Bank fee stories are beginning to sound like fish tales with most of the whoppers stemming from the large multi-nationals.
The Huffington Post recently reported a story about a Fifth Third Bank customer who was charged $300 in overdraft fees--and he didn’t even know it. The customer said the account was overdrawn by $700 even though he never received an email or notification.
Other customers like Taylor McKinley, another Fifth Third patron told The HuffPost that he thought he had closed his account, but less than two weeks later owed $438.35.
Outrageous overdraft stories aren’t limited to Fifth Third Bank. Bank customer “J.T.” from Ohio tussled with U.S. Bank when he tried to track down the origin and basis for approximately $1,000 in fees. J.T. wrote to a local newspaper financial advice columnist saying, “In October 2009, Social Security deposited $479 into my main account. The next day, U.S. Bank removed $479 from my account and said it was a ‘miscellaneous withdrawal’."
The assault didn’t end there. J.T. went onto say that U.S. Bank allowed for an unauthorized $552.88 payment on a payday loan, which caused an overdraft of $333.68. The bank then closed all of J.T.’s accounts, removed any money saved in these accounts to cover overdrafts and still delivered a charge off fee for $283.85. A U.S. Bank spokeswoman told the financial advice columnist that the bank had reached out to J.T. in order to provide images that covered all transactions for research.
While some people may write to financial advice columns to sort out their bank grievances others have become so emotional and exhausted they’ve taken matters in their own hands.
Last month the Littleton, Colorado police were called to a TCF Bank branch when a customer become unruly after learning he couldn’t cash a check due to his overdrawn account. The frustrated customer knocked over the line dividers in the teller station and threw a pile of transfer slips on the floor.
Are Customers Not Being Educated on Fees?
Overdrawn accounts seem to be taking many customers by surprise despite two years of regulatory reforms mandating that the customer must option into the bank or credit union’s overdraft protection service in order to receive it.
"I think there is a lot of confusion about opting in for overdraft coverage overall," says Susan Weinstock author of a recent report by the Pew Charitable Trust.
"They don't understand that by doing nothing, they cannot be charged," she says. "We've had people say, 'I signed the form so that they can't charge me,' when that's how they opt into the most costly overdraft plans."
The Pew Charitable Trust report also found that 90% of customer overdrafts are unintentional, 75% would rather be declined at the check out than pay the overdraft privilege fee and over half of those who had opted in for overdraft coverage actually thought they were not covered.
Weinstock believes there should be better representation of how fees are displayed, wondering if the way food products are labeled might provide for a better avenue for customers to compare options and fees before making a decision.
American Bankers Association spokeswoman Nessa Feddis, however said she was surprised that consumers were confused about overdraft fees and that notices describing overdraft policies are clear cut.
Credit Unions Have a Different Approach to Banking
Perhaps the “cut and dry” approach some banks take have become a major source for customer frustrations. From the barrage of fees to not looking beyond the customer’s “score,” disenchanted bank customers are looking for freedom from fees and unresponsive customer service.
SVP of Branch Administration & Compliance at Kern Schools Federal Credit Union ($1.3 billion, Bakersfield CA) says that the biggest difference is that a credit union’s goal is not to turn a profit through sneaky fees. He adds that when it comes to securing both deposits and loans, member service representatives look beyond a score to in order to obtain the entire picture before rendering a decision.
“Our approach is drastically different than our banking peers,” he explains. “With checking accounts, many banks have gone to higher monthly fees and the customer has to maintain a minimum balance in their account. While they’ve gone to having a strict minimum balance requirement, here at Kerns Schools, we still offer basic checking with no minimum or monthly fee.” He adds that Kerns Schools offers a myriad of checking options in addition to its free account.
Matejka says that he empathizes with the confusion many consumers have experienced at banks. “We’ve heard stories more recently where the customer deposited $100 in a checking account and because the customer is not fully aware about minimum balance requirements, four months later, that $100 is gone because it was consumed by fees.”
Also, not “rubbing stamping” the member into a box is a credit union specialty, Matejka says. He cites a recent example where one of his loan officers was able to help a member obtain a loan for a used vehicle after a string of bad events. “The member was a small business owner but lost his company during the recession. He went through a divorce and although gained custody of his two children would have been unable to secure a loan through a bank even after obtaining reliable employment.”
“His credit was awful, which can happen after losing your business and experiencing a divorce,” Matejka says. “A bank will most likely only look at your score and if it doesn’t conform to their parameters you are out of luck.”
“What sets us apart is that we take the whole picture into consideration, beyond the score,” he says. “We ask the important questions in order to make a decision that benefits both the member and the credit union.”
In the end the member walked away with a $10,000 loan, allowing him to obtain a used car, which provided him with the means to care for his children and get to work.
“Sometimes bad things happen to good people,” Matejka says. “Or those who are not as experienced with financial services. Being a teachers credit union we also serve students who don’t have a lot of money. Unfortunately they don’t know the right questions to ask their financial institution and end up going to a bank without shopping around. The result is that they pay for an account month after month--that they could have had for free through a credit union.”
He adds that a credit union is also more likely to provide the member with his or her first borrowing experience. “Members save with loans too because both our fees and rates are lower than what you would find at a bank.
Have a tale to tell about fees or fed up with your bank? Find a credit union to learn more about low fees and great rates.