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Ally Bank in Talks to Buy ING Direct

This article was written by in Banking. 27 comments.


Update: Capital One has purchased ING Direct.

A little less than eighteen months ago, I mentioned that ING Direct was scheduled to be sold off. The online bank’s parent company, ING Group, received taxpayer assistance. The plan is for ING Group to sell ING Direct USA to pay back the European Commission.

The New York Post reported today that Ally Bank is in talks to buy ING Direct USA, its major online savings account competitor, to expand its portfolio of deposits and offset Ally Financial’s portfolio of troubled assets. I’m a customer of both banks. Both are strong marketers; customers in the United States are familiar with ING’s orange ball and Ally’s amusing commercials.

What this sale might mean for customers

Ally Bank - Online Savings, Better BankI’ve dealt with customer service with both banks and I have never felt frustrated or confused. I have never had a problem with my accounts at either bank, but I have used my accounts at ING Direct much more extensively than my accounts at Ally Bank. Both banks continue to offer very good interest rates for savings, though ING Direct is no longer at the top of this list. The loss of a major competitor means that we could see increased costs of doing business — possibly new fees — and less favorable interest rates for customers. I’d like to think that there is enough competition among high-yield savings accounts to keep these changes to a minimum, but whenever the market combines the top two competitors in an industry, customers need to consider their options.

Ally has worked hard with branding and marketing to disassociate itself with its troubled past parents, GMAC and General Motors. Ally Bank has, in the past, angered the American Banking Association by offering savings interest rates that were too high. The ABA sent a letter to Ally requesting the bank to lower rates so other banks could compete. Brick and mortar banks had to stop posting their interest rates online because their rates could not match what was being offered by low-overhead, online-only banks.

ING Direct has spent many years turning its customers into loyal fans. From the consumer’s perspective, being a fan of a company is dangerous because it can lead to ignoring flaws. Many customers who joined ING Direct years ago due to the bank’s high interest rates have stuck with the bank because they like the service and it would be inconvenient to switch. These are legitimate reasons to stay with a bank, but when it comes to financial decisions, customers can’t ignore the effect it has on a wallet. For someone who has enough money in the bank to earn $50 in interest a year, it might not make sense to switch to a new bank to earn $10 more dollars that year, but interest compounds over time, and the effect a higher interest rate has on a lifetime of savings can be substantial.

Rates are, of course, only one factor in choosing a savings account. Both Ally Bank and ING Direct have offered good to excellent interest rates and great customer service so far. At this point, with Ally Bank’s troubled heritage in the past, it’s safe to say that there is a possibility for good synergy as a result of this sale. But even the simplest acquisitions could end up hurting the consumer.

As of today, there is no definite declaration that Ally Bank will purchase ING Direct. The announcement is only that the two banks are in talks, and these types of announcements often exist only to gauge public (and particularly investor) reaction and sentiment. I think the new online bank formed with the deposits from Ally Bank and ING Direct would not qualify for “too big to fail” status, but the combined bank would be the leading online savings account in terms of volume of deposit accounts.

What do you think of this hypothetical merger? If you’re an ING Direct customer, would you change banks based on the purchase alone? Do you think Ally Bank will be able to handle the merger of the deposits? Do you think it’s weird that ING Direct, a bank with Dutch heritage, would be partly owned by General Motors, a domestic car manufacturer?

New York Post

Updated October 19, 2011 and originally published May 10, 2011. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 27 comments… read them below or add one }

avatar Paula @ AffordAnything.org

Nope, I definately DON’T think it’s strange that a Dutch bank would be partially owned by GM — we live in a global business market that’s beyond national borders.

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avatar Chris

Maybe this will give Ally a reason to have better mobile support? Main reasons I haven’t used them yet is there is no iPhone app nor the ability to deposit checks by taking a picture. ING Direct has the former but not the later.

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avatar tbork84 ♦1,867 (Half-Dollar)

I almost laughed at the idea of an online bank being considered “too big to fail”, but then I realized that stranger things have happened.

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avatar Apex ♦478 (Nickel)

Why is the “online” portion of a bank important to whether or not it’s too big to fail. Setting aside the notion of whether or not too big to fail is a good idea, the concept of too big to fail is that a financial entity has a large enough impact on the financial eco-system that letting it go down will have ramifications through out the entire sector that could start a cascade of failures. I fail to see what being an online bank has to do with whether or not a financial entity meets those criteria. ING does mortgages, ING does CDs, ING has IRAs, ING does pretty much everything that most other banks do.

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avatar Stephen

Any idea what would happen with Sharebuilder? Would that be included in the sale?

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avatar Luke Landes ♦127,550 (Platinum)

ShareBuilder will remain a part of ING, at least that was the plan when I last heard about it.

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avatar skylog ♦368 (Nickel)

ugh. i am not even sure what i want out of a possible deal, but part of the reason i used sharebuilder for a regular etf purchase was their integration with ING. i want to simplify not complicate.

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avatar Ceecee ♦53 (Newbie)

I have an ING account and have thought of opening a CD at Ally. It seems like a good match, I hope it works out.

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avatar South County Girl

I hope fees won’t get crazy at ING Direct. I have a Roth, a bunch of savings accounts, and a checking account with them… its my primary bank.

If fees and interest rates get worse, i’ll be sad ;(

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avatar DonnaFreedman ♦95 (Newbie)

If things change for the worse, I suppose I’ll move my money from ING. Like so many others, I was convinced to give it a try because of the high(er) interest rates. Obviously they’ve dropped, but as you note I’m one of the ones who hasn’t addressed this issue. In part that’s because so much else is going on in my life, and part of it, yeah, is simple inertia. [[blushes, shuffles feet]]

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avatar Ryan

It makes me a little nervous – I really like ING Direct and would hate to see the company messed up. I don’t have any experience with Ally though, so I’ll wait to hold any judgement.

Do we know who’s online interface would be used? I’m guessing Ally if they’re the ones purchasing.

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avatar skylog ♦368 (Nickel)

i am with you ryan. i am also assuming that ING will just be integrated in to Ally. they say change is good, but i just want ING to remain as it has been. i am also wondering what, if anything, will happen to those of us with multiple accounts at ING?

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avatar tigernicole86 ♦55 (Newbie)

I’ve had good experiences with Ally and they make banking really easy. I hope fees don’t get added on as part of the package deal. I like halfway decent interest rates too much…

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avatar shellye ♦107 (Cent)

I’ve had good experiences with ING so far; no complaints here. Like others above, I hope the interest rates don’t sink much farther than they have in the last six months, though.

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avatar Ben

My concern is why are anti trust laws being ignored? We have too many really good companies being gobbled up by larger companies which usually results in restraint of trade. Less competition equals less power in consumers hands.
Corporate control over our legislators has a great deal to do with the difficulties our country is having and is increasing the wealth gap between the very rich and the rest of us ordinary folks.

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avatar Kyle

Ahhh crap. I hope Ally Bank doesn’t screw up ING like they consistently screw up their affiliate program.

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avatar cubiclegeoff ♦896 (Dime)

I like ING now, and hope it doesn’t get messed up. As for their interest rates, they seem to be decent at the moment and a lot of the banks that were outdoing them before have lower interest rates than ING now.

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avatar Yana

I’ve been with ING for years and have been very satisfied with it. I am not familiar with Ally Bank, but am uneasy with its roots. I don’t think I would stay if Ally Bank buys ING Direct. And when any bank account costs me money, I am out of there.

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avatar Suzanne@GrowingRichKids

We’ve been customers of ING Direct for years and love it (although thanks Flexo for the reminder that you should never let this stop you for asking if you can get a better deal elsewhere). If this does happen (and it sounds like a sale will happen, whether it’s Ally or someone else), then I’d likely see if there were any negative changes and then make a decision. I wouldn’t move just because of a sale. I’ll judge them on how they handle the transition and the ongoing service. But it does make me a little nervous because we have been very happy with ING Direct so I’ll be sad to see them be sold.

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avatar slug | sunkcostsareirrelevant.com

Well, this would certainly save me time switching from one to the other to chase rates.

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avatar qixx ♦1,895 (Half-Dollar)

i hope this does not affect my ing accounts too much and any transition is smooth.

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avatar moneymatters ♦357 (Nickel)

I’m a customer of both Ally Bank and ING, and it’ll be interesting to see what happens if this does go through. I suppose the ING customers will just transition to being Ally customer? In any event, I’ve been happy with both banks thus far, and I’m not expecting a change like this to mean much of a change. Could it mean slightly lower rates or more fees? Maybe.. But I expect that there are still enough competitors that it won’t affect it that much.

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avatar lynn ♦155 (Cent)

I agree with BEN. Less competition, less benefit for the consumer.

As an afterthought, why would the commision be able to dictate interest rates. let the naughty boys pay the consquences of their actions. It’s like the little boy who runs to the teacher because he didn’t get a grade he wanted. They stopped posting rates, let them continue to figure their problems out on their own.

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avatar PT Money

I somehow missed this initial announcement. I would not be a fan of this move. If they are counting votes, I’ll cast one for not selling and keeping things as is. I’m not sure what I’d do if this happens. No one else really has the online banking thing figured out quite like ING Direct. Their interface, overdraft protection, and customer service are top-notch.

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avatar skylog ♦368 (Nickel)

i think it is time for me to try to use all those referrals i have left at ING. i can not imagine they will remain.

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avatar qixx ♦1,895 (Half-Dollar)

good call. i better get to using mine up as well.

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avatar Bill

I have accounts at both. They are each excellent banks. I am very impressed with Ally thus far. Excellent customer service.

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