HALF of BofA's revenue now comes from PENALTIES, Fees

[Matsubara]

And I just love how BofA puts out a pamphlet on how to avoid fees and pats themselves on the back for it, when it's obvious that they do NOT want want customers to avoid the fees, and if they gave a damn, they would reduce them to just cover whatever supposed cost to the bank that the fee is supposed to recoup.


http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/06/10/LAZ.TMP

Customer confusion can lead to big profits
David Lazarus
Sunday, June 10, 2007

Do some companies try to take advantage of customers with deliberately unfriendly business practices or a fiesta of fees?
A lot of consumers would call this a no-brainer of a question. But Gail McGovern and Youngme Moon -- respectively, a professor and associate professor at Harvard Business School -- have studied the matter and come up with an academic answer.
That answer is yes.
What's more, the two profs, writing in the current issue of the Harvard Business Review, say such tendencies in corporate circles are both short-sighted and self-defeating.
"Think of the cell phone service, banking and credit card industries, each of which now demonstrably profits from customers who fail to understand or follow the rules about minute use, minimum balances, overdrafts, credit limits or payment deadlines," McGovern and Moon write.
While such companies may have started out with "product and pricing strategies designed to provide value to a variety of customer segments," they observe, these efforts "have evolved into opaque, company-centric strategies" that keep a hand in customers' pockets.
In an interview, McGovern reiterated her belief that execs at most large companies don't sit around a table brainstorming ways they can nickel-and-dime their customers.
"Firms are usually well-intentioned when they start out," she said. "But they end up putting out a confusing portfolio of products and then they notice all the penalty fees that their customers are paying."
That's where things get ugly.

********************

McGovern and Moon note that as much as half of carriers' profits come from income or fees related to under- or overuse of calling packages.
Similarly, they write that banks offer customers a wide array of checking accounts. Different plans, or buckets, may come with different fees, minimum-balance requirements or interest rates.
"If (customers') balances fall below the minimum, they pay various penalties and service charges," McGovern and Moon point out. "If their balances climb well above the minimum, they are stuck with a lower interest rate than they would have earned had they chosen a different bucket."
No matter what, they say, "The firm wins and customers lose, regardless of the direction of the error."

********************

Perhaps that explains an announcement from Bank of America last week that it's starting a campaign to educate customers about how they can avoid fees.
"Customers need more information and they need more tools to better manage their financial picture," Diane Morais, the bank's senior vice president of customer experience, told me.
She said the campaign, dubbed "A Little Knowledge Is a Powerful Thing," is a response to research and focus groups showing that BofA customers are clamoring for ways they can be more responsible for managing their finances.
They're not, Morais added, saying that they think they're being nickel-and-dimed to death.
BofA collected about $22.4 billion last year from penalty and service fees, as well as other forms of non-interest income. Such earnings now account for more than half of the bank's annual revenue, and play a similarly hefty role in bolstering the bottom lines of other financial institutions.
For that reason, it seems almost disingenuous for BofA to be championing the cause of safeguarding customers from fees. Yes, the bank deserves credit for trying to educate people to be better money managers. But does it really want them to succeed?
It's almost like the campaigns from cigarette companies that try to discourage kids from smoking. In reality, antismoking advocates say, the companies are as focused as ever on trying to get young people hooked.



(See link for full article)

[Captain Hilts]

1. Buying up MBNA paid off! What does Joe Biden think of this? nt

[tmlanders]

2. I hate Citizen's Bank

They have been nickel and diming me since I started with them. I am in the process of moving my 401k's to a new broker, and I will have a much better situation when the funds are moved and I can use them for my checking etc. This week I called Citizen's because there was a $150 charge against my account that I did not authorize. When I called they told me it was a "processing fee" on my business loan. This is in addition to the interest I already pay them. And the fee is annual. Now, I am sure that there is fine print somewhere in my loan documentation that says that they can do this to me. But who ever heard of an annual fee on a business loan? They get my money every month -- isn't that enough for them? Wait, never mind...
:banghead: :banghead: :banghead:

[villager]

3. Do NOT get a credit card from Washington Mutual. "I haven't got a clue,"

a credit "manager" finally admitted to me the other night, after I called to ask about how long I'd pay a jacked up interest rate for *one* late payment in two years.

They know *exactly* when your interest will shoot through a roof. they are "helpless" when it comes to knowing when that interest will go down.

Thieving bandits, vampires, bloodsuckers.

I'll stop now, lest I stray past DU's general conversational guidelines...

[driver8]

4. Capital One has lost me as a customer...they are f*cking thieves.

I sent my payment in (on time) however, my minimum payment was $114.00 and I sent $100.00 (don't ask my why...not paying attention, I guess.)

They charged me a $40.00 late fee.

When I called to ask about it, the woman was rather rude and told me since I didn't make the minimum payment, it was as if I had not made a payment at all. I asked her if there was any way we could remove the late fee and to let me pay the $14.00 and she said "no."

I told her, "I have been a Capital One customer for 6 years and have never missed a payment...you just lost me as a customer."

Fuck them.

[napi21]

5. That's true for MOST banks. I don't really think it has anything to do with Biden either.

This is NOT a new tactic for financial institutions, but it has definately gotten much worse over the years.

Personally, I refused to deal with a "BIG Bank" for almost 20 years! They really don't want your and my business, but much prefer the business of the medium to large corporations who use lots of services and pay lots of money with very little hasstle or work on the banks part.

More than 30 years ago, I worked for the Federal Reserve Bank in Pgh. I KNOW banks calculated the cost to process a returned check (NSF) was about .25. Do you realize they were charging $4.00 to the customer back then? NOW it's an average of a $35.00 charge to the customer, but with technology, the cost has most likely gone DOWN! Then someone came up with the "late charge" on credit cards! THAT is the biggest joke in the industry! It sure doesn't cost $35.00 for you to use the banks money for a day or two, no matter HOW HIGH your balance is! The one BIG advantage is that all the credit cards I have, and certainly most of all the others, can be paid online, so they can't use the "slow mail" escuse that your payment was late!

I can't and won't fault the banks for charging "over the limit fees" on a card. I don't care how fininancially uneducated someone is, they KNOW what the limit is on their card, and if they aren't or can't keep track of what they are charging during a month they deserve to be penalized. Would you prefer they deny your purchase? You know there would STILL be a charge for the denial and you'd have the additional shame of haveing your card rejected.

I don't support what these banks or doing, but the consumer has some responsibility too.

[Warpy]

6. I think it's about the same for all megabanks

Back in the good old days, the fees were few and actually represented the cost to the bank for processing things like bounced checks and late loan payments.

Enter deregulation. Junk fees proliferated like oversexed bunny rabbits and started to escalate beyond all reason. Now getting hit with a junk fee, justified or not, can cause all other fees, especially credit card interest rates, to go up.

I think deregulation has taught us all a very important lesson in why big government is necessary to stand up for the people against the powerful. It's also taught us a painful lesson in why even near monopolies are bad for us. We have certainly learned why the libertarian pipe dream of a magically regulated and self policing free market is likely to kill us all off.

Time for that ole pendulum to start swinging back...

[lpbk2713]

7. I dumped BofA years ago and went to a credit union.

It has proven to be an excellent choice.

They were nickel & diming a lot then. I imagine it's gotten a lot worse.