BANKS AND THEIR SERVICE CHARGES TOTALLY OUT OF HAND
By Dallas Realtor Bill Cherry
I don’t know about you, but I’m tired of mega-banks. For the regular mom and pop account holders like me, they are totally out of control, and have been since banking deregulation came along into law.
You might be interested to know that Wells Fargo CEO Dick Kovacevich earned roughly $33.6 million in 2003 (including a $24.6 million estimate for the value of his stock options). And you’ll probably find that his compensation package isn’t much different that that offered Bank of America’s chairman.
But let's make out like that Mr. Kovacevich hasn’t gotten a salary raise or any more stock options since 2003.
In fact, let's make out like that in 2007 he was paid a salary just like you and me. That means he brought home, before taxes, $173,076 a week, every week, all fifty-two of them.
Interestingly, you and I as his bank’s customers can’t make an appointment with him to discuss our accounts even if we were in San Francisco where he is or were willing to fly out there to see him.
Thirty-years ago, the president of the largest bank in my hometown brought home $1,538 a week, and I knew him and I could make an appointment to see him to discuss my banking business. And I frequently did. If I couldn't catch him at the bank, I'd surely run into him at Rotary on Wednesday or at church on Sunday.
The old hometown banks knew what mega-banks don't. It was important to keep their customers’ good will. One of the easiest ways to lose it was to service charge the customer to death. Another way was to clear a deposit or check through the wrong customer’s account. And finally, the sure way to cook the goose was to not be available when the customer came calling.
Here’s just one of the many examples of out of control mega-banking. This is how Wells Fargo handles and processes checking account overdrafts.
When Wells Fargo has closed the business day, all deposits made to your account are posted. Next the charges – checks and other debits – are artificially sorted so that they can be posted in descending amount order, i.e., the largest one first, the smallest one last.
So let’s say your Wells Fargo account balance after all deposits are credited is $2,000 and you have seven checks to be posted against it – one for $2,001.00; one for $9.95; one for $27.50; one for $128.00 and one for $550.00.
Wells Fargo’s bookkeeper will sort the checks so that the $2,001.00 check is posted first. Your account will then be overdrawn by a buck. They will honor the buck overdraft. That then allows them to mark as insufficient the remaining four checks. At $34.00 for an insufficient check, the bank then is able to post a charge of $170.00 against your account, and return all but the largest check. What’s their risk? It's a buck plus the $170 service charges if you decide to skip out on them.
Here’s the way the old hometown bank handled overdrafts.
First, all deposits were posted to your account. Next checks and other debits were sorted in ASCENDING amount order, then the debits processed. So with the example above, the only check that would have been returned was the $2,001.00 check. All others would have been honored. You would have been charged for one insufficient funds check by the bank --$34.00 – and you may have been charged an insufficient funds fee by the payee of that $2,001.00 check.
And you'd have a remaining bank balance of $1,284.55.
So while on the one hand, millions of dollars are being spent annually by the mega-banks to attract and keep clients, and branches are opened and staffed on every corner that there is a Starbucks, it apparently hasn’t occurred to upper bank management that when customers perceive they are being mistreated, that word spreads exponentially and with far greater authority than the bank’s TV ad.
For $173,076 a week, Mr. Kovacevich has just got to be better at running a bank than that. What's your mega-bank story?