I have to admire the creativity of money center bankers. It takes a really imaginative mind to think of new ways to do nothing of value but still charge outrageous fees as if important services are being delivered.
A couple of days ago I became aware of the latest banking fee innovation; bank surcharges for "not" providing service. The first of the "not" fees is being charged by at least one money center bank to consumers who don't use their branches or ATMs.
That's right, customers are being surcharged for not using their bank.
I found out about these fees when one of my employees asked me if it was legal for her bank to charge a $2 surcharge for doing nothing. My employee wondered aloud if the fee might constitute some sort of larceny.
At first I didn't understand what she was saying. How can a fee be charged for doing nothing? I asked to see her bank statement so that I could interpret and explain.
Sure enough, there it was right where she said it would be; a clearly labeled $2 fee for not using her bank to withdraw money. Basically, my employee was charged a $2 fee for using another bank's ATM to get $100 that was in her checking account. This "none use" surcharge was in addition to the $2 fee that the bank which actually owned the ATM charged. As a result, the total fees charged were $4 for a withdrawal of $100.
The fee for doing nothing was buried in my employee's February bank statement. This statement was received last week in the mail.
I studied the bank statement for more than 15 minutes but couldn't figure out how to match the $2 fee up to an actual ATM withdrawal. The information needed to know where and when the withdrawal took place was curiously missing.
We reluctantly decided that the only way to parse the statement was to call customer service for help. After being put on hold for 40 minutes while a recording told us our call was important and we were valued bank customers, we were connected to a very polite customer service representative located somewhere within 8,000 nautical miles of the U.S. mainland.
The customer service representative was ready for our questions. We learned that if we had carefully studied the September 2010 bank statement we would know that the bank had informed us of its unilateral right to charge a fee when customers withdraw money from ATMs owned by other banks. We were told that it was only because of charity and consideration for its customers that the bank didn't start to charge the fee in September. But, charity has its limits, and from now on every time a bank customer uses another bank's ATM, a $2 fee will be assessed.
The customer service representative claimed that my employee had used another bank's ATM in November to withdraw $100 and therefore her bank was entitled to a $2 fee for not using her bank. Of course, the fact that the other bank charged her a $2 transaction fee back at the time of the withdrawal was irrelevant.
The surcharge for not using a branch ATM in November was charged to my employee's bank account in late January and retroactively posted to December 20th. While the customer service representative knew all about America and hoped one day to emigrate to our great nation, she didn't know why December 20th was the posting date for a November fee appearing on a February statement.
After some careful checking the customer service representative told me and my employee that she was wrong when she stated that all checking accounts for all bank customers were being surcharged. We informed us that if my employee had $50,000 on deposit in her checking account the surcharge could be waived. Apparently, only accounts with less than $50,000 were subject to surcharge.
I understand why bank's that own ATM's charge non-bank customers a fee for use of ATMs. After all, there is a cost to running an ATM network, maintaining the equipment and stocking the ATM with cash. But, what I don't understand is why banks think it is OK to charge their customers for not using their branches and ATMs. The $2 fee is being charged for doing nothing and isn't based upon any semblance of the marginal cost not to deliver banking services (for those who aren't good with math, the marginal cost of not doing something is $0).
Since there are really big profit margins and banker bonuses that can be ripped out of the system for not doing things, it won't surprise me if banks think up totally new categories of "not" fees. With a little bit of effort banks should be able to charge fees for customers not using credit cards, not bouncing checks and not defaulting on mortgages.
If banks use "smart card" technology they should be able to figure out other things that we aren't doing in our ordinary lives and charge us appropriately. I think we can all look forward to the day when smart cards will tell banks when we don't buy fast food, when we don't get a new gym membership and when we pass up a shiny new set of chrome wheels for our ride. We should be ready to pay a surcharge to make up for lost banking profits when we don't do things because of our inconsiderate non-use of bank credit and services.
Consumer bank agreements are contracts of adhesion. That means that there isn't an equal playing field between banks and their customers and customers don't have real recourse when banks steal their money. Courts are mostly ineffective because they just don't view bank larceny as anything more than a commercial dispute. Since the amounts taken from any individual customer tend to be small, it doesn't make economic sense to pursue individual remedies to bank theft. After all, what is my employee going to do, sue her bank for $2?
Customers that are abused by their bank just have to grin and bear it. Wronged customers can take their business to another bank but that won't get them back money that has already been taken.
It is the job of regulators to level the playing field and watch out for consumers. Regulators aren't supposed to be industry abuse enablers, they are supposed to watch out for the little guy and make sure that competition produces market prices based upon real competition and not theft and extortion.
Fee's charged for not providing service should be banned immediately by the Federal Reserve, the FDIC, the OCC and every state banking authority. If banks think that regulators overstep their authority by banning non-use surcharges, they can do what the customer service representative told me and my employee to do, hire a lawyer and sue.
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