Despite the exclamation point, this is actually not a big deal. Remember Virtual Bank? It was one of the first online bank accounts I had and it was included in an early 2007 “state of the high yield online savings account” post, a post I never revisited. Those were the days… most online banks offered rates in the high 4% with some breaking 5%. Then the financial industry broke and now we’re happy to see 1% rates!
Well, Virtual Bank’s parent, Lydian Private Bank, failed at the end of June 2011. That’s right, it failed over two months ago, close to three months, and I had no idea. I just received a letter over the weekend, dated August 25th, explaining that Virtual Bank was under new ownership. You wouldn’t know it looking at the homepage because nothing has changed about it and that’s because it was acquired by Sabadell United Bank. Lydian Private Bank had $1.70 billion in total assets and $1.24 billion in total deposits, which is pretty sizable. Fortunately it would cost the FDIC’s Deposit Insurance Fund a “mere” $293.2 million.
As for me, I had $21.90 stashed in the account, an eMoney Market account that I completely forgot about because I failed to add it to my financial network map! Had I remembered, I probably would’ve closed it long ago when I closed so many other accounts. After a short period I closed nearly half of my online savings accounts, a number that is now in the mid-single digits, rather than in the mid-double digits.
What happens next? I thought it would be seamless, I would just have a new account, but it appears I have to claim ownership of my deposits. According to 12 U.S.C. Section 1822(e), I have to claim ownership of the deposits at the new institution within 18 months (this is all included in a letter I received from the FDIC). All I have to do is take some action on the account – deposit or withdraw funds, executing a new signature card, providing a change of address, or just writing them a letter. Otherwise, if I fail to claim it, the funds go back to the FDIC and the FDIC sends it to the state as unclaimed property.
All I did was log into my account and request that it be closed, so we’ll see how painless of a process that is!