TreasuryDirect refuses to confirm transactions
Thursday, March 16th, 2006
Categorized as: Treasury Direct
I purchased $25,000 worth of Series I Savings Bonds electronically in January. After four emails, two phone calls, and three letters to TreasuryDirect, they have told me that they refuse to send me a written confirmation that my account even exists. In fact, in one of my letters, I asked for the confirmation under the Freedom of Information Act, and offered to pay up to $25 for the written confirmation, which they unequivocally denied. This doesn’t give me the feeling that my money is secure. Had I known this was their policy, I never would have purchased the Savings Bonds.
– Barry in Rhode Island
Given that people who invest in Savings Bonds and other Treasury securities are looking for an investment with as little risk as possible, several of TreasuryDirect’s policies are pretty scary. You’ve discovered one of them.
Another is that they don’t notify you if any of the details of your account are changed, for example, the associated bank account or your address. This kind of notification is a standard security practice for financial companies such as brokerage firms or mutual fund companies.
Another is that Regulation E doesn’t apply to Treasury Direct. This is the banking regulation that says if a thief gets your credit card number, your liability is limited.
If a thief gets your TreasuryDirect details, changes the bank account, and cashes in your funds, you likely won’t know until months later when you receive the 1099-INT tax form telling you how much interest income you earned. Meanwhile, the Treasury is adamant that it will not cover your losses.
I’ve brought these issues up with my contacts at the Treasury, but the conversations always end the same way. If you aren’t willing to take the risk, don’t use TreasuryDirect.
I don’t think this is a satisfactory answer. Do you? Leave your comments below.
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Tom Adams
Wow, that may actually be a deal-breaker for me. Not just the lack of controls but the cavalier attitude. I wonder is it because they’re a monopoly and think they don’t have to care? Or maybe because they actually don’t want people to use it?
First of all, given how much banking I personally do electronically, it comes as a real surprise to me to see the U.S. Treasury’s unwillingness to even address these very basic issues. But this story also reaffirms my long-held preference for the traditional paper savings bonds. I personally enjoy the tangible paper bonds, and they are perfect for gifts and prizes. However for awhile now the Treasury has stated their goal of discontinuing paper savings bonds, although no date has been established – – and I can imagine they’d lose a lot of customers that way, myself included. Does anyone have any insight as to how realistic this could be in the next year or two?
[…] Savings Bond Advisor pionts out some scary facts about Treasury Direct. They won’t confirm your account, they don’t inform you if someone else changes your account details, and they don’t guarantee limited liability if a thief steals your information. If you buy ETFs from a broker there are many more security guarantees. […]
TR and AndyK – The Treasury’s transactions costs with TreasuryDirect are tiny compared to paper securities, so I’m sure they want people to use it.
But the other side of the story is that banks and investment companies would prefer that the Treasury didn’t deal with individuals at all, so that they could get the business.
This results in a constant tug-of-war, depending on who the current political appointees are, about how well individual investors are treated by the Treasury.
The particular people who were pressing to do away with paper Savings Bonds have since moved on, so that’s not on the Treasury’s to-do list at the moment, but paper bonds cost the Treasury so much in transaction costs that you can be sure they’re going away someday.
I think there is a mistake here. I use Treasury Direct and changed my bank account information last week. I promptly got an e-mail from T Direct notifying of a change in my account (specifically my bank information) and asked me to review my account or call T Direct if I had any concerns.
On the issue of security, someone in another forum has pointed out that the Treasury confirms with the receiving bank that a linked account belongs to the owner of the TreasuryDirect account. (Different from a trial deposit process.)
People in that forum have also speculated that if someone were to fraudulently open a bank account in your name, and the Treasury were to deposit into that account, you could hold the receiving bank liable for failing to ensure the identity of the account holder.
What other forum? I would like as much information about this as I can get.
Tom, are you aware if security, confirmation, and notification are any better in Legacy Treasury Direct (applicable for Treasuries other than Savings Bonds)? Would you generally recommend TreasuryDirect also for other Treasuries?
I appreciate you writing about these security concerns re: not notifying you in the event the linked bank account was changed. I have written to them repeatedly with my concern about this issue and have asked them to implement two changes that would really help:
1. Notify the account holder of record by email and paper mail if a linked bank account is changed.
2. Not allow any sales of holding in the TD account for 10 days after the change of a linked bank account.
From my interactions with TD, it seems clear they don’t have any interest in making these changes.
I had bought savings bonds several times through TD but am now selling them as the 1 year time frame comes around so I can sell them. There is just no way I am going to take that risk when none of those risks is associated with the paper bonds.
Again, thank you for your newsletter and for raising this issue. My guess is most people with TD accounts are just not aware of these risks.
Actually, the statement about not notifying you about a new bank account is not accurate.
That was my understanding, too, until I added my third bank account to Treasury Direct a few weeks ago. I received an e-mail the next day alerting me to this fact. (This hadn’t happened many months ago when I had added my second bank account, so it’s probably T.D.’s response to online discussions such as this one.)
One-day notice via e-mail is better than a mailed paper notice, in my opinion, because it might even give me the chance to catch any abuse BEFORE the would-be thief’s first transaction to the fake bank account could go through!
– Dan
One more thing on Treasury Direct security…
Go ahead and laugh, but because of many of the same issues mentioned by Tom and others above, I’ve been doing a little extra “paranoid dance” when entering my T.D. password that I don’t bother with for my Hotmail, bank, or credit card log-ins.
I usually type the password slightly wrong the first time, then delete the incorrect digits, and copy/paste in the corrected portion from a text file I keep on my computer. A hacking thief would need more than a simple keyboard logger to get the password.
It may sound like I’m overreacting with a difficult workaround, but it doesn’t really take that much longer, and I usually only check Treasury Direct on Thursday mornings anyway (to transfer the T-bill interest leftover in the C of I).
Still, it would be nice if the security of T.D. was less dependent on users’ protection of their passwords.
NOYB and Dan – I’m really happy to hear that TreasuryDirect has started confirming bank account changes by email. My information was based on prior experience.
However, I did ask the Savings Bonds public relations team about this issue a few days before publishing this information but I guess they didn’t know it had already been fixed.
Mario – I don’t know about Legacy Treasury Direct but I’ll see what I can find out.
Followup – as a test, I recently changed my own email address on TreasuryDirect. I did not receive an email confirmation.
The same day I used the Contact Us button within TreasuryDirect to ask whether confirmations are sent for a variety of transactions types. The answer I received was:
To verify that the TreasuryDirect account holder made the changes E-mails are sent for randomly selected accounts that have had information changes.
Security by random selection? That’s one I’ve never heard of before.
Followup – After further thought, it seems to me that doing things randomly can be a valid security procedure in that it prevents attackers from knowing what response to expect. Random responses can increase security and lower risk for the Treasury.
However, the Treasury puts all the risk of a password attack on the investor and takes none itself anyhow. From the investor’s point of view, password security is increased and risk is reduced by at least having the option to receive notification of any changes to the account.
The people running TreasuryDirect want it to be the best possible system. They’re making continuous improvements. Hearing the customer viewpoint is helpful to them.
Has anyone tried changing the bank info to a account that is not yours (like a family member) to see if they will flag it as an error?
Also, if a burglar got your password, he will change your email so you wont get a warning. He’ll also change the password so you cant get in.
[…] The article refers to our March 18 article TreasuryDirect refuses to confirm transactions., as well as discussions on Morningstar.com forums. […]
There’s a follow-up to this article today at TreasuryDirect enhances security features