I called one of my banks the other day – the one without a coin slot in the top – to help them decriminalize a few of their shadier practices. It promises to be a long slog.
Disclosure: I have two banks. One looks like a pig; the other acts like a pig.
The reason for my call was to cancel an overdraft line of credit attached to my checking account. I’ve never bounced a check at this bank, but they had offered a standby line of credit that would come to the rescue if the need arose and prevent the account from becoming overdrawn. That was back when banks offered actual services to earn their money.
Recently they decided to charge $30 a year for this line of credit, even though I never use it. Then they hit on another ‘revenue enhancer’ (oink oink) – a $5 "funds transfer fee" if the credit line is tapped. Well, $5 –who cares? I’m sure that’s how they thought all their customers would react. Customers are stupid, aren’t they?
Just keep sneaking in those little fees, and next thing you know .... MarketWatch reports that late fees, loan origination fees, over-the-limit and overdraft charges and the like now generate over half of banking industry income.
Loan origination fees? Isn’t that what banks do in order to be banks – and what they’re paid for by collecting interest? It’s like a mechanic charging a wrench-finding fee.
Piggy, Piggy Banks!
But back to my $5. That "funds transfer fee" is actually $5 a day, regardless of the amount of the overdraft. At $5 a day, if I were to exceed my checking account balance by, say, $90 and take four months to repay the loan, it would cost $615 in fees plus whatever interest they charge (about $10, I imagine—fool that I am) and they would probably add an interest-adding-up-arithmetic fee to that. Even if they don’t, charging $625 on a $90 loan for four months is the equivalent of charging a bit over 2000% interest.
The same bank had always returned my cancelled checks with each monthly statement. Then, to save themselves money, they stopped doing that and, instead, sent a sheet or two of Xeroxed check images. Not very convenient, but most of us didn’t protest.
THEN they started to charge a $2 fee each month for "check imaging." I think of it as the "We insist on being paid for our failure to return cancelled checks" fee. I hope they don’t lose the money in my checking account altogether because then they would want to charge me a bank misfeasance fee.
And we bailed them out?
Does the bank care that I cancelled my line of credit? Probably not. If you don’t have the line of credit, they charge $36 for the first overdraft, and one mistake (yours or theirs) can lead to three or four of those fines in escalating amounts as successive checks arrive.
If you try to overdraw at an ATM, of course the electronic system knows you’re asking for more money than you have in your account or within your credit limit. So it should refuse to give you the cash, right? Not when there are $36 or $39 overdraft or over-limit fees they can charge you to celebrate their own blunder.
Low crimes and Misdemeanors
How charged with punishment is the scroll?
If you don’t have free checking, then you’re being charged for the use of your own money. Charged twice, in fact, because they’re already collecting interest on your money and stuffing it in their own pockets — and then they charge you for the privilege of giving them an interest-free loan. Oink oink.
If there’s some reason we haven’t already put these folks in jail, I can’t think what it is, except that in the U. S. Senate the banker is King, and the King can do no wrong.
Aside from the billions they’ve spent buying the Senate, banks have also spent billions in advertising to draw you into their branches. Then they started charging you a fee if your transaction involved a teller. Why? Because their costs are lower on automated transactions via ATMs and ETFs (electronic funds transfers). And then they found ways to charge you for using their ATM.
Eventually, they’ll charge you for walking past the bank.
If you receive a check and deposit it – and it bounces – that’s not your fault, but your own bank charges you a fee (while the check-writer’s bank charges that person a fee), so they’ve fined the innocent and the guilty and kept the money from both.
If you open an account that proves to be so corrupt or otherwise disgusting that you close it within two months, they charge a fat fee for that. Some banks charge for closing an account within six months, it doesn’t matter why. If every teller moons you when you walk in the door, you still pay for leaving.
A billion little bail-outs.
Then there’s the weird world of credit cards, where late fees and over-limit charges are exorbitant – and still rising – as are the interest rates they charge. Most have a rate of around 20% — which used to be called usury – and a "default rate" of 33% or so, which in some times and places would have been punishable by public dismembering. If you’re late with a payment – even to someone else – they can invoke the default rate.
And to make sure they get their lavish late-payment fee, they send your bill later and later every month, leaving only a few days before the due date, so that anyone who is sick or out of town for two or three days will probably owe the late fee and be subject to the 33% default rate when they borrow money to pay all the fees and fines in the fine print.
Who was that masked man?
It used to be that bankers supported their communities and, alas, their banks were occasionally robbed by crooks. Now the crooks run the banks while the victims and their communities go broke. Never forget that 60% of subprime mortgages went to borrowers who could have qualified for much less expensive standard fixed-rate mortgages but were steered to costly, risky loans on lousy terms because those were more lucrative to banks and mortgage brokers.
At the climax of this grand larceny, the bankers stole so much money they went bust, and now the customers get to pay the biggest fee in history, as taxpayers, bailing out the perpetrators – because angels would fall from the very heavens if the bankers were deprived of their bonuses. (They need bonuses to retain "the best and the brightest" – ie., the people who caused the crash.)
Ironically, now that the great feeding frenzy has sunk into the muck, the banks are reduced to petty larcenies by the billions, kiting fees in their desperate efforts to stay afloat and expecting consumers to pay the tab yet again.
The Lost Legion
What’s missing in this picture?
I’ve known some excellent, responsible bankers and mortgage brokers who have gone out of their way to be helpful, and I’m sure you have too.
They were neither too big to fail nor too small to succeed, and they helped ordinary people to buy their homes and cars, to start businesses and keep them going, to send their kids to college and to work their way through problems, setbacks, recoveries, and repairs.
Where are they now?
Many of them are still there, especially in some (repeat, some) of the local and regional banks and no doubt in the lower and middle echelons of some of the giants.
Let’s hope their voices are heard as the salvage work progresses and that the best of the small banks grow larger as the worst of the big ones shrink or disappear.
But we’ll have to pay attention. To begin with, we need to replace – if not tar and feather — every senator of either party who sells out to the banking and insurance lobbies as the ground rules are being rewritten.