The recent news about Congress looking into the behavior of the banking industry when it comes to overdraft fees (in which Bank of America was a key "bad guy") got me to thinking about the banking industry in this country.
And a diary about another Kossack's experience with the unfairness of Bank of America overdraft fees put a more personal face on the problem.
As it didn't appear to affect me directly, I assumed my interest in this topic would quickly fade, since I had more urgent matters to attend to.
I could not have been more wrong, and therein hangs a tale.
Some background to start:
I have been a customer of Bank of America for more than 27 years. I opened a checking account with them in 1982, and have done virtually all of my personal financial business through that account.
For all jobs I have held as a full time employee, I had direct deposit of my paycheck to that account.
In my best year, I pushed nearly $300,000 through that account, between paychecks, stock sale proceeds and the like.
I do not have a savings account with BofA—that is with my local credit union—and my mortgage is also not with them. My 401(k) is with another institution. However, I have two credit cards with BofA—one was taken out at the same time I opened the checking account; the other ended up with BofA through an acquisition. Both credit cards have fairly high limits.
Until this year, I had a stellar record with BofA: I almost always maintained a healthy positive balance in the account, and rarely triggered the overdraft protection which moves "loans" from the credit card to the checking account. For each such "loan", there is a substantial fee charged, amounting to an exorbitant interest rate.
Further, until this year, I paid off the balances on both in full each month.
I own a house, in which I have substantial equity, and for which the mortgage loan and a home equity line of credit amounts to less than half the market value of the house. I have no auto or other long-term loans taken out.
All of the above is intended to establish one fact: I have had a good financial history, backed by a high FICO score, for more than a quarter century. I have been at the same address for 23 years, and have no defaults, bankruptcies or other irregularities to blot my credit history.
Beginning earlier this year, due to the fact that I have been out of a job for more than twelve months, my income stream became a little less secure. Consulting jobs provided, overall, a reasonable income stream to cover expenses, which are not insubstantial—a mortgage, one child in a private college, health insurance, life and disability insurance premiums, property taxes, and so on.
As a result, I have had a few times over the last several months where the timing of checks from clients for services rendered did not quite match up with the due date of payments. In several cases, I ended up overdrawing the account, which resulted in BofA moving money from the credit card to the checking account, for a fee.
Just recently, the credit card balance reached the limit, and the overdraft protection was no longer there. In such cases, BofA would "kindly" honor the check, take my checking account balance negative, and charge me $35 for each such overdraft.
No problem, I thought, as the account balance would be taken in positive territory again in a day or two, and the $35 fee was the stiff penalty I had to pay for such events, and a windfall for BofA. Knowing my account history for 27 years, they could be pretty certain that I was not a deadbeat, and that I had regular deposits which, while sometimes late, would always bring the balance positive again.
In other words, BofA and I had an "understanding": they would skin me a bit every time I let the account balance go negative, I would put up with the fees in exchange for them "taking care" of me when payments didn't quite line up with deposits.
Until, that is, this week.
I had deposited two checks to my account on Thursday night—one from a client and one rebate check from a purchase made several weeks ago. The rule at BofA: if you make a deposit before 8 PM local time on a business day, the deposit is credited to the account the same day. This was handy, as I had several automated payments scheduled for the next few days, and otherwise the account balance would have gone negative again. Neither check was particularly large and I had deposited checks from this client in the past.
Saturday morning, I go to the local coffee shop to get my morning brew, attempt to pay with my debit card, and find that it is rejected. Quite a surprise, as I had over $1,000 in the account after the Thursday night deposits. What might have happened, I thought, was something I had done to myself in the past—forgotten a large automated payment I had scheduled and forgotten to account for.
Once home, I log into BofA's web site and my account, only to find that the Thursday deposit had been reversed, and a note was attached to the reversal indicating it was due to a hold being placed on the deposit for a week's time! And now, the account balance has gone negative, with all the extra fees that implies.
A call (not quick) to BofA's customer service line reveals the following:
- The hold has been placed on the deposit by a group within BofA who makes such decisions in a vacuum, the reasons for that group's decisions are never revealed, and the hold cannot be rescinded under any circumstances.
- Only general reasons can be given to me for what might have triggered the hold: for new accounts (my account is 27 years old), for first-time deposits from a given payee (I had made two deposits from this payee in the recent past), or for large deposit amounts (I have only had such holds done in the past for amounts in excess of $10,000). No match on all triggers.
Asking to speak to a supervisor gets somewhat more information:
- Under my "contract" with BofA, I have to understand that BofA reserves the right to hold any deposit for any reason they deem appropriate for a reasonable period of time.
- The "group's" decision is likely based on the number of recent overdraft fees I have incurred.
- The "group's" decision is an attempt to get me to stop committing deposits against payments before they have a chance to completely clear.
(The third point is particularly disturbing: as such "commitments" are mostly bills due each month on a regular basis, I don't have the flexibility to do anything other than attempt to move my client billing a bit earlier, if that's possible. In addition, if I hadn't discovered this situation soon after it happened, how many more deposits would I have made which would have been held, creating an even larger negative balance and resulting in even more fees before being discovered? What really gets my goat, though, is the thought that money due me, which I rightly earned, is being withheld from my use by my financial institution for far longer than should be needed to validate the payer's ability to honor the check.)
After I express my displeasure, the supervisor attempts to shift the blame fully to me, through the "if you weren't such a deadbeat, you wouldn't have this problem" approach—though it was all diplomatically done, of course.
Now, it's interesting to note that this move by BofA to hold this deposit, and perhaps to hold others, actually has the following effects, beneficial to BofA and not to me:
- Holding deposits is more likely to create a situation in which the account goes negative, since there will now be a delay between the check being in my hands and it being available to pay bills—bills for which the recipients will not be granting a similar delay.
- Since BofA will continue to honor checks which take the account balance negative, they get to "earn" their $35 fee for each check so honored.
Paint me somewhat skeptical about believing that BofA's actions are intended for my benefit, not theirs.
The bottom line to this story?
- I now know what it feels like to be a "deadbeat" in the eyes of my financial institution. Never mind that had, in the prior 26 years, a stellar record. Never mind that I have assets which I can call on, if its sufficiently important, to meet my financial obligations. As a result of events of the last few months, I am now not to be trusted in handling my accounts.
- All actions I've seen taken by BofA with regard to my situation, and similar situations of others, completely serves their interests. High fees for overdrafts, ordering the payment of checks to maximize those fees, and taking actions such a delaying availability of deposited funds all have the effect of increasing the "take" of BofA from customers like me.
It seems to me that the current situation with banks, in which exorbitant fees are charged, and actions are taken which mistreat customers and fill the coffers of such financial institutions— that such actions, while immoral, are completely legal, and are the result of years of deregulation of the financial industry.
One wonders where this will end? With the financial industry being the single largest contributor to politicians in Congress, will it ever end?
Perhaps she has the right idea.