(Daniel Leninger)
Last November, Mint reported at length on the many ways that banks and creditors were sticking it to consumers in anticipation of the The Credit Card Accountability Responsibility and Disclosure Act of 2009 (set to take effect in February.) Among the various unsavory practices were sudden interest rate hikes, strict enforcement of overdraft fees, “due date roulette”, reduced credit limits and universal default – all of which will soon be prohibited. And despite often being depicted as helpless and uneducated, consumers have begun retaliating by hitting the big banks where it hurts – at their bottom line. Slowly but surely, people are concluding that it is simply not worth transacting with institutions that mistreat them, and are beginning to take their business elsewhere instead. Consumer rebellion against banks has taken several forms thus far. Let’s take a look at some of these:
Perhaps the most direct retaliation to bank mistreatment is the simple removal of money by consumers from their bank accounts. To be sure, some of this activity owes to the pathetic amount of interest currently being paid out by most banks. In the UK, for instance, TheMoneyStop reports that consumers are, “…withdrawing billions due to poor returns” on their savings accounts. In the United States, however, banks are increasingly seeing depositors withdraw their money due largely to the types of shoddy service discussed earlier. Indeed, many consumers are apparently resolved to withdraw their money from the “Big Four” banks (Citibank, Chase, Wells Fargo and Bank of America) even if it makes no visible difference to the overall industry. TheWeek.com quoted a disgruntled customer as saying, bluntly, “…maybe I can’t make Chase feel my pain "” but I’ll feel better about myself in the morning.”
(AMagill)
The bitterness that some customers feel toward their banks is hard to exaggerate, and the data substantiates the anecdotes. According to Rueters, a J.D. Power & Associates survey found that, “…only 35 percent of customers polled said they are highly committed to their retail banks” during 2009, “…down from 37 percent in 2008 and 41 percent in 2007.” Bank of America and Citibank were named specifically as receiving low marks in customer service, perhaps providing an impetus for consumers to withdraw funds.
Another outlet for the frustrations of disenfranchised consumers has been switching to smaller, local banks. Despite blogger Felix Salmon’s remark that changing banks, “…is hard, and people are lazy”, the Huffington Post reported on January 8 that its viral, video-driven Move Your Money campaign has resulted in millions of dollars being transferred from big banks to smaller, local competitors. Among the beneficiaries of the growing exodus has been Trustco’s Albany, NY branch, which, “…had 30 new accounts opened just Thursday, almost all of them new customers saying it was their way of ‘fighting back’ against larger banks like Citi and Chase.” Nor are unwealthy consumers the only ones making a stand. Albany’s NEWS10 television station reported that, “…one of those new accounts [at Trustco] is seven figures.” And far from being a local trend, Trustco administrative vice president Robert Leonard states that, “…the trend is the same at their branches in Westchester and in their Florida branch.”
(Betssssssy)
Additionally, Financial-Planning.com reports that since ‘Move Your Money’ kicked off on December 29, “…daily Web traffic has more than tripled on the National Association of Federal Credit Unions’ CULookUp.com, a credit union locator site.” While this is an admittedly crude proxy for new account openings, NAFCU President Fred Becker said, “…it is a good indication that bank customers are looking for alternatives.” The campaign’s two week-old Facebook group, actively for all of two weeks, already boasts a following of over 20,000 members. And even in Michigan (whose economy is so bad that one might expect consumers to sit tight regardless of poor bank treatment) the Lansing State Journal finds that, “…about 59,000 people joined one of Michigan’s 335 credit unions in 2009 through the end of September – the most in more than five years.”
Dissatisfaction with big name banks has also led to rising interest in Internet-only, “direct” banks. The trend was foreseen as far back as April 2009, when BankTech.com reported a study by Tower Group predicting that, “…the amount of money deposited with direct banks will double by 2012.” Monetarily, such a prediction equates to, “…$350 billion in deposits held by direct banks by 2012, up from $160 billion last year.” Without question, some of this growth can be attributed to consumers becoming more comfortable with online banking in general. However, in many respects, the benefits of Internet-only banks dovetail perfectly with the biggest reasons people are unhappy with their current banks. Since the costs of operating direct banks are less than ten percent than those of brick and mortar banks, consumers benefit from fewer and less expensive fees. Some online banks (such as EBank) not only refrain from levying their own ATM fees, but also reimburse any such fees that other banks charge – the very same day.
(Mint)
Additionally, direct banks have acquired a reputation for paying higher rates of return on savings deposits than traditional banks. Bankaholic’s report on the top 50 money market rates and high interest savings accounts found two direct banks (Capital One Direct and Ally Banking) in the top three at 1.58% and 1.49%, respectively, as of January 11. With larger banks often paying less than 1% interest on savings deposits (in addition to nickel and diming their customers to death), it’s hardly surprising that direct, online banks are attracting more people into the fold.
The more radical among consumers are actually refusing to pay what banks and creditors say they owe. An exemplar of this tactic is Ben Pavone, a California lawyer who, “…told Bank of America in a letter last week that he refuses to pay off his credit card debt until the bank lowers his interest rate”, according to the Huffington Post. Furthermore, should Bank of America try to tarnish Pavone’s credit rating, the feisty lawyer vows, “…he’ll sue ‘em.” Reportedly, Pavone’s dissatisfaction with the bank stemmed from his credit limit being reduced when Pavone requested that it be raised. Nevertheless, the lawyer now considers himself to have been, “…squeezed for cash” and is “…eager to argue in court that your interest rates are unfair within the meaning of various state and federal statues, and anxious to point out that you ‘had’ to cut my credit limit from $32,000 down to $30,000 at the same time you were borrowing billions from the federal government and paid your executive bonuses in full.”
It’s important to realize what is at stake when lawsuits are discussed. Even an attorney must endure myriad forms, procedures and paperwork (not to mention an investment of time) to move a lawsuit through the legal system. It is a far more complicated process than many people believe. The fact that some are not only willing to refuse payment but fight for their decision in court suggests that even sophisticated and successful individuals are growing tired of bank industry games.
(Quaziefoto)
Pavone says he drew inspiration for his decision from Ann Minch’s “Debtors Revolt” campaign, which itself grew out of Minch’s frustration with Chase Bank. Upon being informed that her credit card interest rate had zoomed to 21.24%, Minch responded, “…are you stupid? Chase Bank, are you stupid?” in a YouTube clip that has drawn over 50,000 views since its release. Even personal finance guru Suze Orman has lent her moral support to the Debtors Revolt. When Minch appeared as a guest on Orman’s TV program, she revealed that she, like others discussed earlier, had, “…closed her savings and checking accounts with Bank of America and put her money in a local bank.” Before departing the topic, Orman declared herself as emphatically, “…on the bandwagon of credit unions” and other smaller institutions which treat customers ethically. The Debtors Revolt is hardly an isolated occurence, and has spurred countless imitators to carry on what Ann Minch started.
The financial sector is in such a state of upheavel that it is difficult to make iron-clad predictions about its future. However, consumer response to bank practices of the last 12-18 months indicate that patience is running low for the various money-squeezing tactics that were once the norm. Aside from the the looming Credit Card Accountability Responsibility and Disclosure Act and other regulatory pressures, consumers are now applying discipline personally, through the market, by taking their deposits to more upstanding and efficient institutions. It is not difficult to imagine a resurgance in community banking (coupled with increased use of online direct banks) spelling reduced marketshare for the “big four.”
While I have taken some of the steps outlined here, namely moved my payroll direct deposit to a small local bank instead of Bank of America, my favorite tactic was not listed. I’m paying off my debts early. I don’t want to work with these immoral large banks. I have a car loan that was sold to Chase, and I’m throwing all available funds at it to get it paid of in less than a year rather than allow them to profit over the full 3 years of interest. It will be my goal in the coming year to borrow zero money. I also considered refinancing the car with the local bank, and that would be good… I just think paying the loan off and refusing to borrow anything is even better. 6 likes Ryan Says: January 19th, 2010 at 2:02 pm
Overtime regional banks should gain share but it will take time. Unfortunately, several community banks are still facing difficulties in meeting dividend payments to the federal government. It will be interesting to see how it all plays out. like Ross Says: January 19th, 2010 at 2:15 pm
This article got me fired up. I’d heard of Huffington’s efforts, but the debtor’s revolt was new to me. Really, why do customers have to be held to such high credit standards when the banks themselves were irresponsible on a gigantic scale and were only able to pay back their loans with help from the Treasury? I’m moving my money back to a credit union. 4 likes Dwane Says: January 19th, 2010 at 3:09 pm
It is interesting. Citi bank is good at dropping interst rates automatically and taking up to a 40% loss on credit cards that are delinquent. BofA, Wells fargo and Chase are not – they will make you jump through hoop after hoop.
Onething that people need to realize is that bankruptcy is still viable. While settling debt can be a good thing remember you will be taxed as income for the reduced amount. Over all you need to make a simple analysis of how much you owe vs the taxes you will be hit with verse the Bankruptcy which will last for 10 years on your credit report –
One thing to realize – the cash in your pocket is worth alot more than a good credit score in some cases. Not all. like Laurie Hall Says: January 19th, 2010 at 3:25 pm
My only concern with downsizing from my big bank to “small and local” is that the local banks, once successful enough, are bought by the larger banks. Then, you’re back to square one?? My bank is pretty good – SunTrust. I dumped BOA two years ago. When they decided to throw their support at crappy Countrywide. like Darrell Says: January 19th, 2010 at 3:54 pm
I closed both my Wells Fargo and Bank of America accounts. I had been with Wells Fargo (Norwest) for over 40 years. like JJ Says: January 19th, 2010 at 10:37 pm
Big banks are definitely taking advantage of the small window of time before the Credit Card Regulation goes into effect.
The raised interest fees and lowered credit limits are truely unfair acts.
Concerning overdraft fees, however, I have never been sympathetic to people who assume it’s the banks job to keep track of their balance. Banks are in place to secure funds, not to act as a personal accountant. Having worked for a bank in college, I can say with significant experience that many account holders DO NOT keep a proper check register.
It is good to hear that new accounts will have customers opt-in to overdraft limits going forward. It has even come to my attention that some of the big banks will be offering coupons to customers that choose to OPT-IN. Unbelievable… like Steve Says: January 20th, 2010 at 5:52 am
I do not understand why this article is promoting Ally. If you dig in a little bit you will find that Ally is GMAC. GMAC does the same with Ditech. I am sure the reason for this is that a lot fewer people would want to deal with a GM company. GMAC recently received a second bail out. To say the very least they are in a lot of trouble. Maybe suggesting a more stable bank like ING would make a lot more sense. If you really want to stick it to your bank you should have them issue you a credit card that pays out rewards. Never spend more than what you can payoff before it starts accruing interest. When the balance on your credit card hits 1/3 (above 1/3 will ding you on your credit score) of the limit transfer money from your checking account to the credit card account. Cash out for rewards checks every time you qualify for them. This way the bank pays you interest instead you you paying them. Not paying your credit card will hurt you more than it will the bank. This will follow you for years to come on your credit report and score. If you go to purchase a home or refinance you will end up giving the bank way more money then if you had just paid your card. Paying any kind of interest on a credit card is nuts to begin with. The low rates on credit cards are high. A 30K limit should never be allowed. If you have the need to charge 30K you are in financial trouble to begin with or you are just plain rich. If you run up a credit to 30K without the ability to pay it back immediately or within a couple months you will never pay it back. In this country we are insanely addicted to credit. We can start with our government taking out loans they cannot pay back. This is crazy when you see how much money they blow. Time for our leaders to drive or sit in economy class when they travel. Most people think the government is wasteful but a lot of these people do the exact same thing. Don’t charge the new plasma HDTV if you cannot afford to buy one. If you borrow especially on a credit card take some personal responsibility. A 5 year old should know this. Lastly for those of you who listen to Susie Orman. I have worked in the financial sector for years and the majority of what this lady says does not make any sense. With some of the information being completely bogus. With the financial sector changing constantly and guidelines changing constantly the only people who should comment on finance are those in the industry. like Tom Genereux Says: January 20th, 2010 at 6:02 am
I have been disgusted with the thieves called credit card companies and the large banks for a long time. I have moved all my banking to my local credit union many years ago and I am very happy. Instead of a credit card I use my debit card with a large overdraft protection in place to handle quick credit when I need it and pay it back quickly as I can, at my rate, on line. I would like to propose a new kind of credit card, one modeled after the bidirectional electrical meters you see when folks make their own power and sell it back to the electrical power companies. It would work like this: when you have a card with a balance and the bank is charging you, say 10% on your balance you push all the money you can on it until you then have a positive balance (shown as a minus on your statement) then they pay you, 10% on your balance. A true win-win situation. It encourages you to pay back quickly, reducing your overhead and giving the banks money to reinvest and when you go into the positive realm both you and the bank make money, you get paid for your investment in the bank and they get the funds to invest.
Who do I call to get this started?
Tom like goofydg1 Says: January 20th, 2010 at 6:18 am
And don’t even start talking about CD rates. Ugh. Everything else at the bank goes up but not those. like Matt Says: January 20th, 2010 at 6:46 am
I personally have 3 banking accounts with three different banks 2 retail banks TDBank and Chase, as well as ING Direct online where I put the overwhelming majority of my cash. I like having the 2 larger ones for easy access to my money (I use Chase mostly) here in NYC their relationship with Duane Read means they have ATMs on what feels like every other block. I chose to open the ING account specifically because of the way retail banks have treated myself and my friends before. I use my ING account as a true savings account and the other two are used as checking/debit card accounts like Facebook User Says: January 20th, 2010 at 7:09 am
Move to a small local bank? Ok, but go over the financials with a fine toothed comb. The following fact might be worth keeping in the back of your mind: The Federal Deposit Insurance Corporation announced that the insurance fund that covers more than $4.5 trillion in deposits had a negative balance of $8.2 billion as of the end of the third quarter 2009. That’s right, the FDIC coffers are running on empty. In 2009, 140 banks failed. The failure list for 2010 is already 4 long and we’re only 2/3 of the way through January. Go ahead and move your money if you must but take every precaution. Your security of your money is backed by a big vaccuum. like Joshua Davis Says: January 20th, 2010 at 8:24 am
Really if you want to stick it to the big banks, ask for a supervisor (normally an American) a keep there butt on the phone. Most people fail to realize that it cost a company between 15-30 dollars per hour to keen one CSR staffed. So if you get 10 people to ‘waste’ an hour of the banks CSR time you have just cost the bank between 150-300 dollars. like Keith Newton Says: January 20th, 2010 at 9:48 am
I am going to start a new bank. My bank will make only micro loans and charge no interest on the amount loaned. The payback will take as long as it takes as long as the loan is being paid back by at least 10% a year. FDIC will still cover any deposits below their threshold. Online only, no credit cards, no fees, no building, no tellers, no statements, no checks, no surcharges. Just save money and loan it out. That is it. The bank will make a profit from selling stuff online like a store does. There is no reason not to do it right. Altruism to the rescue. Start by giving the bank all of your money that you would put in a bank. Start now. Oh, by the way, does anybody have a clue what to do next? like Facebook User Says: January 20th, 2010 at 9:52 am
The free market usually sorts out this mess, the bad banks end up failing and better banks emerge. But since the free market was subverted, the bad banks keep their bad policies, their bad decision makers, their bad consumer relationship. If your bank is a TARP bank- run away as fast as you can. If they don’t make money from people leaving them, they just get more taxpayer money. Regardless of all the comments by financial wizards employed by government, the only industry to big too fail is the defense industry. like Leave a Reply
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