BY GABE KRAJICEK
Bank of America’s recent decision to slap a $12 monthly fee on all accounts with less than a $1,500 balanceis an insult to consumers across the nation. The charge applies to customers with an “eBanking” account, which up until recently, was free for anyone who didn’t receive paper statements or use bank tellers. Bank of America has now phased out eBanking and transferred all its customers to “core checking accounts” that require them to contribute a direct deposit of at least $250 a month ($3,000 a year) or keep a minimum daily balance of at least $1,500 to avoid the $12 fee.
This greed-driven tactic attacks some of the hardest working and most vulnerable people in the country. In fact, a new survey suggests that nearly 70 percent of Americans maintain an average checking balance of less than $1,000. Making this decision even more insulting is the fact that Bank of America is upping fees after having recorded a record-high profit of $5.6 billion last year.
But it’s not just Bank of America. Over the past seven years, we have seen mega banks make irresponsible lending decisions, get bailed out by the government, and then turn around and charge consumers more for services and products. As her last parting shot, Janet Yellen, the exiting chair of the Federal Reserve board of governors, basically said that the actions being witnessed at Wells Fargo indicate that there is such top-down lack of management oversight that in order to protect consumers, the Fed needed to force Wells Fargo to restructure its top-level leadership. But interestingly, the mega banks are so strong that even the Fed Chair didn’t challenge them while still a sitting member of the committee.
So it’s not just BofA; it’s not just Wells Fargo. Megabanks do not put consumers first. They are not committed to the communities they serve. They are not committed to the customers that bank with them. They are only committed to the stock price and the profit needed to drive it higher. Now I’m not saying that profit is bad, but banking is a trust-based business first. There has to be a balance between profit and good ethics…especially since the five biggest financial institutions currently hold 44% of all the industry assets in the United States according to recent data.
There is a dire need to put a stop to the bad behavior of megabanks now, as it severely impacts consumers and the communities they live in. Unlike megabanks, community banks and credit unions are committed to their communities, and Bank of America’s blatant disregard for consumer well-being has made this the perfect time to highlight the stark contrast between the consumer-friendly policies of credit unions and community banks compared to the predatory practices of the big banks.
Here are just a handful of advantages:
First, community banking is an investment in that community. Studies show that small banks actually make up 54 percent of small business lending. And as we all know, small businesses are critical to driving innovation, creating thriving local economies and significantly reducing wealth inequality.
Second, consumers get better service, plain and simple. Sixty-four percent of people surveyed in the Consumer Banking Insights Study believe community banks and credit unions provide better personal service in any kind of interaction — be it face-to-face, over the phone, or online — than big national banks.
Last, consumers are more likely to get rewarded for their business rather than penalized, asin the case with Bank of America or any other megabank. Let’s face it, this concept is just too consumer-friendly for megabanks’ taste. In general, community banks offer lower fees than big banks, with 63 percent offering free checking. They also have lower overdraft fees, and some community banks are even reimbursing several, if not all, surcharges at out-of-network ATMs. Additionally, studies show that community financial institutions also offer, on average, better interest rates on savings and better terms on credit cards and other loans.
In contrast, the kind of behavior we’ve seen from megabanks time and time again is unacceptable, and we – as a collective industry – need to send a message that the blatant abuse of power just won’t be tolerated. These banks have a long-standing history of consistently acting in their own self-interest regardless of the impact on account holders or the economy at large. If you are an investor, they are in your corner. If not, then they really seem to care less about your well-being.
There is a petition in response to BofA’s fee hike, and it is getting some traction. But it won’t work, as we’ve seen from the past, because BofA will ignore it long enough to outlast the consumer distaste for their actions. You can see the petition for yourself at www.change.org.It’s time to send a real message. We must hold our financial partners to a higher standard – and that standard has to indicate that consumers have the right to expect a fair exchange. When a consumer trusts a financial institution with their income and savings, that institution should honor them by respecting how hard it is to earn every nickel that goes into the account.
It is time to take back banking.
Gabe Krajicek is Chief Executive Officer of Kasasa, an award-winning financial technology and marketing technology provider. For more information on Kasasa, visit www.kasasa.com, or visit them on Twitter @Kasasa, @KasasaNews, Facebook, or LinkedIn.