For unsuspecting depositors of online financial start-ups, the unraveling of a little-known intermediary has separated them from their life savings.
For close to a century, putting your savings into a federally insured bank has been a sure thing: If the institution fails, up to $250,000 of your money will be protected.
What if it isn’t anymore?
The promise of bank insurance — a tenet of U.S. consumer protection since the Great Depression — is now being tested by a crisis swirling around online-only lenders with hundreds of millions of dollars of deposits between them. Customer accounts have been frozen, preventing people from cashing out their life savings. Most depositors have little clue where their money has gone, and whether they will get any of it back.
Rob Copeland | NY Times