Banking Bullies: Don’t Be Held Up by Your Neighborhood Bank
By Martin Brown
Zoe Chapman thought she had done the right thing. Having a credit card issued from a bank on the opposite end of the country, and having been hit for a $49 late fee because her payment arrived in the mail one day late, she thought she would avoid this problem by signing up for a credit card issued by a local bank.
For several months her plan worked perfectly. If the payment was due on the 10th of the month, Zoe would stop in the bank and pay it on the due date or a day or two earlier.
“I’m single, always strapped for cash, and I hate paying those insane interest rates,” Zoe, an office manager at a medical lab, explains. “I work some odd jobs on the side for some extra money, so it’s great to be able to wait a little longer so that when I pay my credit card bill I can pay off the whole thing.”
Her one-day late payment with late fee, and additional interest actually cost her $62. “I have to work quite a few hours to make up for a charge like that. These banks pile on their interest and fees as if we all make as much money as bank presidents, when in reality our take home pay is more like that of bank tellers.”
Zoe did just fine for the first five months with the locally issued bank credit card. Then a problem occurred that put her right back in late fee hell. “My payment slip said ‘Due November 11.’ Well that was a Sunday, so I went into the bank on Saturday morning and paid the entire balance.”
Imagine Zoe’s surprise when her next statement arrived and she found a $49 late fee: interest accrual on a balance she thought had been paid in full. There was also a notice that her 14.9% interest rate would be raised to 19.9% to reflect her less credit-worthy standing, now that she had been “late.”
The very next morning Zoe was in the bank. A young man with a polite smile but a curt manner explained that a payment made in the branch on a Saturday is not credited until Monday, in this case the 12th and therefore the payment was a day late.
“Why are you open on Saturdays?” Zoe asked.
“For our customers convenience,” the bank clerk explained.
“If I come into pay a bill that isn’t due until the next day, it doesn’t seem very convenient to me,” Zoe shot back.“ If Saturday doesn’t exist on your calendar, why would a payment be due date on a Sunday? Wouldn’t Sunday be exempt as well, for bank business?”
Despite the logic of her question, the clerk said the rules were set in stone, and there was nothing he could do about it—despite the bank’s slogan for being “your friendly neighborhood bank.”
Her most vivid memory of the experience was when another teller—one of the few in that branch who’d been there over a decade—quietly leaned over and whispered to her “Sorry. But think about it: how do you think banks make all that money?”
Welcome to the age of what Harvard Law professor Elizabeth Warren calls, “Gotcha” Banking.
Warren, co-author with Amelia Warren Tyagi of All Your Worth: The Ultimate Lifetime Money Plan, would like to see the Federal Government create a Financial Product Safety Commission that would function much like the Consumer Product Safety Commission, which protects buyers from defective products. This commission would as she explains, “review products for financial products on things like mortgages, credit cards, and auto loans.”
As Warren points out, 25 years ago financial products were “strictly screened to make sure that borrowers could repay and there was no such thing as $49 late fees.”
Zoe didn’t give up on her fight. She took her dispute to that bank’s corporate office. “After I threatened to make a complaint to the US Senate Banking and Finance Committee, the bank credited back the fee and adjusted the interest rate back down to where it had been.”
Zoe acknowledges that for people not as persistent as her they probably would have been stuck. “Just out of curiosity,” she later explained, “I kept track over eight months of how often a Sunday due date comes up, I counted three out of eight. That’s approximately three times as often as Sunday appears on the calendar.”
Is it a game that banks play?
Perhaps. Warren suggests that until stricter regulations are in place that you “Do not carry credit-card debt—none, never, no matter what—because credit-card contracts in particular are loaded with tricks and traps.”
The lesson being that, to some extent, we all have to live with banking bullies.
But we don’t have to follow them down a blind alley to see what surprises they have in store for us.