|
|
|
In Banker's Clothing Scott Ritcher, April 2007, from NewsTheMagazine.com
Very disappointed in my relationship with National City Bank, I asked people to tell me whether they love or hate their banks so I could be better educated in choosing a new one. The resulting waterfall of "I hate my bank" messages was fairly substantial. It seems like people feel that banking is a necessary evil and the relationship that people have with their banks is, more often than not, only beneficial to the bank. I'd like to live a cash-only existence, and I try to as much as I can, but I need an account for basic transactions like paying bills, buying things by phone or Internet, or to access the money if someone pays me with a check. I don't like using banks and I'm not sure why I should trust anyone who offers to keep my money for me. My experiences with Sovereign Bank when I lived in Rhode Island and with National City Bank here in Louisville have been enough to move me from "not liking" banks to being vehemently anti-bank. And based on the responses I received from friends over the past 24 hours, my experiences have not been unique, nor is my resulting frustration especially unusual.
Stealth fees Why do people hate their banks? Well, I found that it's almost always because of what are called "stealth fees." These fees occur when a customer overdraws their account – either at an ATM or through a debit card purchase – without being warned that their account has insufficient funds to cover the transaction. The bank approves the transaction as a "convenience" to the customer and adds a fee to their account. This happens silently, without the bank ever alerting the customer that their account is empty and that a fee has been levied. It is not uncommon for these fees to be as high as $35 each. After completing the purchase and being charged a fee, the customer can then go to another store, make another purchase, incur another fee, and even withdraw funds from an ATM, all the while being charged a huge fee for each transaction and never being informed that their account is overdrawn. It could be hours, days, or weeks until a customer finds out, and by that time the fees can amount to hundreds of dollars of debt beyond their zero balance. Many banks also add a daily charge to overdrawn accounts. In theory, if I think I have $10 in the bank, but I really have $9.50, it could play out like this: I buy dinner at the Old Spaghetti Factory for $9.65; the check comes, I present my debit card, the transaction is approved, I sign it and leave, never knowing that I just paid $43.65 for dinner. A week later, I deposit a check for $75 and notice afterward that my balance is negative $6.65. How? Not only did I pay an extra $34 for dinner last week, I was also being charged $8 a day on every day since then for being continually overdrawn. So my dinner actually cost me $91.65. I would have ordered a bottle of wine had I known I was getting fucked so hard that night!
Huge profits at the expense of those who can least afford it Alex Berenson of the New York Times reported in 2003 that Washington Mutual Bank earned over one billion dollars through stealth overdraft fees in a single year, according to industry analyst estimates. That's nearly $3 million a day. And there are six other banks in the country larger than Washington Mutual. In all, checking account customers pay over $10 billion a year in these fees. The Center for Responsible Lending, a North Carolina-based, non-profit research group, found in 2006 that the overwhelming majority of these fees – nearly three-quarters – are paid by financially-distressed customers who live "on the margins of solvency." The added burden of stealth overdraft fees make providing for basic needs and living above zero even greater challenges. Banks are enormous corporations and it's almost impossible to grasp how much money $10 billion is. In more understandable terms, the ten billion dollars that these companies generated through stealth fees in a single year is enough money to provide public housing for all 3 million homeless Americans for about a year and a half. So how much money are these banks making from this predatory practice? Enough to eliminate homelessness in the United States. And then some. Many would argue that each person should know how much money they have in the bank, and that banks have the right to charge these fees to the accounts of customers who exceed their balances, because the bank is essentially providing a loan. If that were true, and these fees are, in fact, considered short-term loans, the CRL study found that the median annual percentage rate for a point-of-sale overdraft "loan" is more than 20,000%. Yes, more than twenty-thousand percent. Honestly, nobody wants that loan and no one would consider 20,000% interest to be "convenient."
Creative manipulation of technology While it's relatively difficult to inform a customer that they're inadvertently writing a bad check, obviously, the technology exists to decline a debit card transaction, ATM withdrawal, or electronic purchase if a customer's account is insufficiently funded. Use of this technology was standard industry practice and historically protected banks from overdrafts until its creative use for extra profits became evident over the past decade. About 50% of all income in the banking industry is now generated from fees, and the CRL says the majority of overdrafts today – 46% – are caused by instantly-verifiable transactions – that is, debit card purchases and ATM withdrawals. Paper checks only account for 27% of overdrafts. Berenson reported that because these programs have been so outrageously profitable, it has changed the way banks do business. Stealth overdraft fees, ATM usage costs, or even a price for getting a statement in the mail; they're all adding up to huge profits. A practice among many banks now is to keep transaction-stopping technology on hold while allowing a customer to run up overdraft fees. The bank will eventually implement their ability to decline transactions, but only after the negative balance grows to the point where it becomes a collection risk. In the same way that institutions are able to instantly verify whether a customer is overdrawing their account, they can also allow customers to view their recent activity in real time. Many banks don't do this. Instead, a customer's online account access may deceptively not reveal recent transactions until several days after they occur. This delay and lack of information about my account has been the most extensive source of irritation and confusion I've had with National City.
Under the guide of courtesy It has to be noted that when a customer overdraws their account they are breaking the law and can be prosecuted for theft. In a significant shift, banks are now enabling this illegality, in fact, encouraging it. A quick look at some of the literature advertising "courtesy overdraft protection" at your local branch is all the evidence you need of this. Historically, banks have dissuaded customers from making mistakes that would cause their accounts to become overdrawn. Overdrawn customers were a liability. And overdraft protection used to be something you could choose to add to your account to protect yourself from miscalculations and extra charges. Today, the option of opening a new account without this expensive, shadowy "courtesy" is, in many cases, not offered. In instances where it is available, the customer must be "creditworthy" and explicitly request the more traditional form of overdraft protection. This type of account is typically available to higher-income customers and is therefore not really an option for people who have trouble keeping money in the bank. As for an account that just declines excessive transactions? You might have to forget about that.
Thanks anyway In the CRL study I've referenced a few times here, researchers for the Center surveyed 2,400 checking account holders and analyzed an independent database of personal banking account transactions documenting more than 8,500 overdrafts. Like myself, and most people I know who expressed their opinion to me, the majority of customers who participated in the CRL survey – 60% – said they would prefer that the bank decline a purchase if they didn't have the money their account, rather than approve it with the addition of a "courtesy" fee. Almost everyone surveyed by the researchers said they would cancel their ATM transaction if they were first warned that it would put their account into the red. Letting a transaction proceed and adding a fee to it is hardly a courteous thing to do if the customer would prefer that you not do it. That's like helping me across the street if I'd rather stay where I am.
What kind of business is a bank? They're only open when people with regular jobs are at work. Sure, National City has Saturday hours. Three of them! 9 AM to noon. The post office is open longer than that. Almost half their revenue comes from fees; not from interest on loans, not from helping people, and not even from providing a service their customers want. What kind of people run businesses that intentionally create confusion in order to prey on their customers' inability to make ends meet? Why are these people so willing to abuse the relationship they have with their customers? Do they not realize that such a relationship cannot be sustained? Sooner or later, people will find other ways to do business. Consumers who have been forced out of mainstream banking by fees that result in debt and bad credit – and banking customers who have left the industry willingly – have resorted to high-interest payday loans and check-cashing operations to conduct their financial business. These small shops have been marginalized in the media as wolves and sharks, yet mainstream banks employ the same tactics. At the very least, I find it perhaps a bit more honorable that those businesses don't hide their predatory gouging behind cute marketing terms like "courtesy" and "protection." They're not pretending to do anyone any favors and they're not acting like they want to be my friend or that we're on the same team. Corporate banks are preying on people who can't afford it, quietly pushing them into huge fees, and telling these struggling people that it's all their own damn fault. I don't believe that it is.
My non-scientific poll of friends In my personal, nonscientific survey that started all this – that is, from the people who wrote in response to my bulletin – the bank that most of my friends had good things to say about was Stock Yards Bank. Twenty-five percent of the people I heard from who had something good to say about a bank said it about Stock Yards. On the other hand, one friend said their experience with Stock Yards was a "bummer." Coming in second with 20% of the positive responses was Chase. No subsequent banks had more than 7% positives without having an equal or greater number of negatives. PNC Bank had as many disappointed customers as satisfied ones; 10% each way. Fifth Third Bank's customers are also split down the middle, having one person on each side of the fence. Seven percent of all respondents suggested I move my account to a credit union rather than a bank. Of the people who had bad things to say about their bank, 40% of them mentioned National City as being the source of that animosity. That is probably partially due to the fact that I was complaining about National City and people wanted me to know they had a similar experience. It certainly made me feel better that I wasn't alone and that all this isn't entirely my fault. One friend recounted an experience with National City in which he incurred over a thousand dollars in fees. He had both a checking and savings account with National City, and each time he got paid, he deposited his paycheck into his checking account. His accounts were set up to automatically withdrawal $50 from his checking every other week and deposit it into his savings. Eventually he decided to switch banks and he closed both of his National City accounts. Some time later, he found out that his National City checking account – which he closed – had been amassing courtesy overdraft charges every two weeks when the automatic withdrawal to his savings account – which he had also closed – was coming up empty. Did you get that? He was silently being charged for a non-existent account's inability to complete a transaction to another non-existent account. He refused to pay the fees because both accounts had been canceled and therefore any automatic activity for those accounts should also have have been canceled by default, right? National City apparently didn't see it that way. They told him it was his responsibility to ensure that all automatically-scheduled transactions were also terminated and they turned him over to a collection agency. He continued to dispute the charges and the collection agency eventually forwarded his information to a banking industry union. This group, in turn, placed his new account at a different bank on hold until the charges were paid. Something similar happened to me when I lived in Rhode Island. I had a dispute with Sovereign Bank over excessive charges, so I closed the account and switched to a different bank. A couple months later, Sovereign was able to shut down my new account and prohibit me from opening an account at any other bank until they got what they wanted out of me. It took weeks to sort out and made it virtually impossible to conduct any business with anyone who didn't use cash. All said, I guess I'm going to switch to Stock Yards, and I can only hope they have some really awesome toaster or lawn chair waiting for me as a "courtesy" gift for signing up.
See also: "Debit Card Danger" by the Center for Responsible Lending, 2007, responsiblelending.org "Banks are reaping billions from stealth overdraft charges" by Alex Berenson, New York Times & Seattle Post-Intelligencer
|
|
This is the official campaign website
for Kentucky State Senate candidate Scott Ritcher.
|
||
Ballot Revolution, Scott Ritcher for Kentucky Senate (This is an archived site from the 2008 election) |