My (Virtual)Bank Failed!

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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!

{ 5 comments, please add your thoughts now! }

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5 Responses to “My (Virtual)Bank Failed!”

  1. gharkness says:

    Wow, I made tons of money off Virtual Bank, probably some ten years ago. They started off with great return rates, and then gradually ratcheted them down, till I finally gave up and moved on to another bank with better rates.

    But they did get me started in the world of internet banking….sorry to hear they failed.

  2. Steve says:

    Wow! It’s amazing that it’s not seamless and you have go through the hassle. On the other hand, last year a small credit card company I use failed and they handed the debt to a new company who then issued a new card along with a statement. It’s amazing that if you owe money, they’ll follow you. But if it’s your money, you need to follow it.

  3. zapeta says:

    I wonder just how many readers have been affected by a bank failure at this point. It seems like everyone I know has had at least one of their banks fail.

  4. mj says:

    I, too, was a customer of Virtual since its inception and was fully expecting its sinking. After the fateful day I went to the main office and found that Sabedell bank out of Miami had taken over and the whole process was seamless. I really didn’t have to do anything else to confirm my relationship but the letter which you mention seems to be pretty standard stuff when these buyouts occur. Sabedell is now the parent company but the Virtual Bank name is still being used and their main office is still in Palm Beach Gardens FL

  5. lef says:

    Mr. Wang,
    If you are going to post, you need to get your facts right. Lydian Private Bank failed and was sold to Sabadell Bank on August 19, 2011, not in June as you state in your post.

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