Note: Even though I am a law school student, I am not a lawyer, and none of this or anything else on this blog should be interpreted as legal advice. Also, I know I’m conflating some legal issues, but this is a really long post, and I wanted to simplify some things.
All within the past 30 days, USAA froze all my accounts, held onto about $10 000 of my money, cleared access to my accounts, froze my accounts again, restored access again, notified me they were closing all of my accounts, told me they were holding onto my money for 30 days, and then finally gave me back my accounts. I’m honestly not sure if USAA will freeze and/or close me again given what happened, but I’m hopeful I’m out of it now.
Just as background info, I first got my USAA accounts about five years ago and used them for very normal things (direct deposit of my paycheck, savings account, regular credit card purchases, etc.). In general, though, it wasn’t my primary financial institution since there aren’t many physical branches. In the summer of 2015, I started MSing more and started depositing money orders with USAA. Various reports from places like FlyerTalk and Reddit come out with stories of people being able to push a lot of volume through USAA, so I thought I should be fine since I don’t do that much (I am horrible at recordkeeping and underestimated my amount).
Everything went fine for a while. One thing of note was that I got a call from an agent in April of this year asking me about my deposits. The agent seemed mostly concerned with whether this was business activity, and I assured him it wasn’t. In fact, he asked if it was for rewards points encouraging of such. I also had some deposits held for 5-7 business days instead of the usual immediate availability with USAA. When it first happened, I called in to ask, and the agent said USAA wanted to make sure they would clear and that USAA was fine with the deposits themselves. It didn’t happen very often, and they always cleared properly, so I didn’t think too much of it.
Then, the weekend before 12 September, I deposited some money orders just as I normally did. Also as normally happened, all funds were immediately available. Early on the 12th, though, I logged into my account and saw a negative balance with a hold of ~$12 000 in deposits. That meant USAA retroactively put the deposits on hold. Something interesting is that not all of those deposits were made that weekend; I had some stretching back to the previous week. I called and was told retroactive holds are something USAA sometimes does to make sure the deposits clear properly. I had never experienced this before, and I had no choice but to go along with it for 7 business days, the amount of time for the investigation. Later that day, I saw I was no longer able to even login, getting a message that my access was restricted. I was told this was part of the investigation. Again, I had no choice but to continue.
Between then and when my accounts were first restored, I made some calls to check in because they were initially unclear how long the investigation would take. During that time, I spoke with a number of agents from various departments, and I was sometimes questioned on the activity. I had decided early on that it was best to be upfront (especially with the generally positive statements from previous agents), and I said I was doing it for rewards points, briefly outlining how I use credit cards to buy debit cards to buy money orders. I made sure to note that I didn’t do this with USAA credit cards. In general, the agents were fairly understanding with the idea and opined that I should be fine.
Finally, my accounts were restored, but there was a caveat: I couldn’t make any transfers whatsoever. That included transfers between my USAA checking and USAA savings accounts, as well as any external transfers. I was also told I could no longer do mobile deposits, only mailing checks in (although when I logged in, it was still an option, albeit with a much lower daily limit, unlike the transfers). The USAA agents I spoke with said I would have to continue using the accounts for 6 months and display good banking behavior (no overdrafts, no returned deposits, etc.) before they could reconsider the decision. This was totally unacceptable, and I asked for an investigation. That investigation apparently completed the next day, and I saw I was able to transfer again.
Then, two days after the accounts were restored, USAA locked me out again. I want to make clear that I did not make any deposits or do basically anything during this time, only logging in to see my balances and such. I called in and asked why I would be locked out now when I was told everything should be fine so long as I didn’t do any more deposits, and I was told they were investigating the previous deposits from the weekend of 12 September, the deposits that had already been investigated and cleared. The agents I spoke with were, in general, also confused about this. I asked how long this investigation would take, and they said it would take 7 business days from the date of the deposits. I pointed out how it was, at the time, 10 business days past, and they had no real response.
Given the lack of any date, I called in the next day (Saturday) and the next Monday. Finally, the next day, Tuesday 27 September, an agent granted me access to my login. However, I immediately saw a problem – my accounts said the available balance was “Unavailable” even though it showed a proper current balance. The agent I spoke with said he didn’t know why that was and suggested I wait to see if it cleared up.
Unfortunately, later that day, I received a call from another USAA agent notifying me that “USAA is exercising its right to cease doing business with you”. I was absolutely shocked given all of this, and I asked why. The agents went over the review process and the “strangeness” of my activity and USAA’s suspicion of fraud. I replied that 1) I had been told by multiple agents that behavior was acceptable and 2) USAA already conducted a review on those specific deposits that concluded in my favor. All of the agents I spoke to kept downplaying the statements of those previous agents, saying that they were mistaken, that they’re just frontline representatives (not all of them were; some specifically identified themselves as being from the fraud department), and that those previous agents’ statements aren’t binding. All the while, they kept emphasizing the “strangeness” of the activity and the claim that USAA can make the decision at any time to cease doing business with a person.
If you learn only one thing when reading this post, let it be this: just because an agent says something, even in its terms and conditions, doesn’t make it true.
I was told the money I had would be held for 30 days and if, after that time, the funds were deemed not fraudulent, I would receive a check in the mail. When I asked, I was told there was no official reason listed for the account closure (even though the conversations with the agents suggested very strongly it was the deposits). I asked for a review, and the agents told me there was no review and the decision was final. Just because an agent says something doesn’t make it true. Just as an aside, some of the agents were actually really, really horrible. I tried asking questions to one agent, and she said she didn’t have the answer. That’s okay, reasonable. I then asked her opinion on how I was explicitly told what I was doing was okay and then got shut down for it, and she said that as her personal policy, she won’t answer that question. That’s less okay, but fine, reasonable. Then she started saying she wasn’t going to answer any more questions and that she was hanging up. I sincerely wanted to just ask basic questions that I thought she would be able to answer, and I asked permission to ask such basic questions like what times the offices were open. She kept repeating that she can’t answer those questions and that she was hanging up.
Sleep cleared my head and calmed me down, and I was determined not to let this be another shutdown. I made a couple more calls and finally found someone who was willing to escalate the case and have it reviewed again. Remember what I said about agents telling the truth? I also decided I was going to pursue legal action because, for lack of better words, this was BS.
I’m not a lawyer, but here’s some basic US contract law. Just because a contract (including a bank’s terms and conditions) say something, it’s not always enforceable. That’s clear in so-called “contracts” to kill; they’re not legally enforceable. Likewise, even if a bank says they can cease doing business with a customer at any time and for whatever reason, that doesn’t make it true. They obviously can’t cease business with someone over their sex or race. Similarly, if a party to a contract makes express statements about what’s allowed and then ends the contract because the other party did exactly the action that was said to be allowed, that would [usually] be against basic contract law, illegal, even if the contract says the first party can end the relationship at any time for whatever reason. This is an example of [among other things] acting in bad faith.
So I wrote up a letter outlining just how USAA’s actions were illegal and gave three reasons: 1) I had been doing this for over a year and never been told there was any issue, so this established a course of conduct as to what was acceptable; 2) USAA agents made express statements that my activity was okay and shouldn’t be a problem; 3) the accounts were closed following a second review of my deposits, deposits that had already been reviewed and approved; and 4) in being notified of the account closures, I was told there was no official reason. That meant either A) the accounts were closed for no reason and USAA acted in bad faith or B) the accounts were closed for the already-approved deposits and USAA acted in bad faith. I also mentioned in the letter that if USAA tried bringing up a new reason for the closures, they would need to base it in some evidence and actually notify me, otherwise they would also be acting in bad faith.
I drafted the letter and mailed it according to the procedures for arbitration outlined in the terms and conditions. Any reader of this blog has probably seen it mentioned elsewhere, but those mandatory arbitration clauses are pretty binding and usually are enforced.
While I wait for USAA to receive and respond to my letter, I have a review. I’m assigned a specific agent, and she goes over my case. Again, I tell her the reason I’m doing this is rewards, and I make it clear I don’t do this with USAA credit cards. She tells me I’ll hear back in a few days about the decision in two business days, 3 Oct. Despite my attempts to reach her and my messages I left to her that day, I don’t hear back until the next day, and it’s bad news – the decision stands to close my accounts and that there’s no way to appeal it again. Just because an agent says something doesn’t make it true. She also notes that they received my letter of intent to arbitrate, and she says that because she isn’t the person appointed to legally deal with the case, I can’t really ask her questions about the arbitration. Here she got really confusing and, in general, unhelpful. She kept trying to make a distinction between the arbitration case, which she couldn’t answer questions on, and the decision, which she could. So, she could answer questions about the decision to close my accounts…but not questions about the closing of the accounts because that would be part of the arbitration or something. Just generally stubborn.
I eventually managed to get an official reason for the account closure: “[t]here was unacceptable behavior or activity on the credit card ending in XXXX”. This was literally the first time it was ever mentioned, and I asked when that activity was since I legitimately never MS with my USAA credit card. She said the last activity was in the statement ending 1 January. That meant the activity was in December. Of last year. 2015. I asked what activity that even was, and she said “there was activity on the credit card that closely matched activity in the deposit accounts”. I said yes, of course there was because I didn’t want to pay interest on the cards so I was paying off purchases after making them. She didn’t seem interested and said the decision was final and that I couldn’t submit any statements or appeal it. Just because blah, blah.
A couple hours later, I got a call from a new person assigned to my case, someone from the fraud team this time (the last person was in the banking side). She seemed extremely concerned with the letter I sent in, and she wanted to go over it with me. After doing so, she said that there didn’t seem to be any fraud on the account and that she was sending the case back to be reviewed. The next day, 5th Oct., I get a call saying my membership has been restored and all my accounts are active. Yay! But don’t do any more money order deposits. Aww, but okay. Your account has been under multiple reviews since June of 2015. Wait, what?!?! Every time, it’s been deemed okay, but to be safe, don’t do it again. I personally understand that what you’re doing is okay and makes sense, but it’s better to avoid the trouble.
And that’s where I am now. I’ve even bought an insurance plan to try to make my account more “normal”. I don’t intend to deposit money orders with USAA for a long time if ever again. One interesting thing is that my daily deposit limit is now $25 000, up from the $10 000 it was before this whole mess. I’m definitely not touching that.
I know people are going to ask this, and if you’ve read all this way, you deserve answer. In August, my last complete month, I deposited ~$57 000 in money orders. They varied between WU, MG, and USPS, but most were MG. Yes, they were all signed from myself to myself. This may have been a good thing because it showed what I was doing in terms of rewards points instead of fraudulently saying they were from other people.
A note about the above. The last agent who contacted me brought up the USAA remote deposit agreement which says you’re not allowed to deposit checks from an account you own. I replied that even though I’m signing it from and to myself, I’m not a signer on the account itself since it’s held by Western Union, MoneyGram, or USPS. I also said that, in general, agents are okay with depositing money orders to yourself since there aren’t many ways to deposit cash to USAA.
Something I learned is that some USAA agents are okay with letting you record calls. Towards the end of all this, I was getting so tired of the run around that I started asking permission to record calls. Unlike Amex agents, some of them were okay with it. My suggestion if you ever get into these situations is to try to [legally] record your calls. Having references to these calls really did help me.
A friend of mine, who does a significant amount less than me, actually went through something extremely similar this past summer. USAA called him and told him they were closing all his accounts, but they neglected to mention anything about his car loans. Eventually, without him doing anything, he got his accounts back. I think it probably was due to him having the loans, but I can’t be sure. He also was told he can’t do mobile deposits for 6 months, but I think he’s technically still able to.
If I had actually been banned legitimately, I would probably have been banned for life. I know this was the statement of an agent, but I was told these decisions are in effect for life.
Finally, to people who think I “abused” USAA, let me ask a question. What would you have done in my situation? It’s definitely true that I didn’t have to deposit money orders to USAA, that I could’ve just not MSed or could’ve used another depository. However, I was told by more than a couple agents, from various departments including the fraud team, that what I was doing was okay. I really wouldn’t have done this if I hadn’t been told that. I might be unreasonable, but I also might still be reasonable.
Just because an agent says something, even if it’s in the terms and conditions, doesn’t make it true. Honestly, if I had actually gone to arbitration, I think I would’ve been successful. The only thing USAA could’ve relied on is its claim that it can cease business at any time for any reason, but that’s clearly not true since there are protected classes like race or sex. Likewise, express statements can change what is and isn’t allowed.
It’s really useful if you can record those statements. Something I’m currently working on is whether, even in a two party consent state, an individual can start recording without notifying the other side because the other side has an automated message notifying the individual the call may be recorded. I know that’s a horrible way to phrase it, but I don’t really care right now.
My only real (it’s still not legal) advice is to make sure you’re prepared to take it as far as you need if you feel you’re on the right side. I wouldn’t have pursued this for nearly a month if I hadn’t been pretty sure that what USAA did was messed up.
Given the recent demise of Winn-Dixie, I’m probably not going to need much room for MO deposits, so I hope this won’t be too much of an issue for me in the future.