Clarification: This story has been updated to add information about a consumer alert on the Michigan Attorney General’s website.
Christmas is over and Santa has moved on, which means it’s my turn to make a list and check it twice to see what bankers have been naughty and nice.
Except for that part about “nice.”
I am sure there is a local credit union manager or two out there who still gives out lollipops at the drive-thru, but most of the financial services industry spent the year working overtime to turn you, their customers, into a flock of suckers.
And so, we turn to our annual Piggy Bank Awards for Dubious Achievement in Financial Services — The 2015 Piggies. It was another year in which bankers went whole hog to bring home the bacon as they porked out on a cynical slop of fees and rip-offs. And, like every year, these banking swine continued to squeal that their dodges, grifts and scams are all designed, “To serve our customers better.”
There were many more financially porky examples of terrible and outrageous behavior out there, including an entire class of financial “advisers” who spent the year fighting tooth-and-nail against a proposed Department of Labor rule that says they have to put the needs of investment clients ahead of their own commissions and fees. But, alas, there is only so much time and righteous indignation that can be mustered, so the awards committee (me) sifted through a trough of pig slops to choose the winning losers.
And the Piggies go to ...
Big bank fees: We start, as we always do, with Bankrate.com’s very useful survey of account fees. It was a good year for banks pigging out and a bad year for you, the banking customer. Let us count the ways: Banks offering free checking with no strings attached fell from 38 percent to 37 percent, the monthly fees for an account rose by 11 percent (to $5.86), and the minimum balance to avoid that fee climbed to $500 or even $1,000. Meanwhile, Bankrate found that ATM fees hit a new average high of $4.52 to make an out-of-network withdrawal, producing $283 million in nearly pure profit for the country’s five biggest banks in just the second quarter. Soooo-ee!
Why all the fee hate? Banks get your checking cash very nearly for free and are supposed to make money by lending it out at a profit. Instead, they charge us more and more every year just to access our own cash, then still lend it out for a profit. What’s next? A carbon tax for idling at the drive-thru window?
More big bank fees: Bankrate.com also found overdraft fees climbing 1 percent, to an average of $33.07. The Wall Street Journal reported that an SNL Financial study found that J.P. Morgan Chase, Bank of America and Wells Fargo snarfed up $1.14 billion in total overdraft fees in just the first three months of the year. Even more depressing? A Pew survey found that 52 percent of customers don’t recall authorizing high-priced “courtesy overdraft protection” (ha!) on their accounts, despite new federal rules calling for disclosure. And the fact that there are much cheaper options offered by most banks.
You folks who do get free checking? Don’t feel quite so smug, since your costs are covered by overdraft fees charged most often to lower-income customers.
Legal restrictions: The continued use of mandatory, pre-dispute, binding arbitration clauses by credit card companies and other financial services gets a Piggy nomination from Dan Ray, editor-in-chief of Creditcards.com. The phrase, he says, “Is quite a mouthful. It’s easier, and more accurate, to say ‘I give up my legal rights,’ which is what you do when you have one of these clauses imposed on you in take-it-or-leave-it style.”
Arbitration clauses take disputes out of court and into a private, nonpublic venue tilted toward the business, not you. It also shields card-issuers and others from the kind of expensive, headline-grabbing class-action suits that often are the only way for consumers to rein in bad or even illegal behavior and get a smidge of justice, especially when regulators and lawmakers depend on the industry for jobs and campaign donations.
Also, did you ever notice how a card issuer or bank handles the legalities when it has a problem with one of its customers? Amazingly, they bypass arbitration when you default on a loan and just sue you in public court.
The Obama administration: First, former attorney general Eric Holder turned himself into a bagman for the Justice Department by finding scads and scads of financial crimes by banksters, only to do his best Inspector Clouseau imitation by being unable to find any, you know, actual criminals who committed those criminal acts all so very, very criminally. So, Holder just collected millions and millions of fines instead of sending anyone to jail, even when the fines were less than the illegally gained profits and were, in many cases, tax-deductible.
But wait, it gets better, and by that I mean, worse: In October, Obama’s Department of Labor waived one of the few sanctions that actual hit Credit Suisse after the bank pleaded guilty to criminal charges that it ran “an illegal cross-border banking business” that helped hide bank accounts.
That meant Credit Suisse might not be able to manage U.S. pension assets, of which it held $15.6 billion at the end of 2014. But David Sirota and Andrew Perez of International Business Times found that the Labor Department gave Credit Suisse a five-year waiver in October.
Well, that’ll teach ’em!
So ... never mind those accounts you illegally hid for who-knows-who trying to hide or launder money gleaned in who-knows-what possibly illegal activities. And surely, as Sirota and Perez pointed out, that $380,000 in campaign donations from Credit Suisse employees had nothing to do with it.
Everyone but Iceland: October was the same month that former Federal Reserve Chairman Ben Bernanke told USA Today that financial executives should have gone to jail. “Everything that went wrong or was illegal was done by some individual, not by an abstract firm,” Bernanke told everyone’s favorite hotel doorstop. “So in that respect, I think there should have been more accountability at the individual level.”
Just for comparison’s sake, note that last year Iceland jailed its 26th banker in connection with the 2007-2010 global financial crisis, according to Antimedia, for a total of 74 years of hard time. On top of that, Iceland’s minister of finance wants to pay every citizen when the country sells off Íslandsbanki bank, which was seized by the government. A 5 percent cut of the sale would give each Icelander the equivalent to $232.
The RushCard: Hundreds of thousands of people who held prepaid RushCard run by music mogul Russell Simmons were locked out of getting their money in October, with some being unable to access cash from paychecks and other money for weeks. That’s enough to get a Piggy nomination from Greg McBride, chief financial analyst at Bankrate.com. “Cardholders of the RushCard being locked out of access to their funds is particularly upsetting. Many prepaid cardholders don’t have bank accounts so without access to their prepaid card, they are truly stuck.”
Rather than count on a rap star, consumers should diversify at least some of their money to the traditional financial system, McBride adds (though, as this column shows, there are plenty of risks there, too). “Using a prepaid card as a supplement to a traditional financial relationship is fine, but using it instead of one — particularly when it isn’t offered by a large, regulated financial institution — is putting all the eggs in one basket,” he says.
Attorney General Bill Schuette: There’s no shortage of unlicensed lenders offering abusive loans on auto titles right here in Michigan. One of them is the home-grown product of Oakland County and others work from a far-off Pacific island. But Michigan Attorney General Bill Schuette — the state’s highest-ranking consumer protection officer — did nearly nothing about it.
While attorneys general in New York, Pennsylvania and Oregon went after the unlicensed lenders’ bank accounts, blocked repo companies from seizing the victims’ cars and issued public consumer warnings, Schuette’s office closed complaints by either taking not action or sending a letter. While consumers have been filing official complaints since October 2014, Schuette’s office didn’t get around to posting a consumer warning on its web site until Dec. 17 — 14 months later. In the meantime, Schuette did find time to ask all 50 U.S. governors to sanction Iran, and to blow more than $2 million of taxpayer money flogging a doomed case on same-sex marriage before the U.S. Supreme Court.
Even then, his office didn’t deem warning consumers worthy of a press release, although a statement was issued when Schuette bet a crate of Michigan apples on the University of Michigan’s Citrus Bowl game.
Schuette was joined in his virtual non-action on title loans by Patrick McPharlin, director of the state Department of Insurance and Financial Services, whose office completely refused to release consumer complaints or even comment on the problem.
Meanwhile, five of the nine citizens who filed complaints about the unlicensed loans with Schuette’s office had the lenders repossess or try to repossess their cars.
Lansing lobbyists and legislators: Speaking of abusive lending, there’s a loophole abusive payday lenders use in several states that, quite astoundingly, is illegal in Michigan — for now. It’s called “CSO lending,” which stands for “credit services organization.” That means that payday shysters pretend to be loan brokers or credit counselors when, in reality, they’re sticking you with a small loan with a big triple-digit interest rate. But what earns a Piggy nomination from Jessica AcMoody, senior policy specialist with the Community Economic Development Association of Michigan, is the fact that CSO lending could be coming here soon.
AcMoody notes that, “NCP Finance out of Ohio is spending a lot of money in Lansing trying to get legislation introduced to make these predatory loans legal.”
NCP seems to be pretty sure its lobbyists can convince enough of our lawmakers to vote against Michigan’s current lending rules — as well as the best interest of state consumers.
Until recently the payday lender’s website included a map with the headline noting that it offers, “CSO Lending in Texas, Ohio and, soon, in Michigan.”
Let’s hope NCP has it very, very wrong. Or else I’m already waaaaay ahead on the 2016 Piggy Awards.