Tuesday, July 20, 2010

Your friendly financial services update: another plea to end the whining.

Now that regulations have almost eliminated overdraft fees, it's time to welcome a slew of other charges from your bank. And you're not allowed to cry about it, either. I'll tell you why.

After a meeting at work yesterday (I am employed by a bank, for those who don't know), I did a little poking and prodding around the Internet to familiarize myself with the abounding hatred for financial institutions. And let me tell you, there is no better place to start than msn.com, where I found this article by Liz Pulliam Weston: Is your bank about to fire you? Liz is extremely knowledgeable, although decidedly anti-bank and seemingly anti-profit. But being anti-profit is in vogue these days, so I suppose that should come as no surprise. Liz tells us that banks are now trying to find ways to make up for the billions they will lose in revenue as a result of the new regulations that govern overdraft fees. She says:

Banks are loath to give up all that sweet, sweet profit. Unless you're a customer of Bank of America -- which decided there was no way to put lipstick on this particular pig and dropped courtesy overdraft altogether -- you've probably been getting mail, and maybe even personal appeals from tellers, trying to persuade you to sign up for courtesy overdraft so your bank can continue to zing you.

I don't mean to digress, but as a side-note, "personal appeals from tellers?" Really? From my experience, tellers frankly do not care whether or not their clients have courtesy overdraft. And furthermore, part of the regulation states that banks are not to influence their clients' decisions concerning "opting in" or "opting out" of courtesy overdraft. This is just one more example of exaggerations that paint profitable businesses out to be monsters.

But anyway. I would like to point out a few things:

1. Banking is a business. Not sure if America forgot that, but I thought it would be worth mentioning. Let's do some very general math. Liz points out that banks "raked in 38.5 billion in overdraft fees last year." Let's take a medium-sized institution with roughly 30,000 employees. Let's take an average salary of $30,000. That's 900 million dollars just in salary for one institution. I point this out because yes, banks have expenses. They have to pay lovely people like myself. They have to pay electric bills. They have to pay for loans that don't get repaid or even *gasp* checking accounts that are overdrawn and never get repaid. They have lots and lots of expenses. Yes, they have a lot of income, too- but they aren't non-profit organizations. Did your ancestors move to America with a dream to work for or start a non-profit? I doubt it.

2. You have been lied to if you are under the impression that you didn't have a "choice" regarding these fees. Please see my prior post, Dear Big Government, please leave the banks alone. Here are just a few examples of your choices regarding banking: you don't have to have a checking account, you don't have to have a debit card, you don't have to overspend, etc. You can use cash if you know you can't keep track of your spending. If you go to a bank and they tell you that you must have a debit card, go to a different bank (come see me at BB&T!). If you are getting charged $5 for cashing a check at a bank that is not your own, either a) go to your own bank or b) open an account at the one that's charging you or c) tell your employer to eat the check-cashing fee. They can do that. My point here is that we always have options. And monsters don't come out of thin air; they are always created by someone. In this case, consumers are so dependent on financial institutions that perhaps some of those institutions have taken advantage of that.

3. So now they will create a Consumer Protection Agency to regulate what these wretched banks can and cannot do. To protect the people. I wonder... maybe they will also create an agency to protect purchasers of handbags. Like Dooney & Bourke will now have to clearly post on their label just how much that handbag actually cost them to produce. If the profit seems unreasonable to the HOPA (handbag-owner-protection-agency), then they have to drop their prices. Why should Dooney & Bourke make so much money? Preposterous! I gave my mom this analogy today: Why is it that when the milk-man charges a ridiculous amount for milk, no one seems to mind? What if the milk-man is raking in the dough and not telling you? My mom said she would look for a new milk-man (typical response for my mother). But honestly- the reason nobody minds is that they can hold the milk in their hand. They can touch it, taste it, feel it, smell it, use it in scrambled eggs, or whatever else they want. Banking is different. Your account is a little less tangible, and that's why you "just can't see paying for banking." (That is a direct quote that many of my clients like to use. They must get together before they come in, so they can prepare their matching scripts.)

Fox News reports:

"I'm about to sign Wall Street reform into law, to protect consumers and lay the foundation for a stronger and safer financial system, one that is innovative, creative, competitive and far less prone to panic and collapse," Obama said.
"Unless your
business model depends on cutting corners or bilking your customers, you have nothing to fear."

Well, thank goodness! I am so glad that Obama is going to make sure that all business owners are completely honest! Phew! I feel so at ease now, knowing that no business out there will be able to make more money than the government deems necessary. If you'd like to read more from that article you can check it out here.

Yet again, the bottom line here is that we are trying to regulate capitalism, and that doesn't work very well. The very principle of supply and demand automatically lends itself to the idea that, if the consumer allows it to happen, a business can essentially charge as much as it wants for a particular good or service. If the consumer stops buying it because it costs too much, then the business re-evaluates. What happened to that? Now, we want to keep buying, buying, buying- and then just ask the law to come in and make sure we're not paying too much.

So, now, your free checking account probably won't be free anymore- because the bank is looking for ways to stay profitable (can you imagine?). Do you have a problem with that? I'd like to know.

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