Wednesday, September 23, 2009

Add NSF fees to the list of commercial banking reforms

Wednesday, the New York Times published a story announcing that two commercial banks, Chase and Bank of America, were preparing to reduce the fees that occur when a customer’s balance becomes negative.

Anyone who runs a month-to-month family budget knows that in recent years many commercial banks have slowly adjusted account policies in ways that increase their revenue from fees.

In the spirit of full disclosure, my wife and I used to hold accounts at Bank of America. In 2006, we became alarmed at the contents of a series of policy notices we received, and eventually canceled our accounts in 2007 after experiencing the “snowballing effect” in which a $7 overdraft and a delayed deposit credit resulted in more than $200 in bank fees and charges.

We opened an account with Wells Fargo, largely because friends who bank there suggested the bank was more customer-centric than some of the other larger banks.

But the Wells Fargo experience proved similar (and in fact, given this morning’s announcements, WF might be less hospitable to its customers than Bank of America and Chase). My current concern involves the insufficient funds policy on a customer’s checking account, but I’ll return to that momentarily.

The September 9 New York Times article by Ron Lieber and Andrew Martin, “Overspending on Debit Cards Is a Boon for Banks," featured Wells Fargo. Peter Means, a 59-year-old graduate student from Colorado, cited a case in which Wells Fargo charged him $238 for seven transactions, each less than $12. This is the “snowball effect” in action: one transaction exceeds the balance of an account, and each subsequent bank fee makes it more difficult for an account holder to return the balance to positive numbers. And, as numerous customers have pointed out (check out an entry posted on from the fall of 2006 or even the muckraking site Wells Fargo Watch), deposits and credits are often delayed at least 24 hours for verification, whereas debits and charges are posted within the same transaction day, exacerbating the snowball effect and delaying efforts to repair the damage to one’s account.

Ron Lieber wrote a follow-up article explaining why this practice began and why it’s not likely to change in the near future.

Add to this mix changes concerning the ordering of transaction reports. According to Hagens Berman Sobol Shapiro, the firm launched a suit against Wells Fargo in Seattle for its practice of ordering daily transactions from largest to smallest (which effectively maximizes bank fees, because smaller charges that might have otherwise been covered are calculated last. Overdraft fees are assessed per transaction, not by the amount a customer overspends). Similar suits have been filed against Wachovia, though this practice appears fairly standard among commercial banks.

I called Bank of America customer service after the announced implementation of this policy. The individual with whom I spoke claimed that the policy change was geared to better serve the customer (the standard argument is that a customer would want to cover larger expenses like mortgage payments and car payments, rather than have them returned). I asked at the time what data had been collected from customers concerning this preference (I am, after all, a social scientist and am always interested in survey and focus group methodology), but the representative could only cite vague claims of customer requests. I repeated this exercise recently with Wells Fargo, specifically requesting, as a customer, that my account clear smaller transactions first. The customer service representative I spoke to again cited the policy’s intent to “serve the interests of our customers” and explained that “the computers” could not be reconfigured to handle my account differently.

As I said, my small contribution to the laundry list of concerning bank practices involves the non-sufficient fund (NSF) fee policy changes. As anyone who’s ever bounced a check knows, banks and commercial retailers both charge penalty fees for writing a check that exceeds one’s available funds. The new policy change involved the reporting mechanism.

When a retailer is informed that a transaction failed to clear the customer’s bank account, the standard practice is to submit the check for payment again, to make sure the problem is not due to a banking error. Only when a second failure is reported will many retailers take the next step of contacting the customer to rectify the situation.

What has changed at commercial banks like Wells Fargo is the manner in which NSF fees are applied to checks. Currently, a customer is charged an NSF fee for each attempt a retailer makes to deposit a customer’s check into their account. In effect, this means that a $10 check that does not clear a customer’s account will most likely accrue multiple NSF fees, at least $70 from the bank in addition to the $25-35 the retailer will charge the customer. Unlike debit card transactions, which are pre-approved at the moment of transaction, customers who bounce a check typically face around $100 in fees per transaction, as well as the original amount of the transaction no longer honored.

The same deregulation that led to the recent financial upheaval on Wall Street would appear to be at least partly responsible for these recent policy changes. With a wider portfolio of increasingly leveraged assets, it’s understandable why most commercial banks have altered their policies to generate more revenue. What isn’t understandable is why these alterations are framed as having the customer’s interests at heart.

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Thursday, September 10, 2009

On Lies and Liars …

Last night, as I watched the president’s speech on healthcare before a joint gathering of Congress, I was struck by the muted partisanship and rancor coming from both sides of the aisle.

Don’t get me wrong, I find it endemic of our national character that so many members of our leadership will launch invective through media coverage and public events and then act so reserved in a personal confrontation with their opposition. Nor am I suggesting that I favor this behavior. I see it as false statesmanship, a show for masses that does not accurately reflect our leaders’ character, their motives, nor even their “class” (whatever that is).

Which brings me to the outburst by South Carolina Congressman Joe Wilson.

For those that missed it, when President Obama refuted the claim that the healthcare reform would provide coverage to illegal immigrants, Wilson shouted from his seat, “YOU LIE!

It was a startling moment. I, like many listeners, was taken aback by that exchange.

Not because of the “breach of decorum” so widely derided by so many this morning. Frankly, I think our democracy is a bit too controlled, with certain speakers being allowed access to the public sphere at certain times. In my opinion, much goes unsaid in our public space, which is one of the reasons I think the pseudo-public space (cable news, talk radio, email chain letters, etc.) are so partisan and nasty.

No, I found the moment interesting for a framing and content reason.

By choosing (or not choosing, the Congressman says this morning he simply was caught up in the moment) to shout “YOU LIE!” instead of “THAT’S WRONG!” or “I DISAGREE!,” the Congressman displays precisely why this discourse surrounding the healthcare debate has been so divisive.

When one frames disagreement in terms of a moral claim about another person, rather than on the arguments themselves, it appears to display a closed approach to said discourse. In other words, there’s not much room for the consideration of the other’s views, much less compromise.

I remember hearing an NPR segment a few months back between a representative of the NRA and a representative from the ACLU. They had been invited to discuss the lapse and proposed reinstatement of the federal assault weapons ban.

As the segment drew on, I was struck by how many times the NRA spokesman said “That’s a lie” and how many times the ACLU spokesman said “That’s simply not true.”

Not that progressives have the monopoly on the high ground nor the conservatives on the low ground. I’ve heard plenty from each side stoop low to claim “lies” (who can forget “Bush lied and people died!”?), and members of both sides frame their remarks in terms of factual disputes and disagreements over evidence.

I do wish, just once, someone in President Obama’s position (or even former President Bush's position) would take an opportunity like the occurrence last night to say, “Excuse me, sir! As I implore my progressive friends and my conservative friends to come together, let me offer you a suggestion about your choice in rhetoric. We may disagree on the evidence supporting your claim or mine. We may disagree about the intentions or likely policy outcomes of the plans under scrutiny. But you cannot claim to know what I know, what my intentions are, or that I am willfully disregarding what I do know in order to offer deceit. You simply don't know me well enough to make that claim. It is precisely this style of rhetoric that polarizes our policy debates and prevents compromise.”

I understand why President Obama could not make such a statement. Politically, it’s better to allow such a remark to pass unchallenged and put faith in the listener to discern the difference between the two approaches.

But I wonder if we’re putting too much faith in the casual listener?

I’ve heard so much discourse about “lies,” “liars,” and “deceit.” And precious little about the possibility of “misunderstanding,” “misinformed,” “disagreement,” etc.

And I fear by not allowing space in our discourse for misunderstandings, differing levels of information access, different ideological approaches to evidence or even simply errors in logic, we proclaim we know the person better than they themselves do, and limit our ability to understand precisely why it is we disagree with another.

In other words, we undermine our ability to interact, and reduce the strengths of a vibrant democracy (a marketplace of ideas in which differing positions interact to learn from one another) to a shallow shouting match where political muscle alone determines political outcomes.

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Wednesday, September 09, 2009

Hitler Opposes Obama

Normally I don't embed YouTube videos (from other people) in my blogs.

But this one hit my funny bone this morning. Had to share.

It's even funnier if you're seen Valkyrie.

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Monday, September 07, 2009

The President's School Address

Unexpected controversy has arisen over the President's plan to address the nation's school children this week.

Are there those that are really so fearful that they think holding their children out of school is the preferable choice to exposing their children to "dangerous ideology"? When did intellectual curiosity become something to fear for so many?

Well, regardless of the underpinning social context of these events, you can view the President's message to our children below. Enjoy.