Very unusual situation with a bank...

[Denne]

I have a client that moved his money from a bank to a credit union in June of this year. He signed one set of papers that the CSR verified with her help desk as correct. Well....after establishing a five year CD for a much better rate at the credit union....3.2475%.....he thought all was set. Unfortunately the bank messed up the paperwork somehow and filed paperwork twice which they said caused them to transfer his funds back to the bank from the credit union. There was no account set up so they put the funds in a money market at .85% ;~( When the client got his credit union statement he realized his balance was zero and a penalty of nearly $300 had been charged. At that point he had only earned about a month of interest at the better rate. The bank now tells him he can get just 2.5%......terrible for something he didn't do wrong!

Well....now the bank says the credit union should have caught the error before sending a check for about $107,000.00 back to the bank. The Credit Union says they did what the paperwork says. He is in the middle and doesn't know what way to turn.

My opinion is that both institutions were in error, but the bank caused the issue. He has not lost nearly $1000.00 between the lost interest and the penalty. He can no longer get the 3.2474% and will loose interest that he should have had for the next five years. He is 90 years old and has asked me what to do. He is sharp and in excellent healh....even bowls a couple times a week! This, on the other hand is really upsetting to him however and he wants me to figure out what interest he will loose. He would like the bank to increase the amount of his principle by or reimburse him for the interest of...estimating....$4000 over the life of the CD and also reimburse him for the current lost interest due to their error as well as the penalty. Am I wasting my time figuring this for him? Any chance they will really increase the IRA CD amount for him????? Any chance they will do anything without getting an attorney....??? I don't want to waste his time or mine if there isn't a valid claim for him....

Opinions or prior experience with this type of issue??? Thanks!

[Jack from Ohio]

I have a client that moved his money from a bank to a credit union in June of this year...

...Opinions or prior experience with this type of issue??? Thanks!

Good luck getting either institution to give him anything. Proof of who or how the error was made will be difficult if not impossible to find or prove.

[JohnH]

You could go to an online interest calculator and run the interest earnings on the principal times the rate. Print that out without any other calculations and let him take it from there. I would not give him anything in writing attempting to calculate his loss on the transaction, because if he really pursues this and your calculations happen to be wrong, then he may want you to own the difference caused by your secondary error.

I also agree with Jack - whatever time anyone spends on this is a waste. It's strictly a project for a 90 year old retiree to occupy his mind. Nothing wrong with that, but hardly productive from your point of view.

Now for the really important question. What's the name of this credit union and are they still offering rates anywhere near the range of 3+% ?

[taxxcpa]

You could go to an online interest calculator and run the interest earnings on the principal times the rate. Print that out without any other calculations and let him take it from there. I would not give him anything in writing attempting to calculate his loss on the transaction, because if he really pursues this and your calculations happen to be wrong, then he may want you to own the difference caused by your secondary error.

I also agree with Jack - whatever time anyone spends on this is a waste. It's strictly a project for a 90 year old retiree to occupy his mind. Nothing wrong with that, but hardly productive from your point of view.

Now for the really important question. What's the name of this credit union and are they still offering rates anywhere near the range of 3+% ?

You can get over 3% dividends on solid companies like A T & T, Procter and Gamble, Johnson and Johnson, Eli Lilly and many others. Also they raise the dividends periodically.

[Jack from Ohio]

Now for the really important question. What's the name of this credit union and are they still offering rates anywhere near the range of 3+% ?

DITTO!!!

[michaelmars]

You can get over 3% dividends on solid companies like A T & T, Procter and Gamble, Johnson and Johnson, Eli Lilly and many others. Also they raise the dividends periodically

are they as solid as aig and enron were?

[JohnH]

You can get over 3% dividends on solid companies like A T & T, Procter and Gamble, Johnson and Johnson, Eli Lilly and many others. Also they raise the dividends periodically.

My asset allocation rules don't allow me to confuse fixed income and equity investments. There's a firewall between them. Money allocated for fixed income should never be crossed over to equity investment. Besides, why would I put money into any individual company when there's the Vanguard Total Stock Market Index Fund to guarantee me the average of the entire US market, plus Baby Berkshires are selling in the $80 range? May as well get Warren Buffet & Charlie Munger to manage part of the equity side - they have a better track record than anyone living today.

[Denne]

Good luck getting either institution to give him anything. Proof of who or how the error was made will be difficult if not impossible to find or prove.

He got copies of all of the transactions from the credit union and it shows the bank pulling the funds....incorrectly. I think he has an excellent case.... He has his original paperwork pulling the money from the bank...putting it into the credit union and copies of all checks transferring. He has his bank statements too.

In addition.....wouldn't the bank and credit union have Errors and Omissions insurance too? They should reimburse him for their errors. He does have proof of it.

By the way.....the 3.25% is no longer available at that CU. They are now at 2.5% The closest he can get is 2.8% at a different CU. With the 2.5% he will loose $4510 in interest earnings he should have had plus the fact the bank put his funds in a money market and a great loss there for nearly three months. What a scam for him....

[Jack from Ohio]

He got copies of all of the transactions from the credit union and it shows the bank pulling the funds....incorrectly. I think he has an excellent case.... He has his original paperwork pulling the money from the bank...putting it into the credit union and copies of all checks transferring. He has his bank statements too.

In addition.....wouldn't the bank and credit union have Errors and Omissions insurance too? They should reimburse him for their errors. He does have proof of it.

By the way.....the 3.25% is no longer available at that CU. They are now at 2.5% The closest he can get is 2.8% at a different CU. With the 2.5% he will loose $4510 in interest earnings he should have had plus the fact the bank put his funds in a money market and a great loss there for nearly three months. What a scam for him....

Even with all the info, you have a better chance on the LOTTO than getting either institution to give him anything based on... Coulda, Shoulda, Woulda.

When the error was made, there was no way to know what the interest rates would be when it was finally discovered. That is out of the control of the banks. So proving that the error caused the client to lose interest is a long shot on thin ice anyway. If the interest rate had stayed up (again out of the banks control) he would have lost $0.

I think I have a Banana Split at your local Ice Cream place that says he will get $0 over this.

[Catherine]

Even with all the info, you have a better chance on the LOTTO than getting either institution to give him anything based on... Coulda, Shoulda, Woulda.

When the error was made, there was no way to know what the interest rates would be when it was finally discovered. That is out of the control of the banks. So proving that the error caused the client to lose interest is a long shot on thin ice anyway. If the interest rate had stayed up (again out of the banks control) he would have lost $0.

I think I have a Banana Split at your local Ice Cream place that says he will get $0 over this.

I've had decent luck in the past with the words "banking commissioner". You never even really have to go to the state -- just say those words, loudly and often, to a bank manager (NOT a CS drone), and watch them trip over themselves trying to make it right.

Just my two cents worth.

[Denne]

I've had decent luck in the past with the words "banking commissioner". You never even really have to go to the state -- just say those words, loudly and often, to a bank manager (NOT a CS drone), and watch them trip over themselves trying to make it right.

Just my two cents worth.

Thank you for the great tip on the "Banking Commissioner." I am going to the bank with him so I will be sure to bring that up if I feel like they are jerking him around. Too bad they mess up is five year CD at such a great rate ;~( As most know, people on social security did not get a raise last year and it sounds like no raise this year either. Then with the interest rates so low it is really difficult for seniors to get by these days....then....something like the bank error here has really cause a strain on his already stretched budget. The bank's error shouldn't cost him over $5000!! He did the right thing for him, by locking in a five year CD.

[michaelmars]

the only thing scarier than "state banking commission" to a bank is "state insurance board" to an insurance company-it really gets there attention.

[jainen]

>>the only thing scarier than "state banking commission" to a bank<<

Recently a new bank terror has come up. It's the county District Attorney, who has a lawyer whose only job is finding out what happened to bank accounts. Somebody at the bank got a commission for pulling that money, and that may be a form of elder abuse. Don't be a nice guy about this. The bank will make a half-way decent settlement offer.

[Catherine]

>>the only thing scarier than "state banking commission" to a bank<<

Recently a new bank terror has come up. It's the county District Attorney, who has a lawyer whose only job is finding out what happened to bank accounts. Somebody at the bank got a commission for pulling that money, and that may be a form of elder abuse. Don't be a nice guy about this. The bank will make a half-way decent settlement offer.

_Excellent_ point on the elder abuse angle!! That will surely get their attention.

[Jack from Ohio]

I am taking all bets for a Banana Split on this one!! And I will NOT welch like the salesman at CCH did on me!!

[JohnH]

I'm coming down on the "it's a total waste of time" side of this discussion as well. The bank and/or the CU may throw him a little bone, but that will be about the only thing that will happen. But since he's probably retired and has all the time needed to spend on it, he may as well go for it.

One thing is for sure - he needs to spend some time investigating where he's going to do business in the future. I say this for two reasons:

1) If I were him, I'm not sure I'd want the incompetents at either institution handling my money;

2) if he gets any satisfaction, whomever he collects from will be looking for ways to make it up - no more favors for this customer.

(I hope Denne will keep us informed on how this situation sorts itself out -> you know, who did what to whom, etc)

[Denne]

I'm coming down on the "it's a total waste of time" side of this discussion as well. The bank and/or the CU may throw him a little bone, but that will be about the only thing that will happen. But since he's probably retired and has all the time needed to spend on it, he may as well go for it.

One thing is for sure - he needs to spend some time investigating where he's going to do business in the future. I say this for two reasons:

1) If I were him, I'm not sure I'd want the incompetents at either institution handling my money;

2) if he gets any satisfaction, whomever he collects from will be looking for ways to make it up - no more favors for this customer.

(I hope Denne will keep us informed on how this situation sorts itself out -> you know, who did what to whom, etc)

Poor guy.....both institutions are in a stand off! Neither seems to want to budge. He is loosing money each day they drag their feet. The bank incidentally is Bank of America.... The Credit Union is a local one, but is My Personal Credit Union. Not anxious to see him use either bank for anything. He is so happy I am helping him....but really is my pleasure to do what I can. I will keep you all posted. Thanks for all of your help here and encouragement along the way too.

[Jack from Ohio]

Poor guy.....both institutions are in a stand off! Neither seems to want to budge. He is loosing money each day they drag their feet. The bank incidentally is Bank of America.... The Credit Union is a local one, but is My Personal Credit Union. Not anxious to see him use either bank for anything. He is so happy I am helping him....but really is my pleasure to do what I can. I will keep you all posted. Thanks for all of your help here and encouragement along the way too.

Your problem in a nutshell.

Way too big for anyone's good. They have completely forgotten who and what the customer(s) are. I can taste those Banana Splits already!!

[JohnH]

Here's the really stupid thing about this situation. If either institution would refund him his $300 and offer some sort of reasonable compromise on the rate, he would probably accept their offer. Instead, they dig in their heels and alienate him, along with everyone else he can tell about the way he's been treated. In the case of BOA, I agree with Jack - they really don't care. But Credit Unions are sometimes flexible and often have local people who can make better business decisions. Guess this just isn't the case here.

Why is he losing money each day? He hasn't moved his money to another bank yet? Or maybe when you say he is "losing money" you're referring to the difference between 3.2475% and the 2.5% he's getting now (about $800/year before taxes). If so, he should probably just put that out of his mind & go bowling or something - that train has left the station.

[Denne]

Here's the really stupid thing about this situation. If either institution would refund him his $300 and offer some sort of reasonable compromise on the rate, he would probably accept their offer. Instead, they dig in their heels and alienate him, along with everyone else he can tell about the way he's been treated. In the case of BOA, I agree with Jack - they really don't care. But Credit Unions are sometimes flexible and often have local people who can make better business decisions. Guess this just isn't the case here.

Why is he losing money each day? He hasn't moved his money to another bank yet? Or maybe when you say he is "losing money" you're referring to the difference between 3.2475% and the 2.5% he's getting now. If so, he should probably just put that out of his mind - that train has left the station.

The reason he is loosing so much money each day is that he is not invested in a CD yet. Bank of America claims they didn't know what to do with his money so they put it in a Money Market at .8%.......once they got the ckeck from the credit union...some time the end of July. He doesn't want to invest in a CD at 2.5% if he can somehow get the 3.25% he was getting. They promised him they would find a way to help him and that was to happen on Tuesday....THIS week Tuesday. Yet another slap in the face for him. He said today he is ready to call an Investigative Reporter that will put the story on the news. Not sure if that will help him or make the banks even harder to work with however. I am going with him on Monday to see the Credit Union President......hopefully he will get assistance there. Sure hate to see him loose $5000 over the bank's error ;~( Certainly seems to be Elder Aguse to me too!!!

Will keep you posted as things progress.......hopefully with much better news soon!

[Catherine]

The reason he is loosing so much money each day is that he is not invested in a CD yet. Bank of America claims they didn't know what to do with his money so they put it in a Money Market at .8%.......once they got the ckeck from the credit union...some time the end of July. He doesn't want to invest in a CD at 2.5% if he can somehow get the 3.25% he was getting. They promised him they would find a way to help him and that was to happen on Tuesday....THIS week Tuesday. Yet another slap in the face for him. He said today he is ready to call an Investigative Reporter that will put the story on the news. Not sure if that will help him or make the banks even harder to work with however. I am going with him on Monday to see the Credit Union President......hopefully he will get assistance there. Sure hate to see him loose $5000 over the bank's error ;~( Certainly seems to be Elder Aguse to me too!!!

Will keep you posted as things progress.......hopefully with much better news soon!

Sometimes the local reporters can get action when no one else can. Public humiliation and loads of bad publicity/image ruining can work wonders where principle and integrity fail.

Good luck and let us know how it all turns out!

[Denne]

Your problem in a nutshell.

Way too big for anyone's good. They have completely forgotten who and what the customer(s) are. I can taste those Banana Splits already!!

I am confident that things may turn out OK Jack....I am taking your bet on that Banana Split ;~)

[Denne]

I have and update on this matter....at least where we are so far anyway! The CD has been re-issued by Bank of America for 3.25%....as of July. There is still no movement on the part of the credit union however. I think together we have provided a solid case to get the bank to move on their previous position. We did have to move up the ladder a bit to get movement however. Not to tackle the penalty portion that the credit union has removed from the principle balance of the IRA/CD.

I do had a question..... Am I reading correctly (Pub 590, page 24) that the credit union should have have rolled the money for a second time within a year? It seems that there is a limitation as to moving the IRA funds more than once a year. Now....wondering if there will be a taxable event on the $107,000.00 since it was moved twice..........

Well, Old Jack........I hope you didn't jump the gun on that Banana Split...lol! I hope you have waited. Perhaps I am waiting for mine to be delivered?? ;~) I think I have earned it, perhaps?? One last step and I am all set for a delicious, icy, sweet treat!

Will keep you all posted about the penalty success.....

[JohnH]

This is amazing.

If you can get BOA to budge on any customer noservice issue, then you and the client are outstanding negotiators.

[Gail in Virginia]

There is no limitation on moving the IRA funds more than once a year. The problem is that you can't have more than one rollover per year - the other moves must be direct transfers. If he actually had possession of the money the second time and rolled it over, you may not have an IRA any more. He may have a distribution.