I particularly enjoy that the president has called his “Financial Crisis Responsibility Fee” a fee. Banks know from fees…
Twenty years ago Texas-based banking consultant Bill Strunk convinced banks that they should allow customers overdraw their accounts and charge them a fee to do it. He’s also credited with convincing clients to make checking accounts free to entice more customers. But high to low transaction processing, that the banks came up with on their own:
LOWELL BERGMAN: Bill Strunk says that many of the big banks have taken his concept of overdraft fees too far. They do that by not processing checks and debit card charges to your account in the order they are received. They use a computer program so the banks can pick out the biggest amounts first and charge them against your account. This empties your account faster, resulting in more overdraft fees for each of the smaller amounts. There’s no restriction on a bank ordering that way?
BILL STRUNK: No. That’s correct.
That from Frontline’s, The Card Game [excerpted above]. Now watch as this sleazy, sneaky, despicable practice is described as something customers asked for:
SCOTT TALBOTT, V.P., Financial Services Roundtable: The program is set up to honor what the customers have told us they want. We’ve set up on a high to low, right? We’ve told you that up front, we were going to process them from high to low. That’s what customers have told us they want- “Process my mortgage first. Process my student loan first. Process my car payment first.” And then all the other transactions, the smaller ones.
LOWELL BERGMAN: Which customers have told you this? When? No one ever asked me.
SCOTT TALBOTT: Yeah, that’s- as I’ve told you- you asked me if there was a survey. There wasn’t a survey. This is the years of working with our customers to find out what they want, and this is what they’ve told us.
Am I the only one who didn’t know they do that? Mark Gimein explains this is standard operating procedure for the banks:
Of all the insults that the consumer banking industry has hurled at the public’s intelligence in the fight over noxious fees—29 percent credit card interest, arbitrary rate hikes, and the rest of its shoddy practices—the most galling is the argument that for the government to intervene in any of this would be to hamper competition and keep banks from serving their customers. In Bank Bizarro world, the chance to pay $39—sometimes five times in one day—for losing track of one’s balance and pulling out a debit card to pay for a soda is a service consumers are asking for. […]
Here’s how the industry’s argument goes: Since, say the banks, we have a vigorously competitive banking sector, if consumers aren’t getting something better than the banks are giving them, it must be because they don’t want it. In this they get backing from friendly economists such as George Mason’s Todd Zywicki, who claim that because folks can always avoid overdrawing their accounts or paying their cards late and choose not to, they must like the option of paying the fees their banks have foisted on them…. The hidden premise in the banks’ rhetoric is that “unregulated” means the same as “competitive.” Unfortunately, it doesn’t.
Back in our Frontline program, the NYTimes’ Joe Nocera articulates the idea behind a Consumer Protection Agency:
The idea is to create a brand-new agency because the current regulators the FDIC, the Fed, the controller of the currency have a fundamental conflict, which is, on the one hand, they’re supposed to look out for consumers. That is part of their franchise. But on the other hand, they’re supposed to look out for the safety and soundness of the banking system. And guess what? When you gouge consumers, you’re actually helping the safety and the soundness of the banking system.
For the New Year, banks rolled out a whole host of new fees to get ahead of the new rules go into effect in February as part of the Credit Card Act of 2009. ATM cards are not covered by the act.
Frontline’s The Card Game will be rebroadcast on January 26 (check local listings). You can also watch the full program online.
Remember: Don’t use your bank ATM card and there are hidden costs when you use MasterCard &/or Visa Debit Cards.