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Don't Pay Off Your Credit Cards

Not unless you're ready to answer to the Department of Homeland Security.

A retired Texas school teacher sent six and a half thousand dollars to his credit card company to pay down a ballance that had gotten out of hand. Because the payment greatly exceeded his usual payments by a significant degree, the credit card company reported the man to Homeland Security and froze his account.

http://www.capitolhillblue.com/blog/2006/03/warning_financial_responsibili.html

Comments

( 11 comments — Leave a comment )
inhim
Mar. 8th, 2006 12:26 am (UTC)
Best reason yet not to pay off my credit cards.
gentlemaitresse
Mar. 8th, 2006 02:49 am (UTC)
I recently paid off 12,000 in cc debt, plus another 8,000 on my car loan. Nobody reported me or froze my account.

kmo
Mar. 8th, 2006 12:42 pm (UTC)
paying off debt
That's good to hear, although I'm not sure how you can know that your creditors didn't report you to Homeland Security.
gentlemaitresse
Mar. 8th, 2006 02:30 pm (UTC)
Re: paying off debt
I guess I can't know for sure, except to say that nothing came of it if they did.

sgnp
Mar. 8th, 2006 05:11 pm (UTC)
Re: paying off debt
I recently made two big payments with no ill effects as well.

My guess is that something like this depends on how aggressive the company's fraud department is, as they'd be the first ones to be alerted to someone whose payments became higher than normal.
sgnp
Mar. 9th, 2006 09:16 am (UTC)
I erased my earlier post because it was long winded. This article has me riled on several levels, and I've wasted more time than I should writing and rewriting this. My wife is ready to kill me and I should be sleeping.

So, then. . .

You've heard from several of your friends that have paid off large debts with no problem. I talked to my mother-in-law who is a bank teller and tax specialist, and asked her if the call center's statements had any validity. She told me that banks and credit institutions don't even have to start reporting abnormal *cash* deposits until they reach $10,000. Even then, the accounts aren't frozen, there's just a report that gets made. This is post-September 11th.

Check funds aren't reported at all. However, thye do wait for the check to clear before applying funds, and that can take a long time.

I'm not saying that Soehnge is lying. I think he was told something very similar to what he reported. However, there are serious omissions, including who told him the delay was due to a DHS investigation and whether or not it was the truth.
kmo
Mar. 9th, 2006 12:38 pm (UTC)
Cash being held
When I sold the house in Port Ludlow, more than a week passed between the time when the buyers' bank transfered the proceeds to my checking account and the time those funds appeared in my account. I called Bank of America to ask them wtf and they told me that the funds would not be available until Homeland Security had reviewed and approved the transaction. Could banks and other financial institutions be holding onto large deposites in order to profit from the money with very short-term investments and blaming the government for delay? I guess it's possible, but my experiences don't jive with the information provided to you by your mother in law. It's not just cash transactions that are subject to delay pending a review by HS.
sgnp
Mar. 9th, 2006 09:30 pm (UTC)
Sorry I've Been Acting Like a Crazy Person
I've basically been deleting my rants as I get more information. Here's all that I've discovered:

1) The Bank Secrecy Act is part of the Patriot Act, and may have been updated since my mother-in-law worked for the bank. According to the new Bank Secrecy Act, banks are required to report transactions greater than $10,000 or (here's the important one) "patterns of spending designed to obscure the moving of large funds" and are "not necessarily limited to cash transactions." The judgement of what is or is not a suspicious spending habit is up to the workers at the bank. Surprisingly, the folks who answer the phone at the Department of Homeland Security don't want to go into what they personally consider suspicious patterns of spending. I'm probably on a list right now.

On a side note, the Homeland Security folks came off as being bored, seemed confused when trying to follow my long-winded hypothetical questions, were constantly talking to me like an ignorant child or very old man, and seemed annoyed at being bothered at work with an issue related to their function. In short, they sounded like a large majority of government employees do when they find themselves talking to an obviously crazy person.

2) My bank, Bank of America, had three employees that gave me three different responses to my questions. The first, a bright, helpful, chipper young woman, said that the world has changed since September 11th and she gets memos all the time about new spending habits to watch out for. The second, a slightly bored guy who likes to talk over you, said that there's a risk management department that stands between the DHS and the Bank of America customers, and that the "patterns of spending" are evaluated by their risk management department before being reported. The final person, a manager, said that the only thing new is the bank reporting their fraud investigations to the DHS, and that the bank itself has always frozen accounts involved in fraud investigations, whether the DHS is contacted or not.

I think the first rep I talked to was a little more free than she maybe should have been. She even outlined one of the scams they're currently on the lookout for. She was very patriotic, and I think she thought that the talk of Homeland Security was intended to reassure me. I think the second rep was a little more knowledgeable, and probably tells it straight. The manager was very candid about banks complying with the government as required by law, but mostly concerned with retaining their money.

3) Everyone I spoke to confirmed that while suspicious account activity may be reported by the DHS, it usually has little or no consequence with regard to how long the funds are held unless fraud has actually occurred. The bank usually simply holds onto the money for as long as it can under the law when it's a higher than normal amount for the account. The manager confirmed that the law allows the bank to hold onto funds greater than $5000 for 5 business days after the check is deposited, even if the funds have been removed from the account of the check issuer. They added that amounts over the intial $5000 can be held for up to 11 business days. This is without any fraud suspected, and with or without the DHS being called. Kerr doesn't give the timeline in his article, but it sounds like the timeline you give in your case fits the norm.

4) The rep may have done you a disservice by implying causation between the DHS investigation and your account freeze. There's an implied statement that your funds would have been freed up sooner had the DHS not been contacted. I'm constantly reminded of escalation reps at our mutual big internet retailer friend offering to transfer customers to the corporate office line to get them off the phone. It's a lot easier to get someone off your back by saying, "Hey man, it's not me. Take your issue up with big brother."

If banks really are using the DHS as an excuse for holding onto your money, they may discover it doesn't have the calming effect it intended. As the article states, people get mad when you mess with their money. Of course, rather than social unrest, it'll probably simply end with a memo telling bank employees not to talk about the DHS to customers.
kmo
Mar. 10th, 2006 01:03 pm (UTC)
Re: Sorry I've Been Acting Like a Crazy Person
No need to be sorry. I've really enjoyed reading your reports. I do consider them reports rather than rants. I bluster on about civil liberties and such all the time, but I never get on the phone and actually grill employees at the Department of Homeland Security. That's awsome, Paul!

It's a lot easier to get someone off your back by saying, "Hey man, it's not me. Take your issue up with big brother."

Totally. "For security reasons," has become the new all-purpose excuse for laziness, ignorance, klugey system design.

This is great, Paul. Would it be alright if I made a new post that included all of your deleted entries? The process of discovery they reveal holds as much interest for me as the "final word" you received from the bank manager.
sgnp
Mar. 10th, 2006 06:26 pm (UTC)
Re: Sorry I've Been Acting Like a Crazy Person
Sure. The only thing I ask is that if you see two deleted posts that are very similar to use the later version. Sometimes I had some spelling and/or grammatical errors.

Also, please add this very long disclaimer:

"I first read KMO's post and was amazed at how someone of his obvious intellect would take an article with only one source and treat it as gospel. To prove my point, I undertook the research that I had wanted so badly for Bob Kerr to have done. My plan was to show the truth. The funny thing is, the more people I talked to, the more the truth kept changing.

What you will find below are my various attempts at schooling KMO according to the facts I had at the time. While KMO and I are friends, it is necessary to appreciate the fact that he and I don't see eye to eye on many issues.

A prime example is that I'm not upset by the fact that my large transactions are reported to the DHS, nor do I fear having a large government. Opposition to big government and obsessive protection of personal liberties is so late-18th Century.

Re-reading my final post, I realized that I forgot he and I have different priorities. You can see it for yourself when I imply that this isn't a big deal, because he would have had to wait just as long to get his money even if the DHS hadn't been contacted.

I want to make it clear that I am not a journalist, nor did I attempt to portray myself as one to the people I interviewed. My motivation in all this was simple: To prove to KMO that he was crazy. With this in mind, I did research on the phone with no prepared notes. I rambled, I stammered.

In every case, I told the person with whom I was speaking that I was simply trying to win an argument I was having with my friend over the Internet. I did not record their names, and you should not take any of their statements as being the official stance of the institutions they represent. As you will see in the various drafts, I ended up paraphrasing them a great deal, and in some cases their statements may be seen as being out of context.

The bottom line is, don't trust anything I say below, and for everyone's sake don't use it as the basis for an argument. If I was a responsible person, I could have done more than call a few people. If I was a responsible person, I would have read the Bank Secrecy Act before posting:

http://www.occ.treas.gov/handbook/bsa.pdf

I didn't. I still haven't. That thing is long. Maybe you could read it yourself and know more about this issue than I do. You most likely care more than I do.

With this in mind, if you decide to duplicate this research and find that the answers you get are entirely different from the ones you will see below, don't be surprised. As you'll see, this is actually something to be expected.
mungojelly
Mar. 12th, 2006 10:33 pm (UTC)
Short term: They fuck up a lot, are overwhelmed by data, and make a mess of things.

Long term: The fraud detection starts to work. It starts to work really, really well. It starts to work uncannily well. It understands things about the market that nobody else understands. Someone makes their USUAL payment, and it flags it, and it's RIGHT.

But of course, that's not the strangest thing that happens, at the end of the world.

<3
( 11 comments — Leave a comment )

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