How are banks allowed to get away with this?

[oceanbaby]

So we have a mortgage with Citibank. Nothing special - regular ole fixed rate 30 year mortgage. Because of cash flow, we like to pay half of it every two weeks when dh gets paid instead of all of it out of one pay check. So we just started doing this again (used to do it on our old loan with a different bank last year before we bought the new house). Both payments were made before the due date. I called today just to make sure that everything got posted correctly.

Surprise, surprise, they hadn't posted my payments. Their explanation was that if they receive a payment for less than the amount due, they "don't know what to do with it." Oh, but conveniently, they have a plan I can sign up for that allows me to do exactly this, but I pay a $375 enrollment fee plus $1.50 service charge for each payment.

I think this is total crap. What do they mean "they don't know what to do with it?" They have my account number. They didn't return it to me. What else IS there to do with it other than post it to my account? The person on the phone went ahead and posted the two payments, confirmed there was no late fee, but told me that I would have to call in after each payment to tell them to post it. Oh, and apparently it takes them 5 days AFTER I call to post, so now both payments and my phone call would have to happen 5 days before the due date. Yeah, 5 days to post a payment. Right.

This is a total freaking scam and I don't get how it is legal. I'm pissed. There is NO WAY I am paying $375 for the privilege of paying early every month! (The loan is very specific that there is no prepayment penalty, by the way.)

[akwifeandmomma]

I'd call Clark Howard.

Lame!

[Maluhia]

Strange.

[oceanbaby]

Who is Clark Howard?

ETA: Figured it out. Thanks!

[earthmama369]

Yeah, that's totally them trying to scam you into paying nearly $400 for the "privilege" of paying your mortgage every two weeks. I'd be inclined to shine some media light on that one. Maybe some light from the attorney general's office. In the meantime, I would simply pay in full once a month to avoid the hassle.

[rainbowmoon]

it's clear banks in this country can do whatever they want without repercussions (AND be rewarded for it to boot!)

[Peacemamalove]

Originally Posted by earthmama369

Yeah, that's totally them trying to scam you into paying nearly $400 for the "privilege" of paying your mortgage every two weeks. I'd be inclined to shine some media light on that one. Maybe some light from the attorney general's office. In the meantime, I would simply pay in full once a month to avoid the hassle.

I agree CALL THE ATTORNEY GENERAL!!!

[Jennifer3141]

Originally Posted by rainbowmoon

it's clear banks in this country can do whatever they want without repercussions (AND be rewarded for it to boot!)

ITA and it's pretty sad.

[Caneel]

Banks are grasping any opportunity to make fee income and avoid losing interest income. Totally d*ck move on their part.

When we got our new mortgage (almost one year ago) the bank didn't offer bi-weekly payments and the lender told me straight out it was because the bank didn't want people paying ahead on their mortgages, the bank wanted as long as mortgage terms as possible.

So I calculated how much an extra payment would be and added that amount to principle each month, which actually benefits us more because it is all principle.

Then when I tried to set up the auto withdraw from my account (for the regular payment) and the extra to principle payment, it was a very difficult process, like the bank wanted to make it hard in hopes people wouldn't do it.

I remember when we got our first loan, the banks were giving you a 0.25% break on interest rates if you agreed to auto withdraw!

Seriously, everyone needs to watch their banks like hawks right now.

Yesterday I heard from a business associate that her bank (a national bank) tried to hold a six figure check, drawn on a local bank, for 10 days even though her bank (the national bank) had called and confirmed the funds were available and the check would clear when processed.

I suspect what the bank wanted to do was to hold the $$$$ for as long as possible and work the float for a few days. (earn interest off of overnight funding)

[Mama~Love]

I hate all banks, and don't trust a single one.

[Caneel]

I have been reading and listening to (on NPR) a lot the subject of bank fees.

People debating on whether or not fees should be or need to be regulated all seem to share the same belief in that if fees are regulated, the era of free or low cost checking and savings accounts will end very quickly, fees to obtain loans like mortgages will increase, and so on - sort of a "be careful what you wish for" scenario.

Right now, the banks are making money off a small portion of the Joe Public population, the people that bounce checks, fall below minimum balances, late fees. These are the little guys, the ones that don't have a leg to stand on when it comes to getting fees waived.

The depositors with lots of money generally pay, in my banking experience, next to no fees even if they bounce checks. I had a commercial customer that would routinely bounce $2+ million in payroll checks because they forgot to transfer funds. Every fee was always refunded.

But in the Joe Public group, there are plenty of people who get free or low cost accounts that go about their business, don't overdraw their account, don't generate fees. The bank loses money on these customers.

If the fees were evenly distributed across the board, the Joe Publics will definately be paying more for their banking services.

But banks definately have preditory practices that must stop, the overdraft protection and the processing of transactions that result in OD fees are just two examples.

[KayTeeJay]

Agree, it is totally a d*ck move by them. Our mortgage is through National City, and I went through the same thing trying to figure out how to set up auto withdrawals. Apparently, the only way to do it is to enroll in their "Accellerated Payment Program" to set up withdrawals every two weeks. DH and I both get paid bi-weekly, so I would be fine with that, but it is $100 or so to enroll, plus a $9 service fee every month! Even though $9/month is not a big deal for us, I just can't pull the trigger on it. The fee is just too stupid. So, I have half the house payment taken out of each paycheck and deposited into a completely separate bank account, then I manually pay online every month. One good thing about NC is that they do allow you to pay future months' payments early. They were just purchased by PNC, which I know nothing about, so maybe things will change...

[StrawberryFields]

Well... although I disagree that they just sat on it without calling anyone, I can see their point abut not knowing what to do with it. A random payment in the middle of the month sent in by a customer could be meant for escrow, or principle only, or just half the regular payment. You don't really want them to pick and choose what to apply it to, know what I mean? And just like you are angry that they didn't just post it toward your monthly payment, the customer right behind you could have sent the same exact payment and been all sorts of pissed that they didn't put it straight to principle. Or escrow. Know what I mean?

Like another poster I just send half to another account on the 15th and the 30th, then make one big payment out of that account on the 1st.

[oceanbaby]

I am going to go into the bank. Dh works right next to a Citibank, and I'm thinking that every other week when he gets paid he can just go in and make a payment. It's kind of a hassle for us, but I'm not paying that fee.

[rainbowmoon]

I would report it to your state banking commission (or whatever state the bank is in) and let them figure it out.

[rainbowmoon]

A simple phone call could have rectified the matter in minutes though. I call shadyness!

Originally Posted by StrawberryFields

Well... although I disagree that they just sat on it without calling anyone, I can see their point abut not knowing what to do with it. A random payment in the middle of the month sent in by a customer could be meant for escrow, or principle only, or just half the regular payment. You don't really want them to pick and choose what to apply it to, know what I mean? And just like you are angry that they didn't just post it toward your monthly payment, the customer right behind you could have sent the same exact payment and been all sorts of pissed that they didn't put it straight to principle. Or escrow. Know what I mean?

Like another poster I just send half to another account on the 15th and the 30th, then make one big payment out of that account on the 1st.

[cristeen]

Originally Posted by StrawberryFields

A random payment in the middle of the month sent in by a customer could be meant for escrow, or principle only, or just half the regular payment. You don't really want them to pick and choose what to apply it to, know what I mean?

Except every set of loan paperwork I have ever seen (and I've seen hundreds) specifies how they apply payments received. Generally along the line of: late fees, escrow overdraft, interest, (impounds) then principal. Since interest accrues DAILY on a mortgage, when that payment comes in, it should be applied RIGHT THEN on the accruing interest and then the remainder on the principal, assuming that there are no bank fees owing. There's no questioning there... Most of them say very clearly that if the payment is for something outside that priority order, then it needs to be clearly marked as such.

OP - I'd recommend you go looking for that document in your paperwork and call them back and raise he!! when you find it - escalate the call to managers/supervisors as many times as necessary. If they put it in writing then they obviously have a policy on it, and are just jerking you around because they can. If you don't get a satisfactory response, I'd take it to the attorney general like the pps suggested.

[oceanbaby]

So I've spent over half an hour on the phone with them this morning, being transferred all over the place, and their official line is that "Citibank does not accept partial payments." They're basically telling me that I'm SOL. My only option is to enroll in their stupid ripoff program. When they receive my partial payments, they apply them to interest, and it's not until they receive the entire amount AND I call them to tell them to apply it, that they accept it as a payment on my account. This however, runs the risk of making my payment late, incurring late charges and reflecting badly on my credit. Even though, both payments are always made before the due date, I have to call before the due date AND allow 5 days processing time.

In the marketing materials they send me about their biweekly plan, their big hype is how much you save on interest by having your payments posted every two weeks rather than once a month. Then it says "Consumers can realize the same advantage on their own, but are rarely able to keep it up consistently." What no one can explain to me is HOW "consumers can realize this same advantage on their own." They just keep saying over and over that there is absolutely no way they will accept a partial payment.

[aniT]

We have CitiMortgage (although when we opened the mortgage it was a different division) We have had the account for 2.5 years and they take ours out bi-weekly to my knowledge we are not charged a fee for this and I am damn sure we did not pay a set up fee either. However ours is through PrimeAmerica something about their smart payment plan.. and because we pay biweekly rather than bimonthly we make two extra payments a month.

But again.. we refinanced before the big meltdown.. DH is good about seeing the writing on the wall.

[Porcelain Interior]

Can't you just hold the first check's amount until you have the full mortgage payment and pay it all at once?

Seems like it'd be much easier.

(BTW I do think these rules are total BS!)