BBVA USA bank to PNC bank acquisition was a disaster for law firms

If you are a law firm, and if until recently you did your banking at BBVA USA bank, you already know most of what I am now describing.  The acquisition by PNC bank of BBVA USA bank was a disaster.  We are now in the process of dumping PNC Bank. If you are a law firm and you formerly did your banking at BBVA USA, I’d guess you are likewise now in the process of dumping PNC bank.

Any law firm necessarily has at least two bank accounts, not just one.  The law firm has an “operating account” which is an ordinary checking account, and the law firm has a separate bank account where client funds are preserved so that they do not get commingled with the law firm’s own funds.  The separate bank account is often colloquially called a “trust account” or “escrow account”.  In most states, a state regulatory agency requires banks to set up such an account in a particular way so that the interest earned on the funds in the account gets paid over to the state regulatory agency.  Often this type of bank account will be referred to by the geek term “Iolta” meaning “interest on lawyer’s trust account”.

In normal daily routine, the law firm will be constantly depositing money into one account or the other, and transferring money back and forth between the two accounts.  A typical sequence of events is that a US client will mail a check to the US law firm to pay in advance for work that is to be carried out by a foreign patent firm in some foreign country.  The US law firm receives the check and uses a smart phone mobile banking app to deposit the money into the law firm’s trust account.  The law firm makes bookkeeping entries to keep careful track of the funds, and reports to the client that the money has been received.

The US law firm then dispatches instructions to the foreign patent firm to carry out the work on behalf of the US client.  A typical example of such work might be the filing of a patent application in a foreign patent office, which involves paying substantial government fees to the foreign patent office.  Eventually the foreign patent firm renders an invoice to the US firm.  The invoice may include professional fees of the foreign patent firm, as well as the government fees that were paid to the foreign patent office, and other out-of-pocket expenses such as translation fees and courier fees.  (A typical invoice for work of this kind will amount to many thousands of dollars.)

The US law firm then pays the invoice of the foreign patent firm (probably using Wise) and carries out various related tasks including docketing and file review.  The US law firm then prepares an invoice and bills the US client for the work carried out and for the many expenses incurred.  (This invoice, too, amounts to many thousands of dollars.)  The US law firm then pays the invoice by using the bank’s online computer banking system to transfer funds from the trust account to the firm’s operating account.  The law firm makes bookkeeping entries to keep track of the disbursement of the funds, and reports the disbursement to the client.

These steps, for example using the smart phone to deposit the client’s check into the trust account, and later using the bank’s online computer banking system to transfer funds, happen dozens of times per month for a busy law firm.  Other similar steps happen at unpredictable times.  As an example a client might send an advance of funds for future work, and the client might wire the funds into the law firm’s operating account.  What needs to happen, without delay, is a transfer of those funds out of the operating account and into the trust account.  An internal standard for most firms is that such a transfer needs to happen on the same day so as to reduce to an absolute minimum the period of time during which the funds momentarily reside in an incorrect location.

In the old days (before Covid, for example) such deposits and transfers might be done by means of physical trips to the bank and by means of physically writing checks drawn upon the two bank accounts.  Indeed when I was first in practice, in the state of Colorado the regulatory agency’s policy was that all transactions into and out of the trust account needed to be by means of physical paper instruments.  This was tied, I suppose, to a poorly thought-through but strongly-held mix of views that (a) a bad lawyer who was tempted to head to Mexico with lots of client funds in hand would necessarily be deterred from doing so if there were paper checks left behind to reveal what had happened, and (b) computer records cannot be trusted and nothing but paper records can be trusted.  

Neither view was, of course, correct.  In the county where my office is located, about twenty years ago there was a big scandal about a lawyer named “Scoop” something (the nickname should have been a clue) who absconded to Mexico with over a million dollars’ worth of client money from his firm’s trust account.  This was back in the days when every transaction had to be by means of a paper instrument, and that did not dissuade Scoop from absconding.

In the years that have passed since the Scoop scandal, the Colorado regulatory agency in charge of client trust accounts has long since put aside any requirement that every transaction must be on paper.  The agency requires the law firm to maintain scrupulous and accurate bookkeeping records, but permits transactions to be electronic.  The agency does not threaten disbarment of the attorney whose client inadvertently wires funds into the firm’s operating account that needed to go into the firm’s trust account, but instead merely requires that any time money gets into the wrong account there needs to be a true-up transaction carried out without delay, and with appropriate bookkeeping entries so that there is a clear record of what took place.

And in these days of Covid, it makes eminent good sense that the law firm can deposit checks into the firm’s bank accounts (including the firm’s trust account) using a smart phone banking app.  Likewise in these days of Covid it makes good sense that the law firm can transfer funds from one account to the other by means of a few mouse clicks in a web-based banking system, with no need to write paper checks and trudge to the bank to carry out a physical deposit.

And so it was for our law firm for the past few years as we made use of BBVA USA bank.  We had opened our accounts at a branch of BBVA USA that was nearby to our main office, and the officers in that branch were very nice and took very good care of us.  We made use of the BBVA online computer banking to transfer money back and forth between our trust account and our operating account, and we deposited checks in our trust account using the BBVA smart phone mobile app.

This past spring of 2021, two things happened that threatened this idyllic bank relationship.  One thing that happened was that the lease ran out on the space where our local BBVA USA branch was located, and the branch closed.  The nice officers who had taken such good care of us over the years got transferred to branches far away.  

The second thing was that it was announced that PNC Bank had agreed to acquire BBVA USA Bank.  This by itself might not have been so bad, but then the inevitable letter showed up in the mail.  You know the kind of letter I am talking about.  It starts out by saying that this deal has been made, and then says “nothing will change”.  It is always a lie when they say this.  The letter goes on to say “we have teams of people who have worked out a transition plan and it will be as smooth as silk”.  I wondered if this, too, was going to turn out to be a lie.  I started to read the fine print and yes indeed it looked like the transition was not going to be smooth as silk.

The first clue was the part where they let slip that every account number would change.  And they would not pay to print new checks for the customers, even though the customers would need to get new checks because of the account numbers being different.  There was also a sort of fuzzy statement that whatever kind of bank account you have at BBVA, perhaps one where the fees are not too high because of whatever average balance you maintain or whatever small number of transactions you have, there would probably not be a corresponding type of bank account at PNC and instead they would just pick whatever PNC bank account type they guessed might be the best one for you.  And yes, it might have higher fees, but they would waive the higher fees for the first three months, something like that, as if that would make it okay.

We did not have any BBVA credit cards, but I vaguely recalled that the fine print also explained for example that if you had a BBVA credit card, it would get converted to a PNC credit card, and yes the interest rates and fees might be higher, something like that.

Basically the place in that first letter that said “nothing will change” was completely a lie.  I guess they meant “nothing will change between now and when the changeover happens.”  Which was set for Columbus Day weekend in October of 2021 (just a few weeks ago).

A few years ago our law firm had been through the process of changing banks, and we knew very well what the consequences were going to be from the changing of account numbers.  When account numbers change, there is a very tedious process of updating automated debits and automated credits.  At our firm, this includes automated debits for many recurring monthly costs including payroll, health insurance, employee retirement program, worker’s comp premiums, and employee vision benefits.  At our firm, this includes automated credits including incoming credit card payments through Stripe and through another processor, and incoming transfers from Wise and from a number of clients who use ACH payments to pay our firm.  

To fully understand how disruptive it is to deal with a change of bank account numbers, one needs to appreciate that every one of these service providers has its own very annoying and complicated paperwork requirements.  No two service providers do it the same way.  One service provider does this by sending an email message which has a link that we click on.  And it requires that we enter a password that has not been used in over two years (since the last time we changed bank account numbers with this service provider).  The password then unlocks a PDF file.  We then complete the PDF file, which requires four pages of information about our firm, all of which the service provider already has except the two new items (the new routing number and the new bank account number) but we have to collect the four pages of information anyway, so that the form is complete.  We must then fax (fax!) the form to a particular fax number, and then docket two or three days to wait for someone to carry out manual hand-keying (hand-keying!) of the routing number and bank account number into their systems.  We then must docket a month to check to see whether the automated debit actually works, which is another way of saying we need to check to see whether they hand-keyed it correctly into their system from the fax that we sent to them.

This updating of automated debit and credit settings to accommodate new bank account numbers is a big time sink.  Most of the service providers refuse to honor any update request for this kind of information unless they hear it directly from a partner of the law firm, meaning that most of these steps cannot be carried out by a bookkeeper or administrative assistant.  

Plainly put, the internal cost to the firm to deal with a change of bank account numbers is well over ten thousand dollars.

So when the letter showed up last spring, signed by the president of BBVA USA and signed by the president of PNC Bank, enthusiastically announcing how proud they were of this happy event, and reassuring me that nothing will change, and when it became clear that a change of bank account numbers was going to be forced upon us (and they were not even going to pay for new checks!), I dreaded the inevitable loss of thousands of dollars.

Keep in mind that our local BBVA branch with its helpful officers had been shut down, with the officers dispersed to the four winds.  So this was already a reason to consider switching banks, given the fact that we were going to have to suffer through a bank account number change no matter what.  

Columbus Day weekend arrived, and with it, the changeover from BBVA to PNC.  Suddenly it was no longer possible to log in at the old BBVA online computer banking web site.  Suddenly the BBVA smart phone app stopped working.  This was not unexpected, because another letter had arrived about a week earlier from the bank, describing the smooth-as-silk transition that would take place.  Eventually it became possible to log in at the PNC online computer banking web site, and it became possible to start using the PNC smart phone app.

Except that almost nothing worked right.  The first problem was that in the PNC online computer banking, we were not able to see our trust account.  Yes we were able to see our operating account, but we were not able to see our trust account.  There were three other BBVA accounts that we had been able to see in the old BBVA computer banking, and none of them were visible in the PNC online computer banking.

I looked in the PNC smart phone app.  It showed our operating account but did not show our trust account.

So it was not possible to transfer funds back and forth between the operating account and the trust account.  It was not possible to deposit a check in the trust account using the smart phone.  Nor was I even able to see the balance in the trust account.

Many other things that PNC did were also broken.  We had set up one of our administrative assistants with a special BBVA ATM card that was usable only for depositing checks at BBVA ATMs.  The card was not, for example, usable to spend money in stores, nor was it usable for withdrawing cash from ATMs.  This was very much on purpose.  The whole point of it was that the card was usable only for depositing checks in an ATM.

PNC shut down that BBVA card that our administrative assistant had been using.  And they mailed out a new PNC card to our administrative assistant.  What PNC mailed out to our administrative assistant was, I guess their product that they thought was the closest PNC equivalent product.  It was an ATM card that was also a debit card.  It could be used to purchase things in stores, with a spending limit of up to ten thousand dollars per day.  It could also be used to withdraw cash from ATMs, with a daily cash withdrawal limit of a thousand dollars per day.  Our administrative assistant, bless his heart, reported PNC’s blunder to us and placed the card in a fireproof safe in our law firm office.

I needed to get the client trust account connected with our PNC online computer banking.  So I got on the phone with the PNC business banking customer care.  I listened to music for 90 minutes.  I never reached a human being.  I hung up and tried again.  Sixty minutes of music.  No human being.  It went like this for two days.

Eventually I hopped into a car and drove an hour and a half to visit the nearest PNC physical branch location.  There was only one bank officer on duty, and in an amazing bit of luck I happened to get there just before four other former BBVA customers arrived who also needed help.  Three of them were lawyers from law firms who were there because they could not see their client trust accounts in their online banking.  The officer filled out a form and said I would have full access to our trust account within three business days.  I thanked him and departed, and the four people waiting in line behind me each moved forward one position for help with the bank officer.

A week later I still could not see our trust account in our PNC online computer banking.  I kept trying the PNC business banking customer care telephone number, variously giving up after 45 minutes or an hour or two hours.  I hopped into a car again and drove the hour and a half again to visit the same bank officer again.  We spent some more time together.  He said “a new special unit” had been set up to deal with the problem of law firms being unable to have access to their client trust accounts and he would now submit a request on my behalf to the new special unit.  It would be fixed within three business days, he said.

Guess what?  No, you could not possibly guess.  Three business days later, I still could not see our client trust fund account in the PNC online computer banking.   It was still impossible to reach a human being at the PNC business banking customer care telephone number.  I hopped in the car again and drove the hour and a half to see the same bank officer a third time.  This time it worked.  Two days later I was able to see our client trust fund account in the online computer banking.  This was three weeks after changeover day.  Three weeks it took for PNC to fix its mistake about failing to provide access to our trust account.

My next step of course was to try doing a transfer of funds from the trust account to the operating account.  I clicked on “transfer funds within PNC” and the online computer banking system asked which account I wanted to transfer from.  I selected the trust account from a drop-down menu.  The online computer banking system asked which account I wanted to transfer to.  I selected the operating account from a drop-down menu.  The online computer banking system asked what day I wanted to do the transfer.  I picked today.  It asked how much money I wanted to transfer, and I typed in some small amount of money for the test.  I then clicked “submit” and it showed the hourglass for a moment, and then came back with an error message that I had pick an invalid “from” account.

I tried a transfer the other direction, followed a similar set of five steps, and eventually received an error message that I had picked an invalid “to” account.

I then went to my smart phone and logged in at the PNC banking app and clicked that I wanted to do a mobile deposit.  It asked which account I wanted to deposit the check into.  I selected the trust account from a drop-down list.  It then invited me to snap a photograph of the front and back of the check to be deposited, which I did. It then asked if I was sure, and I said I was sure.  And then an error message said something like “mobile deposit not available at this time”.

So then I emailed our PNC bank officer to ask about all of this.  He reported back that unfortunately it seems that with PNC, it is impossible to deposit money into a client trust account in any way other than going in person to a branch and depositing a physical check.  And with PNC, if you want to transfer money between a client trust account and a law firm operating account, this can only be done by writing physical checks and going to the bank and physically depositing them.

What PNC neglected to disclose to anybody last spring, or at any time until three weeks after “changeover day”, was that its idea of connecting a client trust account to the PNC online banking is that it is “view only”.  You can see the balance in the client trust account, but that’s it.  You cannot transfer money into or out of the client trust account.  

What PNC neglected to disclose to anybody last spring, or at any time until three weeks after “changeover day”, was that its idea of connecting a client trust account to the PNC smart phone banking app is that it does not permit depositing checks.  You cannot deposit a check into the client trust account using the PNC smart phone app.

If PNC had come clean about this at any reasonable time in the past six months, I could have saved all of this wasted time and three car trips to go see a PNC bank officer.

Fortunately for our law firm, we had had a premonition that this swallowing of BBVA USA by PNC was not going to go well.  Back in August we opened bank accounts at another bank, and we started doing test transactions with the new accounts (an operating account and a client trust fund account) at the new bank.  (We selected First Bank.)  Things were not completely smooth with these new accounts at first, but I am delighted to report that after a couple of months the very well-intentioned people at First Bank seem to have gotten things working pretty well for us.  We had been postponing for example, spending the money to get check-stub checks printed for the new bank accounts at First Bank until we had a sense that things were going to go well.

We had been postponing and postponing the tedious business of migrating all of our automated debits and automated credits, the process that is going to incur the internal cost to us of over ten thousand dollars’ worth of partner time.   When PNC finally came clean (six months too late) about how useless their client trust fund account is compared with the former BBVA client trust fund account that it purportedly replaces, we realized there was no choice but to shut down our relationship with PNC.  We have now launched the migration of automated debits and credits to our new accounts at First Bank.  And we decided to get the check-stub checks printed for the new bank accounts at First Bank.