Nickeled and Dimed By Both Wall Street and Main Street

bank_feeNew Orleans   In the wake of the Great Recession and general financial meltdown we all like to think we’ve got our eyes peeled to all of the slick shenanigans devised by Wall Street wheeler-dealers.  With billion dollar bank settlements still regularly reported in the daily papers and with a new governmental body, the Consumer Financial Protection Bureau, in place that has our backs, we can finally relax.  Not!  I’m increasingly convinced that it’s not the big heist that will get most of us, but the fact that we’re now nickeled and dimed every day and in almost unimaginable ways once we relax even the tightest grip from our hard earned money.   The answer in banking to new regulations and restraints and lower interest rates seems to be rather than the big score, just to suck us dry, bit by bit, day by day.

When we worry about the unbanked, we keep looking for ways to achieve citizen wealth or income security with more safety and less cost.  Generally, most of us would believe that it’s better to put your money in a bank than to wad it up and hide it under your mattress or in a crack in the wall.  I’m just not sure that’s true anymore.

Minimum service fees are so expensive that their main purpose seems to be to suck the money out of your accounts in exchange for nothing.  In the wave of support for credit unions a couple of years ago, some of us opened accounts in the local credit union in our neighborhood, called ASI, because they seemed committed to the area.  The whole point of a credit union used to be savings.  You put some money in, and they get to invest it, but you were able to build a relationship for the future.  Boy, is that old school, gramps!  Once you discover there are minimum balance fees ever month and quarter, a couple of hundred necessary to open the account, becomes not an inducement to savings and security, but a bank donation, because when you’re not watching, it’s gone in a couple of years.

And, not just credit union accounts either.   For years Local 100 had a petty cash account with JP Morgan Chase in Little Rock.  We had forgotten we had it, until a visit to the office several years ago stumbled on a statement.  They were sucking out $20 or more a month to maintain an account with hardly $300 bucks in it.  Over a two year period we wrote, called, and cajoled Chase to close the account and transfer the money out to Capital One where we had our main account.  They delayed.  They promised.  They assured us.  We never saw a dime before it was gone.  For a couple of hundred here or there, the small fry and the big boys know you won’t sue, so they make what’s called a “business decision” to simply steal your money figuring they can get away with it.

It’s not just bank accounts either.  They treat anyone small, even their shareholders the same way.  This week I got a weird letter from Citi, as in Citibank, Citicorp, etc.  They wanted to know how I was going to pay $45 bucks and change for some kind of investment account they had me in.  It’s a long boring story, but 30 odd years ago on an office bet among other things I bought 10 shares of Citi for less than $100 with no brokerage fee.  It goes up and down as they get caught doing good or evil, and now it’s worth $700 or so, many decades later.   This is not Warren Buffet look out time, if you know what I mean, but what was a $45 annual charge all about?  They had an 800 number for questions, so I called.  What a hustle!  So, it seems after having signed us little fish up on one of their accounts, she told me they had started attaching a fee a year or two ago, unbeknownst to me.  So, I said, take me out of this now.  Not so easy, cowboy, she said.  I would still have to pay $45 for last year and $45 for this year out of my small holdings.  Well, all you’re doing is holding my certificates.  Send them to me, I’ll hold them myself.  Oh, no, dude, she claimed they would cost something on the order of $500 apiece, which surely is a big fib!  She claimed they could transfer my shares electronically to a depository of some kind, but that would also cost about one-hundred-and-a-half and when I asked what that outfit would charge annually, she would neither give me the name nor the cost for 5 minutes or more.  Oh, and to transfer out, I would have to sign a form and get it notarized by my bank, which she would supposedly mail to me.  Come on, man!  My Citi shares are hardly worth anything with miniscule dividends, but as a small fish to a Wall Street shark the message was clear, I was either going to have to agree to let them blood suck me for fifty or more every year or they were going to try and take a third or more of the little I had with Citi so that they could bleed me out now.

Modern finance, whether Wall Street or Main Street, is about billions and billions of dollars in transaction costs ripped from the hands of all of us small fry, not shrewd deals gaining value and building the nation’s economy.   We’re the grease on their wheels.  While the government and others try to watch them at the front door, they are stealing us blind and with impunity out of the backdoor in every nook, cranny, and alleyway they can find.

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Banks Creating Unbanked Millions

money-under-bedLittle Rock       I hate to say “I told you so,” but of course, I in fact did tell you so, when I recently warned that banks for any reason or no reason at all can refuse to continue to allow you to have a checking account or bounce you out of their customer line.  A recent article in the Times confirms that in fact the level of what used to be called the “unbanked” has risen by 10% since 2009 according to the Federal Deposit Insurance Commission (FDIC).

            And, yes, “unbanked” does sound like the “undead.”  You may be walking and talking, but you are also doing a lot more of it and paying a premium to pay your bills, transfer money, and handle daily affairs because banks won’t let you have an account.   This is actually a fairly new phenomenon.  Only a couple of years ago if we were meeting with bankers and said that we needed to continue to reduce the level of the unbanked among lower income Americans, all of the bankers at the table would reflectively nod in agreement.

            No more it seems.  Big data is dunning the poor.  Minor mistakes, like a one off overdraft can lead to people being blacklisted.   According to the Times:

The largest database, founded in the 1970s, is run by ChexSystems, a subsidiary of FIS, a financial services company in Jacksonville, Fla. Subscribers — Bank of America, JPMorgan Chase, Citibank and Wells Fargo among them — “regularly contribute information on mishandled checking and savings accounts,” ChexSystems says on its Web site. “A consumer may dispute any information in their file and ChexSystems will facilitate the resolution of the dispute on the consumer’s behalf,” the company said in a statement. A rival, Early Warning, which is owned by Bank of America, BB&T, Capital One, JPMorgan Chase and Wells Fargo, says roughly 80 percent of the 50 largest American banks pay a fee to subscribe to its deposit-check service.

The banks claim this all began as an attempt to stop fraud, but that’s not really true.   Bankers have been honest with us for years that the old school checking account part of their business was a money loser and in fact a loss leader.  Here comes big data that can collect every misstep by a poor Joe or Jane along the road, and wham, that’s all it takes to push them into all of the financial predators lying in wait for the poor. 

Good luck with resolving the disputes as well, that is if you know there is one.

The article claims that, “Banks are required to provide a reason for rejecting an applicant,” but I’ve read some of the documents that banks put out, and I’m not sure that is really true, and if true, it’s certainly not enforced.”

But all of these financial institutions are federally or state chartered.  The FDIC insures each account for a hundreds of thousands of dollars.  There is huge governmental leverage here that should be reminding banks that they are in the service business not just the get-rich-quick-business.   If they want to stop fraud, good on them, though they might spend more energy supervising some of their own practices, and trying to hard handle someone whose check clears faster than the bank gets around to recording their deposit.

 

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