Chase Bank safe deposit box holders were surprised recently when they received a letter titled, “Updated Safe Deposit Lease Agreement.” In addition to raising the rental rate for the box , the Bank further implemented rules that prohibit box holders from storing money, coin and currency in the box unless it is of a collectible nature. Furthermore, the bank instructed these box holders that the total value of all property kept in their box should not exceed $25,000.
The Chase communication also repeatedly advises the box holder that their box contents are not insured by the bank or the FDIC. “Most box holders today mistakenly believe their contents are fully insured by their financial institution or the FDIC. It is one of the most misunderstood features of any retail banking product or service in the market” said Dave McGuinn, President of Safe Deposit Specialists.
The new contract changes appear to be a focused effort by Chase to control and minimize the potential liability and regulatory exposure related to their safe deposit box operation.
A more effective strategy to achieve the same result many banks are now pursuing is providing box holders the option to insure their valuables when the box is rented and at renewal. Regulations from the Office of the Controller specifically authorize banks to offer box content insurance. Requiring box holders to either insure their contents or decline coverage while acknowledging that neither the bank nor the FDIC insures the box contents is a very effective tool to manage both legal and regulatory exposures.
Consumer storage facilities across the country have long used this approach to eliminate claims by their storage clients when there is a burglary, fire, flood, tornado or other catastrophe.
The new Chase rules also explicitly prohibit its customers from storing any gold bullion or other metal coins in the box. The new rules are difficult to reconcile with Chase’s aggressive strategy to grow its Private Bank client base by offering a full menu of investment, banking and insurance services. These clients typically have higher value property and jewelry and are much more likely to utilize a safe deposit box to store property. With the high acquisition cost associated with this customer segment, it is unclear why Chase would risk alienating its existing depositors.
For its part, Chase has not publicly commented on the new safe deposit box rules.
Whatever the reason for the change, Chase Bank’s recent rule changes place many of its safe deposit box holders in a very awkward position.