article source: http://bucks.blogs.nytimes.com/2013/04/02/keeping-an-eye-on-savings-account-transfers/?partner=rss&emc=rss

DealBook: JPMorgan Chase Is Reining In Payday Lenders

JPMorgan Chase plans to give customers more power over their high-interest payday loans.Timothy A. Clary/Agence France-Presse — Getty ImagesJPMorgan Chase plans to give customers more power over their high-interest payday loans.

JPMorgan Chase will make changes to protect consumers who have borrowed money from a rising power on the Internet — payday lenders offering short-term loans with interest rates that can exceed 500 percent.

JPMorgan, the nation’s largest bank by assets, will give customers whose bank accounts are tapped by the online payday lenders more power to halt withdrawals and close their accounts.

Under changes to be unveiled on Wednesday, JPMorgan will also limit the fees it charges customers when the withdrawals set off penalties for returned payments or insufficient funds.

The policy shift is playing out as the nation’s biggest lenders face heightened scrutiny from federal and state regulators for enabling online payday lenders to thwart state law. With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or foreign locales like Belize, Malta and the West Indies to more nimbly dodge statewide caps on interest rates.

Bank of America and Wells Fargo said that their policies on payday loans remained unchanged.

At an investor meeting in February, Jamie Dimon, JPMorgan Chase’s chief executive, called the practice, which was the subject of an article in The New York Times last month, “terrible.” He vowed to change it.

While JPMorgan Chase never directly made the loans, the bank, along with other major banks, is a critical link for the payday lenders. The banks allow the lenders to automatically withdraw payments from borrowers’ bank accounts, even in states like New York where the loans are illegal. The withdrawals often continue unabated, even after customers plead with the banks to stop the payments, according to interviews with consumer lawyers, banking regulators and lawmakers.

The changes at JPMorgan, which will go into effect by the end of May, will keep bank customers from racking up hundreds of dollars in fees, generated when the payday lenders repeatedly try to debit borrowers’ accounts. Still, the changes will not prevent the payday lenders from extending high-cost credit to people living in the states where the loans are banned.

It is possible that other lenders could institute changes, especially because rivals have followed JPMorgan’s lead in recent years. In 2009, for example, after JPMorgan capped overdraft fees at three a day, Wells Fargo also changed its policies to reduce the number of daily penalties charged.

The changes come as state and federal officials are zeroing in on how the banks enable online payday lenders to bypass state laws that ban the loans. By allowing the payday lenders to easily access customers’ accounts, the authorities say the banks frustrate government efforts to protect borrowers from the loans, which some authorities have decried as predatory.

Both the Federal Deposit Insurance Corporation and the Consumer Financial Protection Bureau are scrutinizing how the banks enable the lenders to dodge restrictions, according to several people with direct knowledge of the matter. In New York, where JPMorgan has its headquarters, Benjamin M. Lawsky, the state’s top banking regulator, is investigating the bank’s role in enabling lenders to break state law, which caps interest rates on loans at 25 percent.

Facing restrictions across the country, payday lenders have migrated online and offshore. There is scant data about how many lenders have moved online, but as of 2011, the volume of online payday loans was $13 billion, up more than 120 percent from $5.8 billion in 2006, according to John Hecht, an analyst with the investment bank Stephens Inc.

By 2016, Mr. Hecht expects Internet loans to dominate the payday lending landscape, making up about 60 percent of the total payday loans extended.

JPMorgan said that the bank will charge only one returned item fee per lender in a 30-day period when customers do not have enough money in their accounts to cover the withdrawals.

That shift is likely to help borrowers like Ivy Brodsky, 37, who was charged $1,523 in fees — a combination of insufficient funds, service fees and overdraft fees — in a single month after six Internet payday lenders tried to withdraw money from her account 55 times.

Another change at JPMorgan is intended to address the difficulty that payday loan customers face when they try to pay off their loans in full. Unless a customer contacts the online lender three days before the next withdrawal, the lender just rolls the loan over automatically, withdrawing solely the interest owed.

Even borrowers who contact lenders days ahead of time can find themselves lost in a dizzying Internet maze, according to consumer lawyers. Requests are not honored, callers reach voice recordings and the withdrawals continue, the lawyers say.

For borrowers, frustrated and harried, the banks are often the last hope to halt the debits. Although under federal law customers have the right to stop withdrawals, some borrowers say their banks do not honor their requests.

Polly Larimer, who lives in Richmond, Va., said she begged Bank of America last year to stop payday lenders from eroding what little money she had in her account. Ms. Larimer said that the bank did not honor her request for five months. In that time period, she was charged more than $1,300 in penalty fees, according to bank statements reviewed by The Times. Bank of America declined to comment.

To combat such problems, JPMorgan said the bank will provide training to their employees so that stop-payment requests are honored.

JPMorgan will also make it much easier for customers to close their bank accounts. Until now, bank customers could not close their checking accounts unless all pending charges have been settled. The bank will now allow customers to close accounts if pending charges are deemed “inappropriate.”

Some of the changes at JPMorgan Chase echo a bill introduced in July by Senator Jeff Merkley, Democrat of Oregon, to further rein in payday lending.

A critical piece of that bill, pending in Congress, would enable borrowers to more easily halt the automatic withdrawals. The bill would also force lenders to abide by laws in the state where the borrower lives, rather than where the lender is.

JPMorgan Chase said it is “working to proactively identify” when lenders misuse automatic withdrawals. When the bank identifies those problems, it said, it will report errant lenders to the National Automated Clearing House Association, which oversees electronic withdrawals.

Article source: http://dealbook.nytimes.com/2013/03/19/jpmorgan-reining-in-payday-lenders/?partner=rss&emc=rss

DealBook: FrontPoint to Shut Most Funds After Insider Trading Charges

Steve Eisman, a star manager at FrontPoint, considered leaving in the wake of the allegations of insider trading.Daniel Acker/Bloomberg NewsSteve Eisman, a star manager at FrontPoint, considered leaving the firm in the wake of the allegations of insider trading.

FrontPoint Partners, once a multibillion-dollar hedge fund before it was battered by allegations of insider trading, will shut down most of its funds by the end of the month.

The decision to wind down and restructure its business is a surprising reversal of fortune for the hedge fund. Earlier this year, FrontPoint had appeared to have weathered the scandal when it raised $1 billion for a new fund. And in March, its co-chief executives, Dan Waters and Mike Kelly, announced that the firm had bought back majority ownership of itself from Morgan Stanley, concluding a long-delayed spinoff.

But the good news was short-lived as investors continued to flee the fund when the window for withdrawals opened earlier this month.

“We have received capital redemption requests from some of our clients and as always we will honor those requests,” FrontPoint said in a statement to The New York Times in response to questions. “These actions are affecting strategies differently at FrontPoint Partners and as a result we will be winding down select strategies.”

The firm declined to state how much money investors wanted back. But people who spoke to the fund’s executives say that FrontPoint was winding down most of its business.

Earlier on Thursday, a spokesman for the firm, Steve Bruce, had denied that the firm was shutting down.

FrontPoint is just one of several funds brought low by a widespread government crackdown on insider trading at hedge funds. Two funds, Level Global Investors and Loch Capital, shut down after raids by federal agents late last year linked to the broader investigation.

More broadly, FrontPoint’s move comes at a difficult time for the hedge fund industry, amid increased regulation and difficult markets. Some prominent managers like Stanley Druckenmiller, Chris Shumway and most recently Carl C. Icahn have left the field and manage their own money.

In many ways, the rise and fall of FrontPoint mirrors that of the industry itself. In late 2006, when owning a hedge fund was considered a smart way for banks to deploy capital, the firm was bought by Morgan Stanley for about $400 million.

Then, during the financial crisis, the hedge fund was lauded for the insight of one of its most colorful managers, Steve Eisman, who had placed a bet against the subprime mortgage market that earned him hundreds of millions and a major role in “The Big Short,” the best seller by Michael Lewis. Several other hedge fund managers, including John A. Paulson and the Harbinger Group founder Philip Falcone, also minted fortunes from their bets against the housing market.

But trouble began at FrontPoint in November last year when a French doctor was arrested by federal authorities and accused of leaking secret information about a clinical drug trial to an unnamed portfolio manager. It quickly became public that the portfolio manager was Joseph F. Skowron, a doctor who ran a health care portfolio at FrontPoint.

The firm, which managed about $7 billion at the time, placed Mr. Skowron on leave and terminated the entire health care team. Effort to reassure investors that Mr. Skowron’s fund was separate from the many others it ran failed. Clients withdrew $3.5 billion as they raced to the exits.

A long planned spinoff from Morgan Stanley — prompted by the Dodd-Frank financial overhaul — was delayed as result of the huge withdrawals and legal complications.

The tide seemed to turn in January, when the firm announced that a new fund that would lend money to midsize companies had raised $1 billion. At the time, Mr. Waters, one of the firm’s chief executives, indicated the firm’s transparency had paid off.

But weeks later, Mr. Eisman, FrontPoint’s star manager, told those close to him that he was considering leaving the firm, frustrated with the collateral damage his funds had suffered from the insider trading incident. Clients had withdrawn nearly $500 million from funds he managed, according to a person close to Mr. Eisman.

Last month, Mr. Skowron was formally charged by federal authorities, accused of conspiring to hide his role in a trading scheme that netted FrontPoint Partners more than $30 million. Mr. Skowron was leaked confidential tips about a drug trial by Yves M. Benhamou, a French doctor, who accepted envelopes stuffed with cash for the information.

Mr. Benhamou has pleaded guilty to insider trading and obstruction of justice.

FrontPoint declined to say which funds would be closed after the shakeout. The only fund they did indicate would remain open was the midsize lending fund, which has money committed for several years.

Article source: http://feeds.nytimes.com/click.phdo?i=d1377718695c741f2ce34385bc05263e

DealBook: FrontPoint to Shut Most Funds After Insider Charges

Steve Eisman, a star manager at FrontPoint, considered leaving in the wake of the allegations of insider trading.Daniel Acker/Bloomberg NewsSteve Eisman, a star manager at FrontPoint, considered leaving the firm in the wake of the allegations of insider trading.

FrontPoint Partners, once a multibillion-dollar hedge fund before it was battered by allegations of insider trading, will shut down most of its funds by the end of the month.

The decision to wind down and restructure its business is a surprising reversal of fortune for the hedge fund. Earlier this year, FrontPoint had appeared to have weathered the scandal when it raised $1 billion for a new fund. And in March, its co-chief executives, Dan Waters and Mike Kelly, announced that the firm had bought back majority ownership of itself from Morgan Stanley, concluding a long-delayed spinoff.

But the good news was short-lived as investors continued to flee the fund when the window for withdrawals opened earlier this month.

“We have received capital redemption requests from some of our clients and as always we will honor those requests,” FrontPoint said in a statement to The New York Times in response to questions. “These actions are affecting strategies differently at FrontPoint Partners and as a result we will be winding down select strategies.”

The firm declined to state how much money investors wanted back. But people who spoke to the fund’s executives say that FrontPoint was winding down most of its business.

Earlier on Thursday, a spokesman for the firm, Steve Bruce, had denied that the firm was shutting down.

FrontPoint is just one of several funds brought low by a widespread government crackdown on insider trading at hedge funds. Two funds, Level Global Investors and Loch Capital, shut down after raids by federal agents late last year linked to the broader investigation.

More broadly, FrontPoint’s move comes at a difficult time for the hedge fund industry, amid increased regulation and difficult markets. Some prominent managers like Stanley Druckenmiller, Chris Shumway and most recently Carl C. Icahn have left the field and manage their own money.

In many ways, the rise and fall of FrontPoint mirrors that of the industry itself. In late 2006, when owning a hedge fund was considered a smart way for banks to deploy capital, the firm was bought by Morgan Stanley for about $400 million.

Then, during the financial crisis, the hedge fund was lauded for the insight of one of its most colorful managers, Steve Eisman, who had placed a bet against the subprime mortgage market that earned him hundreds of millions and a major role in “The Big Short,” the best seller by Michael Lewis. Several other hedge fund managers, including John A. Paulson and the Harbinger Group founder Philip Falcone, also minted fortunes from their bets against the housing market.

But trouble began at FrontPoint in November last year when a French doctor was arrested by federal authorities and accused of leaking secret information about a clinical drug trial to an unnamed portfolio manager. It quickly became public that the portfolio manager was Joseph F. Skowron, a doctor who ran a health care portfolio at FrontPoint.

The firm, which managed about $7 billion at the time, placed Mr. Skowron on leave and terminated the entire health care team. Effort to reassure investors that Mr. Skowron’s fund was separate from the many others it ran failed. Clients withdrew $3.5 billion as they raced to the exits.

A long planned spinoff from Morgan Stanley — prompted by the Dodd-Frank financial overhaul — was delayed as result of the huge withdrawals and legal complications.

The tide seemed to turn in January, when the firm announced that a new fund that would lend money to midsize companies had raised $1 billion. At the time, Mr. Waters, one of the firm’s chief executives, indicated the firm’s transparency had paid off.

But weeks later, Mr. Eisman, FrontPoint’s star manager, told those close to him that he was considering leaving the firm, frustrated with the collateral damage his funds had suffered from the insider trading incident. Clients had withdrawn nearly $500 million from funds he managed, according to a person close to Mr. Eisman.

Last month, Mr. Skowron was formally charged by federal authorities, accused of conspiring to hide his role in a trading scheme that netted FrontPoint Partners more than $30 million. Mr. Skowron was leaked confidential tips about a drug trial by Yves M. Benhamou, a French doctor, who accepted envelopes stuffed with cash for the information.

Mr. Benhamou has pleaded guilty to insider trading and obstruction of justice.

FrontPoint declined to say which funds would be closed after the shakeout. The only fund they did indicate would remain open was the midsize lending fund, which has money committed for several years.

Article source: http://feeds.nytimes.com/click.phdo?i=d1377718695c741f2ce34385bc05263e

Bucks: To Open an Account, 111 Pages of Fine Print

While you are opening that new checking account, don’t forget to read the accompanying 111 pages of legal fine print that go along with it.

How many pages?

A new study from the Pew Charitable Trusts found that 111 pages is the median length of checking account disclosure documents given to customers by the 10 biggest banks in the United States.

Often nestled in the thicket of disclosures, schedules and related addenda are rules that favor the bank over the customer. These include binding arbitration clauses, which require any dispute over the contents of the agreement to be settled by a private arbitrator — usually one picked by the bank — instead of a judge. Other versions allow customers to take their case to court, but require them to cover the bank’s costs — even if the customers are found to be in the right.

An excerpt from a PNC Bank disclosure, included in the report, even states that such funds will be withdrawn from your account “without prior notice to you.”

The report, on “hidden risks” in checking accounts, notes that the new Consumer Financial Protection Bureau has already been asked by Congress to look into such mandatory arbitration clauses.

Pew recommends that the bureau require banks to summarize crucial information about fees, account terms and conditions in a short, plain-language format, similar to the so-called Schumer Box now used for credit cards. That would make it easier for consumers to compare accounts and avoid costly fees.

Pew also recommends that regulators require banks to post deposits and withdrawals in an “objective” way — like chronological order — to minimize instances when banks reorder postings to increase fees from bounced checks. Most banks post checks in order of highest dollar amount to lowest, which tends to maximize the bounced check fees. Banks can also process debits to the account before posting deposits.

Pew provides a clear illustration of the effect of this method, in a chart based on a recent court challenge of Wells Fargo’s daily transaction-posting policy. The chart shows that posting deposits and debits in chronological order would result in fees of $22, while Wells Fargo ordered them in a way that the customer ended up owing $88.

Citibank, in a departure from its big bank peers, recently announced that it would start processing checks in in “low to high” order to minimize potential fees for overdrawn accounts. But it remains in the minority.

“Since we collected our data, some banks have said they’re changing this policy,” said Eleni Constantine, director of Pew’s financial security portfolio. “But it’s voluntary. They could go back to what they were doing before, anytime they want to.”

The Pew report also found that consumers are not given enough information to compare the various overdraft options — that is, protection against overdrawing your account by debits or bounced checks — offered by their banks.

Usually, a transfer plan, in which funds are moved from the customer’s savings account or credit card to cover shortages in the checking account, is significantly cheaper, at about $10 a transfer. But many banks promote more expensive options in which the bank pays the shortage and charges a fee — typically $35.

Have you read your checking account disclosure? Did you understand it? Did anything in it surprise you?

Article source: http://feeds.nytimes.com/click.phdo?i=c2b3147552dbacef972494438bb798ff

Letters: ‘My Finest Hour as an Investor’

To the Editor:

While I found your article, “The Raider in Winter” (April 17) to be informative, I believe readers might draw conclusions that are inaccurate. The article states, “Mr. Icahn lost so much money during the financial crisis that he is still a bit shaken by the experience.” I find this statement to be nonsense.

In my business, if losing money shakes you up, you won’t last until “spring,” let alone become a “raider in winter.” Ironically, and at the risk of being immodest, I believe the financial crisis was my finest hour as an investor and as a man who stood by his commitments.

During the crisis, many hedge fund investors demanded their money back, but many funds refused. My fund returned capital to any investor who asked. To meet withdrawals, from November 2008 to March 2009, I invested $500 million of my own capital, rather than having the fund sell significant positions at depressed prices. While I believed then that my investment might have a major short-term loss, it became one of my best ever, resulting in a 61 percent annualized return.

The hedge fund in general certainly was not a losing experience. My investment in it over the last seven years totaled $3.4 billion. My profit on that, including fees, now totals $2.1 billion.

Running the fund has been enjoyable and exciting, not a “headache.” While I remain bullish for the second quarter, I believe that within the next several years, there will be a severe market break. I don’t wish to manage other people’s money through another 2008. It may sound corny, but it bothers me more to lose money for those who have entrusted me than to lose my own capital. I am battle-hardened; they are not.

Carl C. Icahn

Manhattan, April 20

Article source: http://feeds.nytimes.com/click.phdo?i=ad5c0f4681455da560218a2cee3f0000

Bucks: Citi’s New Policy May Mean Fewer Bounced Checks

Citibank says it will change the way it processes customers’ checks, a move that could result in fewer fees for bounced checks for account holders.

Customers are being notified this week in their bank statement mailings that as of July 25, the bank will process checks in order of “low to high”—that is, it will pay checks in order of smallest dollar amount to the largest. Currently, Citibank — as do most banks — pays checks in order of highest dollar amount to the lowest. The thinking has been that big checks are often covering important bills like mortgage or car payments.

The method, though, tends to maximize fees for bounced checks and has long been criticized by consumer advocates. Cece Stewart, Citibank’s president of consumer and commercial banking, writing in a company memo this week, gave the example of a customer with $100 in a checking account who wrote three checks, for $90, $35 and $25. Currently, the bank would pay the $90 check first, leaving insufficient funds to cover the second two, resulting in two fees of $34 each — $68 total.

Under the new system, the bank will process the $25 and $35 checks first. The $90 check would still bounce, but the customer would face just one $34 fee.

“We think this is the right thing to do and we believe we are the first major bank to do it,” Ms. Stewart wrote.

The Center for Responsible Lending says on its Web site that the change makes Citibank “unusually active among our nation’s largest banks in voluntarily reforming” its overdraft practices. “We think it’s a really big deal,” says Rebecca Borne, a senior policy analyst at the center. “Finally, a large bank has acknowledged what we think is the reality, that low to high is best for customers.”

Citibank has never charged overdraft fees for debit card transactions or A.T.M. withdrawals, according to Ms. Stewart. Rather, the bank simply declines those transactions if an account balance is too low.

Wells Fargo and Bank of America currently pay checks from high to low, but have bowed to consumer concerns by reducing the maximum number of overdraft fees to four a day from 10. Both banks charge $35 for each overdraft, so that’s still a potentially hefty $140 a day.

Since customers write fewer checks these days, however, paper checks are often less of a concern than fees charged when debit card purchases push accounts past their limits. Someone sitting in a coffee shop for a few hours, paying for snacks and refills, could potentially do some real damage if the balance dips too low. Last summer, Bank of America began declining debit card transactions if they exceeded the account’s funds, instead of letting them go through and then charging a fee.

Wells Fargo currently gives customers the option — required by federal regulators — of having debit transactions declined or having them go through, with a fee, if their balance is too low. (Even if the customer has given permission to be charged overdraft fees, thought, the bank still won’t impose more than four.)

Wells Fargo says it will make changes later this spring to the way it processes some payments. Currently, all categories of deductions are processed at the end of the day and paid in high-to-low order.

But as of May 16, the bank will take a hybrid approach. Paper checks and automatic deductions — like preauthorized monthly student loan payments — will still be paid from high to low. But the bank will process A.T.M. withdrawals, debit card purchases and online bills chronologically, in the order received. (JPMorgan Chase has followed a similar approach for about a year, a spokesman said). If for some reason a specific transaction time isn’t available, a Wells Fargo spokeswoman, Richele Messick, said, the bank will process such debits in order of low to high. “These changes are going to help simplify processes and benefit customers,” Ms. Messick said.

What do you think? Would you rather see one standard for charging overdraft fees, or do you prefer letting banks set their own policies?

Article source: http://feeds.nytimes.com/click.phdo?i=014292f8c366f6cb725c5ec4059338c2