No Even Breaks For Bank Customers

New and more horrible corporate rip-offs lurking in near future! Banks win big - and guess who pays?

Thanks to the pinheads on the Supreme Court, big banks are in a better position than ever to continue to rip us all off. A monster case - First National Bank and Trust vs. the National Credit Union Administration - recently was decided in favor of the banks and against the credit unions.

Credit unions were formed, and given special tax treatment, to serve groups with “a common bond” - most commonly all the folks working for one large employer. The credit unions wanted to be able to open their doors to a variety of groups so a single credit union could serve multiple groups with multiple common bonds. We’re not talking about all the guys on a softball team but, say, employees of smaller companies that don’t have credit unions.

But the court said no. There are two reasons this is really bad news.

First, fees. Study after study shows that doing business with a credit union saves mucho dinero. I would say the banks are nickel-and-diming us to death with fees, but it’s more like five bucks here and 25 bucks there. They charge us for using their ATMs and they charge us if we go in to see a cashier. They charge us for our checking accounts, they charge us for our savings accounts and they charge us to find out what’s in our accounts.

Banks have not only been running record profits for six straight years now, but according to the Federal Deposit Insurance Corp., as reported by the Gannett News Service, the percentage of those profits accounted for by fees has gone up from less than 25 percent in 1984 to almost 40 percent in 1997.

According to FDIC documents, banks collected $30.9 billion in fees in the first nine months of 1997, up 15 percent from the same period a year earlier.

Second, what’s the biggest trend in employment today? Temps, of course - “contract workers,” subcontracting, hiring fewer and fewer full timers who would be eligible to be in a credit union. Ergo, fewer credit union members and more poor fish for the banks.

But, wait - didn’t we just read that NationsBank Corp., one of the Very Bigs, is cutting its fees? Well, yes, we did, but read the fine print. According to Knight-Ridder Tribune Business News, Nations will no longer charge its best customers $25 to stop payment on checks, $5 for copies of checks they’ve written or $8 for incoming wire transfers. CEO Hugh McColl Jr. told Knight-Ridder, “We need to treat people differently based on how much business they do with us and we have to be willing to cut fees.”

What that means, you poor schnerk, is that rich folks will not have to pay bank fees, but you will. NationsBank did open its marble heart and agree to repeal the $1 fee for blank deposit slips and the $1.25 monthly fee for debit cards for all customers.

Banks used to make money on the spread between their deposits and their loans. Since deregulation in 1986, banks have come to rely increasingly on fees for profits. In Canada, according to the Financial Post, fees account for less than 5 percent of bank profits.

Consumer Union says that economies of scale promised by big bank mergers have not materialized. Studies have shown that as banks grow larger, they charge higher fees. Mary Griffin of Consumer Union Inc. told the Financial Post that more than 100 different fees have been introduced by American banks, which have risen an aggregate of 50 percent since 1990, or more than twice the rate of inflation.

And in a new and more exciting wrinkle for the bankers, Congress has ordered the government to electronically deliver all federal benefits payments, except those from the Internal Revenue Service, effective Jan. 2, 1999. No more paper checks for Social Security recipients or veterans. Unfortunately, about 10 million Americans, most of them poor, don’t have bank accounts. Think how surprised they are going to be when they open an account so they can get their checks and their checks suddenly start getting whittled away by banking fees.

Note also that banks have been closing their branches in poor city neighborhoods and small towns. Add lack of access to banks to the fact that many who get government checks are poor, elderly and disabled, and you have just a wonderful scenario ahead.

I am always amused when I am told that the “invisible hand” - the magic of the marketplace, the wonders of competition - will take care of these excessive fees. I’m starting to think that the magic of the marketplace is about as real as the magic of Siegfried and Roy.

In Chile, which is an increasingly interesting case study of what happens when you let Milton Friedman’s pure capitalism loose in the world, they are now charging 75 percent annual interest rates on credit cards. If we let ‘em, they’ll do it here, too.

You think not? Check out what your bank charges you if you bounce a check. Consumer groups estimate that the actual cost to the banks of processing a bad check is less than $1. What’s your bank’s profit ratio on those things?

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