Ally Bank just cancelled my checking account!

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Ally Bank just cancelled my checking account!

Postby joebruin77 » Sun Sep 05, 2010 3:31 pm

Up until today, I have been a fan of Ally bank. I have 4 accounts there (online savings, checking, and two CD's). However, I just received a letter in today's mail informing me that because I have deposited some checks from my business into the account and because I wrote some pay checks for employees using that account, Ally has determined that I am using this account for business purposes. They go on to say that "By law" they are not permitted to pay interest in business accounts. They state that this is "clearly stated in the account agreement." So effective Sept 15th, they are closing this account and, more importantly, that they are going to deduct all interest paid to date since the account was opened.

I just went to the Ally website and no where do I see a statement that the checking account cannot be used for business purposes. Perhaps it says this in the actual account agreement, but how many people actually read the account agreement from top to bottom. My question is, has this happened to anyone else and do I have any kind of recourse? Any suggestions are appreciated.

BTW, I intend to transfer all of my business to discover bank.

Thank you,
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Postby sscritic » Sun Sep 05, 2010 4:07 pm

It's right at the top of the Disclosure:
I. DEPOSIT AGREEMENT AND DISCLOSURES
A. Our Agreement
When we say “Ally,” it means Ally Bank. If you see the words “we,” “us” or “our,” we are talking about Ally Bank. When you see the words “you” and “your,” we mean each person who owns an account or a trustee who can manage an account. When you see the word “Agreement,” we are referring to this Deposit Agreement.
B. Account Basics
1. Who Can Open an Account
• For All Accounts: Anyone who is a citizen or a legal permanent resident of the United States (U.S.), is at least 18 years old and has a Social Security number and U.S. address (not just a P.O. box) can open an account.
• Additional Rules for Interest Checking Accounts: Interest Checking accounts are only available to consumers for personal, family and household purposes. You may not use an Ally checking account that earns interest for business purposes.
http://www.ally.com/files/pdf/ally-bank ... eement.pdf

They should have mailed you a copy of the Deposit Agreement when you opened the account. And yes, you should read the account agreement from top to bottom. It is a contract. When I sign a rental agreement, I read it from top to bottom. When I buy a house, I read everything from top to bottom. It's a good habit to get into. You avoid surprises that way.

P.S. Are you going to read the Disclosure Agreement from Discover Bank?
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Postby Paladin » Sun Sep 05, 2010 4:25 pm

sscritic wrote:It's right at the top of the Disclosure:
I. DEPOSIT AGREEMENT AND DISCLOSURES
A. Our Agreement
When we say “Ally,” it means Ally Bank. If you see the words “we,” “us” or “our,” we are talking about Ally Bank. When you see the words “you” and “your,” we mean each person who owns an account or a trustee who can manage an account. When you see the word “Agreement,” we are referring to this Deposit Agreement.
B. Account Basics
1. Who Can Open an Account
• For All Accounts: Anyone who is a citizen or a legal permanent resident of the United States (U.S.), is at least 18 years old and has a Social Security number and U.S. address (not just a P.O. box) can open an account.
• Additional Rules for Interest Checking Accounts: Interest Checking accounts are only available to consumers for personal, family and household purposes. You may not use an Ally checking account that earns interest for business purposes.
http://www.ally.com/files/pdf/ally-bank ... eement.pdf

They should have mailed you a copy of the Deposit Agreement when you opened the account. And yes, you should read the account agreement from top to bottom. It is a contract. When I sign a rental agreement, I read it from top to bottom. When I buy a house, I read everything from top to bottom. It's a good habit to get into. You avoid surprises that way.

P.S. Are you going to read the Disclosure Agreement from Discover Bank?


When you rent a car do you read the contract from top to bottom? One would have to be a lawyer to navigate through daily life!
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Postby sscritic » Sun Sep 05, 2010 4:41 pm

Paladin wrote:When you rent a car do you read the contract from top to bottom? One would have to be a lawyer to navigate through daily life!

I see your signature: "Life is short. Do what you want."

If you don't want to read contracts before you sign them, it is your right. Do what you want. Just don't be surprised that the terms of the contracts you didn't read have consequences. I want to read the contracts, so I do. We both are doing what we want.
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Postby dave.d » Sun Sep 05, 2010 4:41 pm

In other words, it was right there in the fine print .

http://www.youtube.com/watch?v=x1LeXSA8uCI
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Postby downshiftme » Sun Sep 05, 2010 4:50 pm

When you rent a car do you read the contract from top to bottom? One would have to be a lawyer to navigate through daily life!


It's your choice, of course. But you can be assured the other party to almost every contract you sign has read and understood it. Probably even wrote most of it. What's your defense when it turns out you are in a less favorable position than you might wish? Guessed it would be different terms than those that were written down and given to you to sign? You will not have even the tiniest chance to prevail in any disagreement. Maybe you hope to find a jury composed of similarly inclined non-readers. Unlikely.
Last edited by downshiftme on Sun Sep 05, 2010 4:57 pm, edited 2 times in total.
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Re: Ally Bank just cancelled my checking account!

Postby rustymutt » Sun Sep 05, 2010 4:56 pm

joebruin77 wrote:Up until today, I have been a fan of Ally bank. I have 4 accounts there (online savings, checking, and two CD's). However, I just received a letter in today's mail informing me that because I have deposited some checks from my business into the account and because I wrote some pay checks for employees using that account, Ally has determined that I am using this account for business purposes. They go on to say that "By law" they are not permitted to pay interest in business accounts. They state that this is "clearly stated in the account agreement." So effective Sept 15th, they are closing this account and, more importantly, that they are going to deduct all interest paid to date since the account was opened.

I just went to the Ally website and no where do I see a statement that the checking account cannot be used for business purposes. Perhaps it says this in the actual account agreement, but how many people actually read the account agreement from top to bottom. My question is, has this happened to anyone else and do I have any kind of recourse? Any suggestions are appreciated.

BTW, I intend to transfer all of my business to discover bank.

Thank you,
joebruin77


Your don't do business accounts in your personal account.
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Postby Paladin » Sun Sep 05, 2010 5:04 pm

downshiftme wrote:
When you rent a car do you read the contract from top to bottom? One would have to be a lawyer to navigate through daily life!


It's your choice, of course. But you can be assured the other party to almost every contract you sign has read and understood it. Probably even wrote most of it. What's your defense when it turns out you are in a less favorable position than you might wish? Guessed it would be different terms than those that were written down and given to you to sign? You will not have even the tiniest chance to prevail in any disagreement. Maybe you hope to find a jury composed of similarly inclined non-readers. Unlikely.


I believe judges have the power to strike down unfair and unenforceable contracts. My point is that the average person does not have the ability to understand a auto rental agreement when it is handed to him at the counter. Should he sit down and spend 2 hours reading it? Perhaps call his attorney for an opinion? The suggestion that one should read all contracts in detail is impractical. A house purchase contract sure but an auto rental?
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Postby cwcwcw » Sun Sep 05, 2010 5:23 pm

Paladin wrote:
downshiftme wrote:
When you rent a car do you read the contract from top to bottom? One would have to be a lawyer to navigate through daily life!


It's your choice, of course. But you can be assured the other party to almost every contract you sign has read and understood it. Probably even wrote most of it. What's your defense when it turns out you are in a less favorable position than you might wish? Guessed it would be different terms than those that were written down and given to you to sign? You will not have even the tiniest chance to prevail in any disagreement. Maybe you hope to find a jury composed of similarly inclined non-readers. Unlikely.


I believe judges have the power to strike down unfair and unenforceable contracts. My point is that the average person does not have the ability to understand a auto rental agreement when it is handed to him at the counter. Should he sit down and spend 2 hours reading it? Perhaps call his attorney for an opinion? The suggestion that one should read all contracts in detail is impractical. A house purchase contract sure but an auto rental?


We are talking about a deposit agreement, not a car rental contract. When a bank sends you a deposit agreement in the mail, you DO have hours to spend reading the document (should you so desire). It is NOT a comparable situation to the car rental contract you keep citing because if a person is renting a car, presumably they have someplace to be and limited time. In that case, I could see them not fully reading the agreement (even though they really should).

But, in the case of the OP, the relevant information is found in literally the second bullet point, almost at the top of the deposit agreement. I am not sure why you are defending the OP, if you indeed are. OP even admits that he didn't read the agreement, but belly-aches that nowhere on the website does it say anything about not using the checking account for business purposes. So, somebody responded in kind and posted just how easy it was to find.

You don't need to be lawyer to read a few lines of the deposit agreement before you find out that using the account for business purposes is a no-no. [personal comments deleted by admin alex]

I think other posters were just pointing out the obvious, grown-up reality of dealing with business contracts. You are well within your rights to sign without reading, but then you'd better be prepared for surprises down the line.

Ally is not in the wrong here. OP is and anyone who defends OP mystifies me...
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Probably not Ally's fault.

Postby Taylor Larimore » Sun Sep 05, 2010 5:48 pm

Hi Joe:
Ally has determined that I am using this account for business purposes. They go on to say that "By law" they are not permitted to pay interest in business accounts.


I suspect Ally is correct. If you close all your accounts because Ally is obeying the law, you may be cutting off your nose to spite your face.

Good luck whatever you decide.
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Postby sscritic » Sun Sep 05, 2010 5:52 pm

Paladin wrote:I believe judges have the power to strike down unfair and unenforceable contracts. My point is that the average person does not have the ability to understand a auto rental agreement when it is handed to him at the counter. Should he sit down and spend 2 hours reading it? Perhaps call his attorney for an opinion? The suggestion that one should read all contracts in detail is impractical. A house purchase contract sure but an auto rental?

While I may not read every word (I probably read over 90%, skipping only the parts I already know), I have checked with my own insurance company in advance about the coverage it will provide. I also have checked with several different credit cards to see what they offer on car rentals, and use the card that gives me the greatest reduction in liability. I can't imagine just going in to rent a car without thinking about these issues and doing some research and reading in advance. You are right, I won't call my attorney from the counter, but neither will I call my insurance agent nor my credit card company from the counter.

You can also try and read the agreement in advance.
Hertz wants you to know the facts. There are a lot of misconceptions and misunderstandings about insurance on rental cars these days, but one thing is certain: not knowing exactly what you are covered for, could have a significant financial impact. The following information is designed to give you some important facts and help keep you from taking unnecessary chances.
https://www.hertz.com/rentacar/byr/inde ... AreYou.jsp

I think the time I use in getting prepared to rent a car is time well spent.
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Postby nisiprius » Sun Sep 05, 2010 5:57 pm

Gak.

I'm currently paid as an independent contractor, with my income being reported on a 1099-MISC, and have to file Schedule C-EZ, "Net Profit From Business (Sole Proprietorship)"

Am I breaking the law and risking all the past interest ever paid into my checking account by depositing what I think of as "my paychecks" into my personal, interest-paying checking account?
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Postby HueyLD » Sun Sep 05, 2010 6:04 pm

Hi Nisiprius,

Your action is totally within the law. NOW accounts eligibility also includes sole propriertors.
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Re: Probably not Ally's fault.

Postby natureexplorer » Sun Sep 05, 2010 6:05 pm

Taylor Larimore wrote:Hi Joe:
Ally has determined that I am using this account for business purposes. They go on to say that "By law" they are not permitted to pay interest in business accounts.


I suspect Ally is correct. If you close all your accounts because Ally is obeying the law, you may be cutting off your nose to spite your face.

Good luck whatever you decide.
This only applies to business checking accounts, not business savings accounts. I am sure Ally would be happy to open a new checking account for you. They are really just following the law. Having said that, that youtube video is indeed hilarious.
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Postby nisiprius » Sun Sep 05, 2010 6:07 pm

HueyLD wrote:Hi Nisiprius,

Your action is totally within the law. NOW accounts eligibility also includes sole propriertors.
Thank you! I guess I've got some fine-print homework to do, but thanks for letting me know in advance how it's going to turn out.
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Postby NAVigator » Sun Sep 05, 2010 6:12 pm

cwcwcw wrote:Ally is not in the wrong here.


If fact, Ally is adhering to the law. They HAVE to enforce this. A quick Google search shows that there have been many attempts in recent years by state governments to repeal this depression era law. I'm not sure if any were successful, but obviously not in the state that Ally is based or where the OP lives.

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Re: Probably not Ally's fault.

Postby tfb » Sun Sep 05, 2010 6:14 pm

natureexplorer wrote:This only applies to business checking accounts, not business savings accounts. I am sure Ally would be happy to open a new checking account for you. They are really just following the law. Having said that, that youtube video is indeed hilarious.

which law is this? does it also apply to a credit union's share draft account?
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Postby Paladin » Sun Sep 05, 2010 6:16 pm

sscritic wrote:
Paladin wrote:I believe judges have the power to strike down unfair and unenforceable contracts. My point is that the average person does not have the ability to understand a auto rental agreement when it is handed to him at the counter. Should he sit down and spend 2 hours reading it? Perhaps call his attorney for an opinion? The suggestion that one should read all contracts in detail is impractical. A house purchase contract sure but an auto rental?

While I may not read every word (I probably read over 90%, skipping only the parts I already know), I have checked with my own insurance company in advance about the coverage it will provide. I also have checked with several different credit cards to see what they offer on car rentals, and use the card that gives me the greatest reduction in liability. I can't imagine just going in to rent a car without thinking about these issues and doing some research and reading in advance. You are right, I won't call my attorney from the counter, but neither will I call my insurance agent nor my credit card company from the counter.

You can also try and read the agreement in advance.
Hertz wants you to know the facts. There are a lot of misconceptions and misunderstandings about insurance on rental cars these days, but one thing is certain: not knowing exactly what you are covered for, could have a significant financial impact. The following information is designed to give you some important facts and help keep you from taking unnecessary chances.
https://www.hertz.com/rentacar/byr/inde ... AreYou.jsp

I think the time I use in getting prepared to rent a car is time well spent.


I never said that I would rent a car without thinking about the issues in advance. I have. My point was simply that it's not practical to read the contract when it is handed to you.
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Re: Ally Bank just cancelled my checking account!

Postby cwcwcw » Sun Sep 05, 2010 6:37 pm

joebruin77 wrote:BTW, I intend to transfer all of my business to discover bank.


sscritic wrote:P.S. Are you going to read the Disclosure Agreement from Discover Bank?


Taylor Larimore wrote:If you close all your accounts because Ally is obeying the law, you may be cutting off your nose to spite your face.


From what I can tell, Discover doesn't even offer checking (only online savings/money market). So, hopefully OP calmed down and didn't close all of his accounts just yet....

What's that old saying about looking first before one leaps?

I think given his ignorance of the Ally deposit agreement, and unfounded assumption that Discover offers checking (when it doesn't) demonstrates a broader pattern of impulsiveness that the OP needs to address.

These are things remedied by FIVE SECONDS of reading, so the whole "read the contract from top to bottom" hardly even applies. Just LOOK BEFORE YOU LEAP, OP ... I think it might save you from some future aggravation ... =/
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Re: Probably not Ally's fault.

Postby nonnie » Sun Sep 05, 2010 6:59 pm

tfb wrote:which law is this? does it also apply to a credit union's share draft account?

Hi tfb,

You might want to start your reading here (I ran out of patience)
"August 26, 2009
The FDIC extended its temporary Transaction Account Guarantee Program through June 30, 2010. This program provides depositors with unlimited coverage for noninterest-bearing transaction accounts at participating FDIC-insured institutions. The unlimited coverage applies to all personal and business checking deposit accounts that do not earn interest (including Demand Deposit (DDA) accounts), low-interest NOW accounts (NOW accounts that cannot earn more than 0.5% interest), Official Items (e.g., cashier or bank checks) , and Interest on Lawyer Trust Accounts "IOLTA" (or the equivalent type of deposit).

For more information, visit:
http://www.fdic.gov/news/news/financial ... 09048.html

I know the above info applies to the temporary TARP program but just the mention of "personal" ...checking deposit accounts that do not earn interest" makes me start wondering about interest bearing checking accounts in general. As I'm sure you know banks can opt out of particular types of FDIC coverage in order to save $$$. Also, there are lots of banks out there offering interest on business checking accounts so perhaps it has something to do with choice on the part of banks?

SScritic--you like to read the fine print :D (that's a compliment!)--what can you find out about the law?

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Postby the intruder » Sun Sep 05, 2010 7:20 pm

nisiprius wrote:Gak.

I'm currently paid as an independent contractor, with my income being reported on a 1099-MISC, and have to file Schedule C-EZ, "Net Profit From Business (Sole Proprietorship)"

Am I breaking the law and risking all the past interest ever paid into my checking account by depositing what I think of as "my paychecks" into my personal, interest-paying checking account?


Depositing a check you recieve for performing personal services as an independent contractor is no different than depositing a paycheck paid to you by your employer because the check is for your personal account. What the OP did was write paychecks TO his employees on his personal checking account which is indicitative of running a business. I dont know what kind of business he had but if he deposited checks to a payable to a business that was in a different name than his own name, joe schmoe, INC the bank will flag the account.

Also if he is writing paychecks to employees he has to withhhold state and federal taxes and remit to IRS an state tax dept.
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Thank you and some feedback

Postby joebruin77 » Sun Sep 05, 2010 7:47 pm

I wish to thank everyone for taking the time to reply to my original post. I do hear and appreciate the message that I made a mistake in not reading the deposit agreement. I do accept responsibility for that error.

However, I am a bit disappointed that from a single post, various people have judged me to be "lazy, ignorant, and impulsive." Since I do not see myself as having any of these qualities, I would ask you to consider the following:

1) My original objection is not focused on whether or not Ally is legally correct in closing my account. In fact, I assumed that they were or else they wouldn't have taken that action. My objection is to the fact that the only place the customer is informed that they cannot use the account for business is in the deposit agreement, which is received after the account is opened. For example, if you go to their website and click on the "details" of the checking account, it would be helpful if it said something to the effect that this is a personal checking account that cannot be used for business.

2) When I applied for the account over the phone, I even told the Ally rep that I am in business as a sole proprietor and plan to deposit checks from my business. I brought this up to clarify how checks would need to be made out by my clients in order to be deposited in the account. The rep said that the checks would need to be made out in my name exactly (as opposed to the name of my business). It would have been very helpful if at that moment, the rep informed me that I should not be using the account for any business purposes.

3) When I stated in my original post that I plan to switch to discover bank, I meant that I plan to move my online savings account, which is currently still with Ally. And, yes, despite my "laziness and ignorance", I did manage to research the discover account before making that decision.

HueyLD referenced that if a person is in business as a sole proprietor, as I am, then they are included in eligibility for NOW accounts. If HueyLD or someone else could clarify or provide more info on this, I would appreciate it.

Finally, I don't mind honest feedback. In fact, I welcome it. If I am in the wrong or if I made an error, I appreciate being told so. That is the only way I can learn. But I do suggest that those of you who made broad, general judgments about my character based on one specific post, may want to engage in some self reflection. It may demonstrate a broader pattern of being quick to judge others that you may need to address.
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Postby the intruder » Sun Sep 05, 2010 7:56 pm

I didnt judge you. As the saying goes Stuff happens and you seemed to have walked in it.

Unlike others who have nothing better to say, I am more concerned with whether you are violating IRS/state rules for failure to withhold income & FICA tax.
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Postby joebruin77 » Sun Sep 05, 2010 8:01 pm

the intruder wrote:I didnt judge you. As the saying goes Stuff happens and you seemed to have walked in it.

Unlike others who have nothing better to say, I am more concerned with whether you are violating IRS/state rules for failure to withhold income & FICA tax.


hi, intruder,

i appreciated your original comment and the intent behind it. my earlier comments about feeling judged were not in reference to your post.

as for your concerns, i do appreciate them, but i believe i am in full compliance with the tax laws. my cpa prepares my payroll each month, including the specific withholdings and deductions. the pay checks written from this account were for the net pay amount, not the gross pay amount.

if you think i may be violating any other laws, please let me know.

Thank you.
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Re: Thank you and some feedback

Postby sscritic » Sun Sep 05, 2010 8:14 pm

joebruin77 wrote:My original objection is not focused on whether or not Ally is legally correct in closing my account. In fact, I assumed that they were or else they wouldn't have taken that action. My objection is to the fact that the only place the customer is informed that they cannot use the account for business is in the deposit agreement, which is received after the account is opened. For example, if you go to their website and click on the "details" of the checking account, it would be helpful if it said something to the effect that this is a personal checking account that cannot be used for business.

The Disclosure is not completely hidden, but it could be easier to find. If you click on legal (at the bottom of every page) and then on Agreements (not Disclosures), you find a link to "Ally Bank Deposit Agreement" (it is a different link than the one I gave you in my first reply, but it is the same agreement). I often click on links at the bottom (contact us, site map, etc.) for other reasons, so I tend to look there when I can't find something somewhere else on the site.

Also, a search for "Deposit Agreement" will lead you there, but that presumes you know the name of the agreement. Well, maybe it is not necessary to know the exact name; a search for "account disclosure" shows the needed link in first position.
http://www.ally.com/search/index.html?t ... ntext=null
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Re: Thank you and some feedback

Postby HueyLD » Sun Sep 05, 2010 8:25 pm

joebruin77 wrote:HueyLD referenced that if a person is in business as a sole proprietor, as I am, then they are included in eligibility for NOW accounts. If HueyLD or someone else could clarify or provide more info on this, I would appreciate it.

Hi Joe,

That provison is from the FRB Reg. D. See this link below. Best wishes.

http://www.wyomingstatebarfoundation.or ... bility.pdf
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Re: Thank you and some feedback

Postby joebruin77 » Sun Sep 05, 2010 8:26 pm

sscritic wrote:
joebruin77 wrote:My original objection is not focused on whether or not Ally is legally correct in closing my account. In fact, I assumed that they were or else they wouldn't have taken that action. My objection is to the fact that the only place the customer is informed that they cannot use the account for business is in the deposit agreement, which is received after the account is opened. For example, if you go to their website and click on the "details" of the checking account, it would be helpful if it said something to the effect that this is a personal checking account that cannot be used for business.

The Disclosure is not completely hidden, but it could be easier to find. If you click on legal (at the bottom of every page) and then on Agreements (not Disclosures), you find a link to "Ally Bank Deposit Agreement" (it is a different link than the one I gave you in my first reply, but it is the same agreement). I often click on links at the bottom (contact us, site map, etc.) for other reasons, so I tend to look there when I can't find something somewhere else on the site.

Also, a search for "Deposit Agreement" will lead you there, but that presumes you know the name of the agreement. Well, maybe it is not necessary to know the exact name; a search for "account disclosure" shows the needed link in first position.
http://www.ally.com/search/index.html?t ... ntext=null


Thanks for the detailed instructions. I will be more careful when opening future accounts, a valuable and important lesson learned.

As you referenced, the agreement could be a lot easier to find, especially given Ally's advertisements of being the bank that doesn't have a lot of "fine print".
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Re: Thank you and some feedback

Postby joebruin77 » Sun Sep 05, 2010 8:27 pm

HueyLD wrote:
joebruin77 wrote:HueyLD referenced that if a person is in business as a sole proprietor, as I am, then they are included in eligibility for NOW accounts. If HueyLD or someone else could clarify or provide more info on this, I would appreciate it.

Hi Joe,

That provison is from the FRB Reg. D. See this link below. Best wishes.

http://www.wyomingstatebarfoundation.or ... bility.pdf


Thank you!
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Re: Thank you and some feedback

Postby Paladin » Sun Sep 05, 2010 10:00 pm

joebruin77 wrote:I wish to thank everyone for taking the time to reply to my original post. I do hear and appreciate the message that I made a mistake in not reading the deposit agreement. I do accept responsibility for that error.

However, I am a bit disappointed that from a single post, various people have judged me to be "lazy, ignorant, and impulsive." Since I do not see myself as having any of these qualities, I would ask you to consider the following:

1) My original objection is not focused on whether or not Ally is legally correct in closing my account. In fact, I assumed that they were or else they wouldn't have taken that action. My objection is to the fact that the only place the customer is informed that they cannot use the account for business is in the deposit agreement, which is received after the account is opened. For example, if you go to their website and click on the "details" of the checking account, it would be helpful if it said something to the effect that this is a personal checking account that cannot be used for business.

2) When I applied for the account over the phone, I even told the Ally rep that I am in business as a sole proprietor and plan to deposit checks from my business. I brought this up to clarify how checks would need to be made out by my clients in order to be deposited in the account. The rep said that the checks would need to be made out in my name exactly (as opposed to the name of my business). It would have been very helpful if at that moment, the rep informed me that I should not be using the account for any business purposes.

3) When I stated in my original post that I plan to switch to discover bank, I meant that I plan to move my online savings account, which is currently still with Ally. And, yes, despite my "laziness and ignorance", I did manage to research the discover account before making that decision.

HueyLD referenced that if a person is in business as a sole proprietor, as I am, then they are included in eligibility for NOW accounts. If HueyLD or someone else could clarify or provide more info on this, I would appreciate it.

Finally, I don't mind honest feedback. In fact, I welcome it. If I am in the wrong or if I made an error, I appreciate being told so. That is the only way I can learn. But I do suggest that those of you who made broad, general judgments about my character based on one specific post, may want to engage in some self reflection. It may demonstrate a broader pattern of being quick to judge others that you may need to address.


I was thinking the same. cwcwcw did a whole psychological profile on you from one posting.

Of course his own ignorance of forum rules and etiquette was highlighted, not to mention good manners.
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Re: Probably not Ally's fault.

Postby natureexplorer » Sun Sep 05, 2010 10:22 pm

tfb wrote:
natureexplorer wrote:This only applies to business checking accounts, not business savings accounts. I am sure Ally would be happy to open a new checking account for you. They are really just following the law. Having said that, that youtube video is indeed hilarious.
which law is this? does it also apply to a credit union's share draft account?
Sorry, I don't know, but it's what Wells Fargo told me when I opened a business checking account with them.

I remember once asking ING Direct what would happen if I had more than 6 withdawals per month from my savings account. They said they might mail a letter first, but they might even close it right away. If they don't close it the first time it happens, chances increase that they will close it if it happens again. They said, it's no problem though, they can open me another one right away. And if I have several savings accounts with them, then only that particular account is affected. The point is that it sounded like they do this just to follow the federal regulations.
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Postby MnD » Sun Sep 05, 2010 11:11 pm

If I was the bank, I would have contacted the account holder and said "it looks like you may be using this account for business. That's a big no-no and if that's the case and you persist, your account will be closed."
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Postby MnD » Sun Sep 05, 2010 11:12 pm

the intruder wrote:Unlike others who have nothing better to say, I am more concerned with whether you are violating IRS/state rules for failure to withhold income & FICA tax.


That rates as "something better to say"? :roll:
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Postby sscritic » Mon Sep 06, 2010 12:04 am

I have to admit that I am now a little confused.

The OP writes: "I am in business as a sole proprietor."

HueyLD writes in response to Nisiprius: "NOW accounts eligibility also includes sole proprietors."

Ally writes (according to the OP): " 'By law' they are not permitted to pay interest in business accounts."

Put the three together, and I reach the conclusion that Ally's Account Agreement restriction is NOT required by law to exclude business of a certain kind, including the OP's, from interest bearing checking accounts.

They may just be protecting themselves against proving to a regulator that the OP is in the permissible category.
Depository institutions violating the prohibitions on eligibility for NOW accounts may be cited in an examination and fined $1,000 per violation.

Do others interpret the situation the same way?
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Postby nonnie » Mon Sep 06, 2010 12:30 am

sscritic wrote:I have to admit that I am now a little confused.

The OP writes: "I am in business as a sole proprietor."

HueyLD writes in response to Nisiprius: "NOW accounts eligibility also includes sole proprietors."

Ally writes (according to the OP): " 'By law' they are not permitted to pay interest in business accounts."

Put the three together, and I reach the conclusion that Ally's Account Agreement restriction is NOT required by law to exclude business of a certain kind, including the OP's, from interest bearing checking accounts.

They may just be protecting themselves against proving to a regulator that the OP is in the permissible category.
Depository institutions violating the prohibitions on eligibility for NOW accounts may be cited in an examination and fined $1,000 per violation.

Do others interpret the situation the same way?


1)I don't believe the OP ever confirmed that it was a NOW account.
2) Sole props and non-profits are eligible for regular business checking accounts but corporations are not so maybe it's not a NOW account?
http://www.bankofamerica.com/small_busi ... t_checking

The law BofA is referring to is unclear to me. I couldn't find it on the FDIC website. I think you're right about Ally covering themselves or at the very least not understanding the OP is a sole prop but in the end that doesn't matter because Ally covered it in their regs, right?
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Re: Ally Bank just cancelled my checking account!

Postby EO 11110 » Mon Sep 06, 2010 1:40 am

joebruin77 wrote:Up until today, I have been a fan of Ally bank. I have 4 accounts there (online savings, checking, and two CD's). However, I just received a letter in today's mail informing me that because I have deposited some checks from my business into the account and because I wrote some pay checks for employees using that account, Ally has determined that I am using this account for business purposes. They go on to say that "By law" they are not permitted to pay interest in business accounts. They state that this is "clearly stated in the account agreement." So effective Sept 15th, they are closing this account and, more importantly, that they are going to deduct all interest paid to date since the account was opened.

I just went to the Ally website and no where do I see a statement that the checking account cannot be used for business purposes. Perhaps it says this in the actual account agreement, but how many people actually read the account agreement from top to bottom. My question is, has this happened to anyone else and do I have any kind of recourse? Any suggestions are appreciated.

BTW, I intend to transfer all of my business to discover bank.

Thank you,
joebruin77



ahh, the joys of banking with a hedge fund -

remember the gm bailout? sorry that cerberus didnt show you the same gratuity :evil:
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Postby infecto » Mon Sep 06, 2010 2:02 am

Its comical to watch how one persons insert foot into mouth mistake turns into a whole debate within this thread.
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Postby Gekko » Mon Sep 06, 2010 8:10 am

well so much for their annoying, obnoxious, offensive, and insulting commercials.
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Postby nisiprius » Mon Sep 06, 2010 10:16 am

I think the real take-home here is that if you're running a "real" business--if you're employing people and filing a real schedule C, not C-EZ--you need professional financial advice.

I assume that the sort of CPA who advises small businesses would know the point about business checking accounts and would have prevented the OP from making the mistake.

The point about Ally's "fine print" ads is amusing, but if the "fine print" refers to a generic issue about regulations that applies to every bank, it's not completely fair. I don't remember any bank ever cautioning me not to use a personal checking account for business expenses.

Another point is that brick-and-mortar banks may have their uses. Banks do have brochures 'n stuff about their "business services," which of course I never read as I'm not running a business. I were starting a business in the natural course of events, rather than just opening an account on the Web, it would seem natural to me to walk in and chat with a customer rep, who'd probably volunteer the bad news that I needed a no-interest checking account.
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Postby HueyLD » Mon Sep 06, 2010 11:18 am

I think the source of confusion about types of accounts is between what's legal and what's allowed by Ally's own deposit agreement (a contract).

As an example, drinking in a restaurant may be allowed by law for adults over certain age, but a restaurant does not have to provide alcoholic beverages unless it makes money.

The interest-bearing checking account at Ally looks like a NOW account, but their contract specifically limit the account to consumers for personal, family and household purposes. The contract also specifically excludes uses for business purposes. So, Ally chooses not to serve business entities including those allowed to own interest bearing checking accounts by law. (The Reg. D)

Currently, businesses not eligible under the Reg. D can still earn interest on their checking accounts, but those are "analysis" accounts that have lots of processing fees and require very high balances to avoid additional service charges.

There is a pending legislation in the Congress to address this issue, but we are not supposed to discuss pending legislations.
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Postby downshiftme » Mon Sep 06, 2010 11:24 am

what would happen if I had more than 6 withdrawals per month from my savings account.


I ran into this with my bank. I got a terrible letter threatening to close my account if it happened again and it seemed awfully harsh. What actually happened was I made 2 ebay purchases that month, but PayPal inexplicably put each through as 3 separate transaction - using up my limit of 6 and the one transfer I made directly put me over the limit. I will admit, I had forgotten about this limit which was disclosed when I opened the account but even if I had remembered I would have been caught unexpectedly. The bank's harsh response seemed out of proportion to the "offense" which I don't really understand anyway. Who cares if there are more than 6 transactions on a savings account? Why?

This account earns 0.05% interest. Had I had that money instead in my checking account earning 0.02% interest I could have enjoyed unlimited transactions without a problem. There's only a few thousand dollars in this account which I keep separate for budgeting purposes. At these rates, the total interest is a few cents a month - much less than the cost of the postage to send me a letter. Why would a bank care about this? I understand it is some kind of regulation. Why would regulators care about this?
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Postby tpcooper » Mon Sep 06, 2010 12:03 pm

Why would regulators care about this?


It is probably an outdated rule now that ACH transfers are so common (all accounts should just be viewed the same), but my understanding is the reserve requirements for "transaction accounts," such as checking, and "non-transaction accounts" like savings accounts are different. A bank has to keep more of the balance of checking accounts in reserve than savings accounts because the idea is the account holder is more likely to need that money.

Someone can correct me if I am incorrect.
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Postby HueyLD » Mon Sep 06, 2010 12:27 pm

Why would regulators care about this?

Please understand that regulators are required to enforce the law passed by the Congress. They don't have to care about a regulatory issue one way or another.

Why would a bank care about this?

As tycooper indicated earlier, the bank's penalty for failing to comply with the law is a higher reserve requirement which will cost money. In addition, there may be certain fines involved for not being a law-abiding corporate citizen.
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Postby nisiprius » Mon Sep 06, 2010 12:37 pm

tpcooper wrote:
Why would regulators care about this?
Someone can correct me if I am incorrect...
I'm not at all sure and would welcome some banking 101 clarification. But there used to be, and may still be, some profound distinction between "demand" deposits and other deposits. The issue, I think, is that because of the real-time nature of withdrawals from demand deposits, they are more susceptible to a run on the bank if not handled very carefully. That's why some not-quite-checking-accounts say that the bank has the option of requiring 7-day notice of withdrawals--in a pinch there's a big difference between money the bank has to scrape up now, and money it has to scrape up in seven days. I guess limiting withdrawals to four a month is regarded as having a meaningful slowing-down effect.

There used to be a sacred physical law of the universe that "demand deposits can't earn interest," whose rationale I never understood, but it's why NOW accounts were "negotiable orders of withdrawal" and not "checking accounts"--they were, initially, a sneaky end-run around the law.

It was such a freaky episode that I've never known how to process it, but the day a bank VP yelled at me--I was a customer trying to get clarity as to whether I had the right to break a CD--is that he suspected I was a spy for the banking regulators trying to trick his representative into promising demand withdrawals from a term account, which I take it in that time and place would have been a serious crime or something.
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Re: Ally Bank just cancelled my checking account!

Postby LiveFreeorDie » Mon Sep 06, 2010 12:52 pm

joebruin77 wrote:Up until today, I have been a fan of Ally bank. I have 4 accounts there (online savings, checking, and two CD's). However, I just received a letter in today's mail informing me that because I have deposited some checks from my business into the account and because I wrote some pay checks for employees using that account, Ally has determined that I am using this account for business purposes. They go on to say that "By law" they are not permitted to pay interest in business accounts. They state that this is "clearly stated in the account agreement." So effective Sept 15th, they are closing this account and, more importantly, that they are going to deduct all interest paid to date since the account was opened.

I just went to the Ally website and no where do I see a statement that the checking account cannot be used for business purposes. Perhaps it says this in the actual account agreement, but how many people actually read the account agreement from top to bottom. My question is, has this happened to anyone else and do I have any kind of recourse? Any suggestions are appreciated.

BTW, I intend to transfer all of my business to discover bank.

Thank you,
joebruin77


Recourse?

Did you not try to use a personal checking account as a business account?
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Postby downshiftme » Mon Sep 06, 2010 10:12 pm

It is probably an outdated rule now that ACH transfers are so common (all accounts should just be viewed the same), but my understanding is the reserve requirements for "transaction accounts," such as checking, and "non-transaction accounts" like savings accounts are different. A bank has to keep more of the balance of checking accounts in reserve than savings accounts because the idea is the account holder is more likely to need that money.


I guess that makes sense from a historical perspective how the rule came into being. Curiously, I have other accounts at the same bank (and it's related investment arm) with many many times the sum involved in this tiny savings account. Most of those I will not be moving or transferring until I retire (maybe a decade or more) but the Regulations consider them "demand" accounts that need a higher reserve, while my tiny almost no interest savings account which I use to move money around a few times a month counts as a less volatile account that needs a lower reserve. Strange and not really accurate view of the world under modern on-line banking. Doesn't really seem all that useful a distinction, but it probably keeps legions of accountants employed.
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