Deposit boxes fall through the cracks
In the early 1980s, when Philip Poniz moved to New Jersey from Colorado, he needed a well-protected place to stash his collection of rare watches. He had been gathering unusual pieces since he was a teenager in 1960s Poland, fascinated by their intricate mechanics. His hobby became his profession, and by the time of his relocation, Poniz was an internationally known expert in the history and restoration of high-end timepieces.
At first, he kept his personal collection in his house, but as it grew, he wanted something more secure. The vault at his neighborhood bank seemed ideal. In 1983, he signed a one-page lease agreement with First National State Bank of Edison in Highland Park, New Jersey, for a safe-deposit box.
In 1998, Poniz rented several additional boxes and stored in them various items related to his work. He separated a batch of personal effects — photographs, coins he had inherited from his grandfather, dozens of watches — into a box labeled 105. Every time he opened it, he saw the glinting accumulation of his life’s work.
Then, on April 7, 2014, he lifted the thin metal lid. Box 105 was empty.
“I thought my heart would fail,” Poniz said. He paused in his retelling of the memory. At age 67, he has a strong Polish accent and speaks English carefully. He struggled to find the right words to describe the day he discovered his watches were missing.
“I was devastated,” he said. “I was never like that in my life before. I had never known that one can have a feeling like that.”
There are an estimated 25 million safe deposit boxes in America, and they operate in a legal gray zone within the highly regulated banking industry. There are no federal laws governing the boxes; no rules require banks to compensate customers if their property is stolen or destroyed.
Every year, a few hundred customers report to the authorities that valuable items — art, memorabilia, diamonds, jewelry, rare coins, stacks of cash — have disappeared from their safe deposit boxes. Sometimes the fault lies with the customer. People remove items and then forget having done so. Others allow children or spouses access to their boxes and don’t realize that they have been removing things.
But even when a bank is clearly at fault, customers rarely recover more than a small fraction of what they’ve lost — if they recover anything at all. The combination of lax regulations and customers not paying attention to the fine print of their box-leasing agreements allows many banks to deflect responsibility when valuables are damaged or go missing.
“The big banks fight tooth and nail, and prolong and delay — whatever it takes to wear people down,” said David Mcguinn, the founder of Safe Deposit Specialists, an industry consulting firm. “The larger the claim, the more likely they are to battle it for years.”
In the days after Poniz found his box empty, he began piecing together what had happened: The current owner of the bank, Wells Fargo, had apparently tried to evict another customer for not keeping up with payments, and bank employees had mistakenly removed his box instead. After drilling No. 105 open, the bank shipped its contents to a storage facility in North Carolina. After Poniz discovered the loss, Wells Fargo sent back everything it had in storage, but some items had vanished.
In a six-page report filed with the Highland Park police, Poniz described the watches, coins, documents and other items that were gone. Using auction records and sales reports, he estimated that their combined value was more than $10 million. That would make it one of the largest safe-deposit-box losses in U.S. history.
Banks increasingly regard safe deposit boxes as more of a headache than they’re worth. They’re expensive to build, complicated to maintain and not very lucrative. The four largest U.S. banks — Jpmorgan Chase, Bank of America, Wells Fargo and Citigroup — rarely install them in new branches. Capital One stopped renting out new boxes in 2016.
“All of the major national banks would prefer to be out of the safe-deposit-box business,” said Jerry Pluard, president of Safe Deposit Box Insurance Coverage, a small Chicago firm that insures boxes. “They view it as a legacy service that’s not strategic to anything they do, and they’ve stopped putting any real focus or resources into it.” He estimates that about half of the safe deposit boxes in the country are empty.
As the number of bank branches in the United States declines, safe deposit boxes are being relocated, evicted and sometimes misplaced. Dozens of claims have been filed, sometimes for hundreds of thousands of dollars of lost property.
No regulator formally tallies customer losses in safe deposit boxes. Pluard, who tracks legal filings and news reports, estimates that around 33,000 boxes a year are harmed by accidents, natural disasters and thefts. He often gets phone calls from people who are fighting their bank for compensation.
“I tell them it’s hard, almost impossible,” he said. “What drives banks’ conduct is regulatory oversight, and none of the regulators pay any attention to safe deposit boxes. This just falls through the cracks. If the banks do something inappropriate, it’s very hard for customers to get any sort of relief.”
The Office of the Comptroller of the Currency, the banking industry’s main federal overseer, said it had no grounds to get involved.
“No provision of federal banking law expressly regulates safe deposit boxes,” said Bryan Hubbard, an agency spokesman.
And the scant protections offered by state laws are often simply ignored — as Poniz discovered during his futile search for the missing contents of his box.