5 ms·

> The accounts you are thinking about are all, under the hood, lines of credit, even though they don't look like that. You present this statement as though it'

by lmm 2y ago

> The accounts you are thinking about are all, under the hood, lines of credit, even though they don't look like that. You present this statement as though it's an immutable law of nature, rather than a design feature of the US banking system that allows them to offer an excuse for closing accounts that's convenient for those banks. (The fact that someone on HN can read about it and feel smart because they think they understood the deep reality that lesser people don't get is also a convenient design feature).

tptacek 2y ago
As long as we agree that it's a basic feature of the US financial system I don't think there's much for us to argue about.
- alexey-salmin 2y ago
  I haven't seen any proof that it's a basic feature of bank accounts. Some specific services (checkbooks, embossed and offline-chip cards, visa/mc acquiring) can require a credit-worthy account, but these services can be denied without denying the account itself.
  - patio11 2y ago
    Does your envisioned product allow someone to direct deposit a paycheck? Then congratulations, it is a credit account, because a) we expect to spend paychecks including very soon after receiving them but b) payroll companies sometimes screw up payroll and can in some cases pull the money back.
    - alexey-salmin 2y ago
      Can you reference a law saying that the bank is obligated to force an overdraft on a non-overdraft account when the transaction is reversed? This was a screw up by neither the bank nor their client, I see all reasons to bounce it back and let the wrong party figure it out. Furthermore I saw that exact case IRL in another country and the payroll company had to settle it with the employee (not with the bank) in court. I understand that US banking can be very different here but neither googling nor chatgpt was able to provide any specific proofs. Some people claim online that a bank can never refuse an ACH transaction but it's obviously false, they do it easily when the account is closed, blocked or overdrawn beyond a certain limit.
      - tptacek 2y ago
        This is in the article. https://f16c0eccd54007287fb794f9a3d05f2a.cdn.bubble.io/f1698430248752x773632316049114100/10.pdf https://f16c0eccd54007287fb794f9a3d05f2a.cdn.bubble.io/f1698...
        alexey-salmin 2y ago
        I read that. It's an inverse of what you describe above: bankruptcy is ongoing, all accounts are already frozen. However the debtor asks the court to unfreeze them, resume the normal operation, resume all ACH operations except for chargebacks because they suspect fraud. It never says the bank was obliged to honor reversals with insufficient funds out of pocket, it's not even close. Accounts in question have sufficient funds. Now here's a legally binding document that actually controls reversals and returns of ACH entries: NACHA: A Complete Guide to the Rules Governing the ACH Network [1] All newer versions are paywalled but for a question you claim is essential to the US banking the 2005 version should suffice. Here's what I see after reading it for two hours. > Except as otherwise provided for in subsection 6.1.3 (Restrictions on Right to Return), an RDFI may return an entry for any reason. I didn't find any restrictions that disallow immediate return of the REVERSAL entry with reason code "R01 Insufficient Funds". Reversal entry of a credit entry is a normal debit entry with a word "REVERSAL" in it. Now the originator can potentially dishonor the return: > An ODFI may dishonor a return entry (1) if it can substantiate that the RDFI failed to return the entry within the time limits established by these rules, thus causing either the ODFI or Originator to suffer a loss, or (2) if the return entry contains incorrect information, does not include all information required by Appendix Five (Return Entries), or otherwise fails to comply with the requirements of Appendix Five. To dishonor a return entry, the ODFI must transmit a dishonored return entry complying with Appendix Five to its ACH Operator within five banking days after the Settlement Date of the return entry. However the possible reasons for dishonoring is very limited and doesn't include "we really need that money" reason. Besides filling errors the only real reason is the time limit that doesn't apply here. So, I can't find any concrete proof that the receiving bank must always honor the reversal ACH entry, especially at loss. The topic of losses from erroneous entries is mentioned multiple times but never in such context. It maybe a confusion of ACH network rules with Visa/MC rules that do have this requirement in some cases, don't know. [1] https://archive.org/stream/gov.law.nacha.ach.2005/nacha.ach.2005_djvu.txt https://archive.org/stream/gov.law.nacha.ach.2005/nacha.ach....
    - lmm 2y ago
      Allowing payroll companies to pull money back is a design choice, not an immutable fact of nature, as is pretending to clear instantly. Other choices are possible. (Obviously not crypto nonsense; RTGS settling in <3 days is boring, mainstream bank plumbing in many countries. You know this)
      - tptacek 2y ago
        It is the design choice of the system we have now. The post doesn't claim that it is the only possible design choice. The post doesn't even claim that the banking system was never weaponized for political reasons; it makes clear that has in fact happened. What it is at pains to point out is that the complaints of crypto-magnates about the system being recently weaponized against them are dubious, because their complaints center around longstanding properties of our system that other businesses routinely trip over.
        lmm 2y ago
        > The post doesn't claim that it is the only possible design choice. Not explicitly. But it's set up to mislead you into thinking that, by pretending to be a deep dive into the causes of something, while spending great effort on some of the (minor) causes and quickly skating over other, more significant causes that reflect more negatively on the author's industry. > The post doesn't even claim that the banking system was never weaponized for political reasons; it makes clear that has in fact happened. What it is at pains to point out is that the complaints of crypto-magnates about the system being recently weaponized against them are dubious, because their complaints center around longstanding properties of our system that other businesses routinely trip over. The post is at pains to make it all sound normal and inevitable and unintentional. Of course when the bank sends a letter saying that its decision is final this is a bald-faced lie, everyone in the banking system knows that sending bald-faced lies to your customers is normal and expected, how deceptive it is of the crypto folks to pretend to believe that the letter they were sent meant what it said. Of course people should be cut off from the financial system and told vague lies and evasions about why, that happens to everyone, why would anyone complain about that? The post acknowledges that the financial system is set up to secretly cut people off without review or recourse, that this ability is weaponised for political reasons, and then glosses over and misdirects around the fact that this is a deliberate setup that serves that financial system's interests. It may not be malicious targeting of crypto folks in a narrow sense, but it's indistinguishable from it, by design. "Look, it really doesn't matter that our system silently cuts off people who work with our competitors and lies about the reasons, because that's just our system behaving as normal and it does exactly the same thing to bodega owners" is not, once you strip away the flourishes, a compelling defense.
- lmm 2y ago
  I don't think it's a "basic" feature. I suspect it's one of those things that, like the ACH upgrade mentioned in the article, would be changed swiftly if the relevant parties were sufficiently motivated.
  - tptacek 2y ago
    I don't agree, but even that statement concedes Patrick's point.
    - lmm 2y ago
      [flagged]
      - tptacek 2y ago
        That is absolutely not true of Patrick's writing. Whatever else you might say about it, "lacking in testable claims" is not a reasonable argument to make about this post.
astrange 2y ago
You can't make a bank account where there is no possible chance a transaction can be reversed. That's what you're asking for. (Crypto doesn't do this. You can be taken to court and they don't care that it's decentralized and immutable and all that. That's much of the point of his writing.)
- alexey-salmin 2y ago
  If account has insufficient funds to do a reversal the bank is not always obliged to step in, only in a few specific circumstances. Avoiding such circumstances is possible.
  - astrange 2y ago
    There's an example in the article. If the account is owned by a company and it goes bankrupt, the account no longer contains money even though your computer says it does. So if anyone reverses a deposit quickly enough your computer is going to let it through and you're paying for it.
    - alexey-salmin 2y ago
      Your example is interesting but I don't see how a bank can be held liable if the bankruptcy wasn't communicated to it properly, is there any proof it's a real thing? The example in the article is different if I read it right: bankruptcy was already known to all parties, account frozen, but the debtor asked court if some operations can be resumed except for chargebacks.

by lmm 2y ago

tptacek 2y ago

As long as we agree that it's a basic feature of the US financial system I don't think there's much for us to argue about.

alexey-salmin 2y ago
I haven't seen any proof that it's a basic feature of bank accounts. Some specific services (checkbooks, embossed and offline-chip cards, visa/mc acquiring) can require a credit-worthy account, but these services can be denied without denying the account itself.
- patio11 2y ago
  Does your envisioned product allow someone to direct deposit a paycheck? Then congratulations, it is a credit account, because a) we expect to spend paychecks including very soon after receiving them but b) payroll companies sometimes screw up payroll and can in some cases pull the money back.
  - alexey-salmin 2y ago
    Can you reference a law saying that the bank is obligated to force an overdraft on a non-overdraft account when the transaction is reversed? This was a screw up by neither the bank nor their client, I see all reasons to bounce it back and let the wrong party figure it out. Furthermore I saw that exact case IRL in another country and the payroll company had to settle it with the employee (not with the bank) in court. I understand that US banking can be very different here but neither googling nor chatgpt was able to provide any specific proofs. Some people claim online that a bank can never refuse an ACH transaction but it's obviously false, they do it easily when the account is closed, blocked or overdrawn beyond a certain limit.
    - tptacek 2y ago
      This is in the article. https://f16c0eccd54007287fb794f9a3d05f2a.cdn.bubble.io/f1698430248752x773632316049114100/10.pdf https://f16c0eccd54007287fb794f9a3d05f2a.cdn.bubble.io/f1698...
      - alexey-salmin 2y ago
        I read that. It's an inverse of what you describe above: bankruptcy is ongoing, all accounts are already frozen. However the debtor asks the court to unfreeze them, resume the normal operation, resume all ACH operations except for chargebacks because they suspect fraud. It never says the bank was obliged to honor reversals with insufficient funds out of pocket, it's not even close. Accounts in question have sufficient funds. Now here's a legally binding document that actually controls reversals and returns of ACH entries: NACHA: A Complete Guide to the Rules Governing the ACH Network [1] All newer versions are paywalled but for a question you claim is essential to the US banking the 2005 version should suffice. Here's what I see after reading it for two hours. > Except as otherwise provided for in subsection 6.1.3 (Restrictions on Right to Return), an RDFI may return an entry for any reason. I didn't find any restrictions that disallow immediate return of the REVERSAL entry with reason code "R01 Insufficient Funds". Reversal entry of a credit entry is a normal debit entry with a word "REVERSAL" in it. Now the originator can potentially dishonor the return: > An ODFI may dishonor a return entry (1) if it can substantiate that the RDFI failed to return the entry within the time limits established by these rules, thus causing either the ODFI or Originator to suffer a loss, or (2) if the return entry contains incorrect information, does not include all information required by Appendix Five (Return Entries), or otherwise fails to comply with the requirements of Appendix Five. To dishonor a return entry, the ODFI must transmit a dishonored return entry complying with Appendix Five to its ACH Operator within five banking days after the Settlement Date of the return entry. However the possible reasons for dishonoring is very limited and doesn't include "we really need that money" reason. Besides filling errors the only real reason is the time limit that doesn't apply here. So, I can't find any concrete proof that the receiving bank must always honor the reversal ACH entry, especially at loss. The topic of losses from erroneous entries is mentioned multiple times but never in such context. It maybe a confusion of ACH network rules with Visa/MC rules that do have this requirement in some cases, don't know. [1] https://archive.org/stream/gov.law.nacha.ach.2005/nacha.ach.2005_djvu.txt https://archive.org/stream/gov.law.nacha.ach.2005/nacha.ach....
  - lmm 2y ago
    Allowing payroll companies to pull money back is a design choice, not an immutable fact of nature, as is pretending to clear instantly. Other choices are possible. (Obviously not crypto nonsense; RTGS settling in <3 days is boring, mainstream bank plumbing in many countries. You know this)
    - tptacek 2y ago
      It is the design choice of the system we have now. The post doesn't claim that it is the only possible design choice. The post doesn't even claim that the banking system was never weaponized for political reasons; it makes clear that has in fact happened. What it is at pains to point out is that the complaints of crypto-magnates about the system being recently weaponized against them are dubious, because their complaints center around longstanding properties of our system that other businesses routinely trip over.
      - lmm 2y ago
        > The post doesn't claim that it is the only possible design choice. Not explicitly. But it's set up to mislead you into thinking that, by pretending to be a deep dive into the causes of something, while spending great effort on some of the (minor) causes and quickly skating over other, more significant causes that reflect more negatively on the author's industry. > The post doesn't even claim that the banking system was never weaponized for political reasons; it makes clear that has in fact happened. What it is at pains to point out is that the complaints of crypto-magnates about the system being recently weaponized against them are dubious, because their complaints center around longstanding properties of our system that other businesses routinely trip over. The post is at pains to make it all sound normal and inevitable and unintentional. Of course when the bank sends a letter saying that its decision is final this is a bald-faced lie, everyone in the banking system knows that sending bald-faced lies to your customers is normal and expected, how deceptive it is of the crypto folks to pretend to believe that the letter they were sent meant what it said. Of course people should be cut off from the financial system and told vague lies and evasions about why, that happens to everyone, why would anyone complain about that? The post acknowledges that the financial system is set up to secretly cut people off without review or recourse, that this ability is weaponised for political reasons, and then glosses over and misdirects around the fact that this is a deliberate setup that serves that financial system's interests. It may not be malicious targeting of crypto folks in a narrow sense, but it's indistinguishable from it, by design. "Look, it really doesn't matter that our system silently cuts off people who work with our competitors and lies about the reasons, because that's just our system behaving as normal and it does exactly the same thing to bodega owners" is not, once you strip away the flourishes, a compelling defense.
lmm 2y ago
I don't think it's a "basic" feature. I suspect it's one of those things that, like the ACH upgrade mentioned in the article, would be changed swiftly if the relevant parties were sufficiently motivated.
- tptacek 2y ago
  I don't agree, but even that statement concedes Patrick's point.
  - lmm 2y ago
    [flagged]
    - tptacek 2y ago
      That is absolutely not true of Patrick's writing. Whatever else you might say about it, "lacking in testable claims" is not a reasonable argument to make about this post.

astrange 2y ago

You can't make a bank account where there is no possible chance a transaction can be reversed. That's what you're asking for. (Crypto doesn't do this. You can be taken to court and they don't care that it's decentralized and immutable and all that. That's much of the point of his writing.)

alexey-salmin 2y ago
If account has insufficient funds to do a reversal the bank is not always obliged to step in, only in a few specific circumstances. Avoiding such circumstances is possible.
- astrange 2y ago
  There's an example in the article. If the account is owned by a company and it goes bankrupt, the account no longer contains money even though your computer says it does. So if anyone reverses a deposit quickly enough your computer is going to let it through and you're paying for it.
  - alexey-salmin 2y ago
    Your example is interesting but I don't see how a bank can be held liable if the bankruptcy wasn't communicated to it properly, is there any proof it's a real thing? The example in the article is different if I read it right: bankruptcy was already known to all parties, account frozen, but the debtor asked court if some operations can be resumed except for chargebacks.