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Discover 4506-T Request

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I just wanted to give a heads up to the CB community. Exactly a year ago, I open a Discover Card 9.5 months out of Chapter 7 BK and was given a 12k limit at 0% for the first 14 months. I was surprised at being approved and at the limit. I was honest with my annual income and they did not ask for pay stubs or anything else.

 

Fast forward to this month and in anticipation of my 0% promo ending (and the rate jumping to 16.9%), I applied for a a 10k personal loan from my credit union to refinance the 10k that I had charged on the card over the year. Now maybe it wasn’t the smartest to go over 30% utilization, I was taking advantage of the 0% and I wasn’t balance chased or anything like that.

 

My credit union approved by at 7.9%, cut a check and mailed it directly to Discover this week. Low and behold I try to log in today and am locked out and call their “verifications” team. While they weren’t necessarily rude, the did treat me like I was a criminal and said that they can request a 4056-T anytime they want. I brought up that it’s interesting timing since my CU just sent them a check for refinancing my balance. They acted clueless and said that I have until 1/3/2021 to return the form or my account will be closed. 
 

I am expecting almost $500 from their cash back match promo in December so of course I’m an not doing anything until I get that money. Also, while my account is in “verifications” they WILL NOT allow me to have account access, or mail me a statement to pay my bill. So I have to call in and make the payment (free of charge - bless their little hearts) and call in to get the cash back match bonus redeemed. Once my account is closed, they will then restore my online access so I can continue to make any payments due.

 

I don’t think I’m going to participate in their fishing expedition. My tax returns are none of their business. If the would have asked for them when I opened the account, I wouldn’t have provided them. Obviously my tax returns are going to reflect my itemized deductions and I am not going to voluntarily hand that information over to anyone. I think I’ll close the account myself on 1/2/2021.

 

My BK will have been discharge for two years on 2/15/2021, so I’ll apply elsewhere for a credit card to replace it. I have other unsecured credit already established, so I have been successful in rebuilding me credit since discharge. While it was nice to be approved for a high limit so soon after BK discharge, it’s definitely not my highest limit at this time, so I’m ok with saying goodbye to Discover.

 

TL;DR: Be cautious when making a large payment to Discover or you may be facing a FR.

 

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I want to observe that if your tax transcript reasonably backs up your stated income, there's every reason to expect that you'll be back in business with Discover.  To be frank, your charge/balance/refi pattern has some things in common with typical credit card "blow out" strategies:

 

- Consistently charge more than is repaid each month;

- Run the balance to within 80% of the credit limit

- Refinance or transfer a substantial portion of the accumulated balance, bringing the card back to a low balance.

 

In cases where issuers ultimately have to bite a defaulted balance, the cardholder does a "rinse, repeat" number on the above step, until such time as their credit resources are exhausted and they can no longer refinance an outstanding balance.  The card is now maxed out and ultimately the cardholder stops payment.  An aspect that is likely common in this scenario is that the cardholder overstated their income when applying for credit.

 

Now, I'm not suggesting that you're in "blow out" mode, to any respect.  In fact, if your overall cash flow needs warranted borrowing $10k over the last year, then utilizing your charges on this card by which to effect a 0% draw up front is a very efficient strategy.

 

Just understand that there's room, in Discover having observed your cash flow behavior, for them to be concerned that you might ultimately stick them with a balance.  For some greater degree of assurance that this isn't the case, they've asked you to confirm your income.  The only practical means by doing this is for them to request something directly from the IRS, with your authorization.

 

You're within your right not to accede.  You'll most likely be shut down in that case, but it's your choice.  Personally, I think it's a bit misguided to suggest that they might be intent on a "fishing expedition".  But, it's you call.  Electing to refuse the 4506-T request feels, just a tad, comparable to the proverbial "cutting your nose off to spite your face". 

 

Please understand this feedback is strictly extended with constructive intent.  Whatever course you elect, I'm pulling for you!! :)

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You should be excited they want to see your transcripts. That should pave the way to higher CLIs in the future. And as far as them seeing your itemized deductions, I'm not sure why that matters, but either way that's not how transcripts work. Have you seen an IRS transcript? It's not a copy of your tax returns.

 

Beggars can't be choosers and 2 years post BK is not the time to close your best card out of spite.

 

FYI, you would have been better served by having the CU send you the check and you pay off the balance from your regular account. 

Edited by shifter

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5 hours ago, MarvBear said:

To the OP:   Was the Bank check sent to Discover for $10,000.00? Or was it less than that amount?


I have no desire to derail your question for the OP, Marv.  However, I'm curious about the context in which the $10k distinction makes a difference.  (It doesn't seem like CTR reporting would be involved.)

 

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Just curious about the amount because since Discover is a bank there is a possibility of an SAR. Not sure just curious.

Sent from my SM-G986U using Tapatalk

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2 hours ago, MarvBear said:

Just curious about the amount because since Discover is a bank there is a possibility of an SAR. Not sure just curious.

Sent from my SM-G986U using Tapatalk
 

gotcha.  I think it's unlikely under the circumstances noted.  But concede it's possible.

 

Still, the flagging threshold for a SAR typically is cited as just $5000.  Plus, from the related details, I don't see specific behavior that might signal questionable cash movement that merits reporting (such as possible "structuring").

 

I still presume that Discover is likely eying an overall accumulation of debt on the part of OP over the last year (possibly longer) and is simply evaluating whether the current exposure may be excessive, incorporating income assessment into that review.  Sign of the times ... not a sign that OP has necessarily conducted his financial affairs in a manner that poses appreciable added risk.

 

I'd hope for (and expect) an "all clear" from the review.

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1 hour ago, hdporter said:

gotcha.  I think it's unlikely under the circumstances noted.  But concede it's possible.

 

Still, the flagging threshold for a SAR typically is cited as just $5000.  Plus, from the related details, I don't see specific behavior that might signal questionable cash movement that merits reporting (such as possible "structuring").

 

I still presume that Discover is likely eying an overall accumulation of debt on the part of OP over the last year (possibly longer) and is simply evaluating whether the current exposure may be excessive, incorporating income assessment into that review.  Sign of the times ... not a sign that OP has necessarily conducted his financial affairs in a manner that poses appreciable added risk.

 

I'd hope for (and expect) an "all clear" from the review.

I agree. Nothing here strikes me as generating a SAR nor CTR.  But it does raise risk from Discover's POV hence the 4506-T to mitigate that risk. Worth doing the 4506-T. Hege's gotten lots of CLIs after such requests.

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Personally I would have filed a CTR and an SAR. If the amounts were as I asked. It fits traditional money laundering patterns although I'm making no accusation about the OP. Sometimes the things we do have unintended consequences with even the best thought out plans. I've been there many times myself.

Sent from my SM-P580 using Tapatalk

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1 hour ago, MarvBear said:

Personally I would have filed a CTR and an SAR. If the amounts were as I asked. It fits traditional money laundering patterns although I'm making no accusation about the OP. Sometimes the things we do have unintended consequences with even the best thought out plans. I've been there many times myself.

Sent from my SM-P580 using Tapatalk
 

I understand entirely and wouldn't argue.

 

The pattern also keenly fits the "charge / rinse / repeat" cycle of debt accumulation that, in terms of frequency, dwarfs your scenario by anywhere from 10:1 to 100:1.  Having even modest concerns, Discover's response suits both scenarios to a "T" (noting the possible Treasury reporting as an "unknown" possible add-on).

 

I hope this suggestion doesn't cause the OP concern.  Assuming everything is reasonably on the "up and up", Discover's behavior rates as little more than nuisance.

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2 hours ago, MarvBear said:

Personally I would have filed a CTR and an SAR. If the amounts were as I asked. It fits traditional money laundering patterns although I'm making no accusation about the OP. Sometimes the things we do have unintended consequences with even the best thought out plans. I've been there many times myself.

Sent from my SM-P580 using Tapatalk
 

Why? It wasn't a cash transaction (no CTR involved) but a CU to Bank on behalf of the OP. From Discover's POV it could be signs of kiting or, more likely, someone that's digging a debt hole or even setting up for a bust out but those aren't reasons for SARs. All the more reason for the OP to send in the form.

 

I've generated my share of CTRs. Mostly because when I went to Vegas back in my zero credit days it was just a lot easier to bring a bunch of cash.

Edited by cashnocredit

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1 hour ago, cashnocredit said:

Why? It wasn't a cash transaction (no CTR involved) but a CU to Bank on behalf of the OP. Could be signs of kiting or, more likely, someone that's digging a debt hole or even setting up for a bust out but those aren't reasons for SARs.

 

I've generated my share of CTRs. Mostly because when I went to Vegas back in my zero credit days it was just a lot easier to bring a bunch of cash.

 

I have only passing familiarity with CTR/SAR reporting guidelines.  Based on the following passage, you've likely made an accurate call re CTR reporting:

 

https://www.nafcu.org/compliance-blog/ctr-refresher-fincen-revises-ctr-instructions-again

 

Quote

The Financial Crimes Enforcement Network (FinCEN) recently updated its CTR Electronic Filing Instructions, providing technical corrections and clarifications for financial institutions dealing with complex currency-related situations.

 

Quick Refresher. As outlined in the FFIEC BSA/AML Examination Manual, credit unions are required to electronically file a Currency Transaction Report (CTR) for each transaction in currency (deposit, withdrawal, exchange, or other payment or transfer) of more than $10,000 by, through, or to the credit union. Currency is defined in the manual as coin and paper money of the United States or any other country as long as it is customarily accepted as money in the country of issue. Therefore, transactions not involving currency are not subject to CTR reporting requirements.  

 

Note, the source is strictly addressing credit unions here, but I find it reasonable to believe this extends to other financial institutions.  Marv's call re SAR is sound.

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Sorry for the delay in responding. I truly appreciate the replies. It was exactly 10k that was cut in the form of a cashiers check from my CU to Discover (moving forward I now know to put the money in my account first and send it though my own bank).

 

My initial hesitation was supplying them information that they should and could asked before opening the account 1 year ago. Like I said, the cash back match is really all that I’m concerned about. I already have been approved for higher credit limits through my credit unions. While I would not want to lose available credit, my overall utilization is below 30%, even with my use of the Discover card (which was mostly (65%) for treatment for my cat with cancer - sadly he lost his fight, but I got to spend more time with him and he was pain free, so for that I am grateful). I do have the money in to pay the card off, but took out the loan because I’m an a bit concerned about COVID and having additional furloughs (work for the government). I will pay the loan in full in about a year, regardless, unless COVID causes me to get laid off (not likely in my specific field).

 

So while I think this is a drastic invasion of privacy, I decided to fill out the form today. Apparently the IRS is backed up, so I’m also sending in three months of bank statements for them to review my account sooner. Ironically when I applied, I understand my income, but now with furlough days and limited OT, I’m right around the income I put down when I applied. 
 

Anyhow, thank you to all that responded. I will post a follow up once their “verification” is compete.

 

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1 hour ago, californiadreamin said:

So while I think this is a drastic invasion of privacy, I decided to fill out the form today. Apparently the IRS is backed up, so I’m also sending in three months of bank statements for them to review my account sooner.

 

Smart move. I think you'll be just fine. Don't take it personal. Banks have to look out and there are many that will take advantage given the opportunity. Also, this damned covid thing is messing up a lot of folk's lives and finances through no fault of their own.

 

We also lost our dog to cancer last year and still miss her every day.

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**Final update. I submitted the online form and supplied my bank statements and my account was unlocked today. There were no changes to my credit limit. I was able to redeem my cash back and look forward to my first year cash back bonus next month. I appreciate the feedback everyone provided and will most definitely not ever send a third party payment to a credit card company. I hope the date point helps someone in our community. 

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2 hours ago, californiadreamin said:

**Final update. I submitted the online form and supplied my bank statements and my account was unlocked today. There were no changes to my credit limit. I was able to redeem my cash back and look forward to my first year cash back bonus next month. I appreciate the feedback everyone provided and will most definitely not ever send a third party payment to a credit card company. I hope the date point helps someone in our community. 

glad it worked out even if it was a pain.

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On 11/27/2020 at 3:21 PM, californiadreamin said:

**Final update. I submitted the online form and supplied my bank statements and my account was unlocked today. There were no changes to my credit limit. I was able to redeem my cash back and look forward to my first year cash back bonus next month. I appreciate the feedback everyone provided and will most definitely not ever send a third party payment to a credit card company. I hope the date point helps someone in our community. 

Thank you for posting the outcome. 

On 11/22/2020 at 9:59 AM, californiadreamin said:

treat me like I was a criminal

After you cash out your first-year bonus, run away from Discovery and don't look back.

 

No customer who uses a credit card the way it was designed deserves to be treated like this.   What an awful company.

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Wow !  Discover is now requesting 4506-T forms or closing accounts.  About 2 years ago, Synchrony Bank locked me out of my Walmart Mastercard account, saying it was under verification.  They sent me a 'strong' letter requesting I allow them access to 2 years of tax returns via 4506-T.  If I agreed to allow them access, they would review my accounts and advise me by mail if my accounts would be unsuspended, if I did not allow them access, they would close all of my accounts.

At the time my score was mid 700's, no derogatory marks (even with 4 incidents of layoffs).  I had 20+ SB accounts, with only a small handful with balances, including Walmart MC.  

I did not allow them access, they closed my accounts.

I

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