Overdraft Fee Limitations / Proposed Banking Legislation

Currently, banks legally must offer customers the option to opt out of over draft programs. So, upon customer request, the bank must code a customer’s account, not paying items when the customer does not have efficient funds to cover items attempting to come through. The problem is the average customer does not know this is even an option. They don’t know to ask to opt out of overdraft programs.

Senate Banking Committee Chairman Chris Dodd is drafting a bill to limit or regulate the overdraft programs at financial institutions. Among other things, the bill would require financial institutions to get the consent of the customer to overdraft services before the bank could charge overdraft fees.

In the House, Rep. Carolyn Maloney has been working on a similar bill, called The Maloney bill. This bill would require banks to give consumers notice and a chance to cancel a transaction at the point of sale or at an ATM machine when the transaction would trigger an overdraft fee.

Both bills are looking at prohibiting banks from manipulating payment priority of items. Many banks pay the largest to smallest items, stating that the larger items are more important items, like a house payment or a car payment. Critics claim that this is just ploy to maximize the collection of fees since the consumer might have multiple smaller checks that clear the same day. If the first transaction overdraws the account, each subsequent charge will incur a fee.

Dodd’s bill is being supported by Sen. Charles Schumer, D-N.Y., the No. 3 Democrat in the Senate. Schumer stated that overdraft fees should be proportional to the amount of the overdraft.

From the financial industry perspective, it is difficult to make money in “straight banking” and must be supported by fee based products. Although I am not sure how true this is, I do know that the spread between what we charge on loans and what we pay for deposits has continued to shrink every year I have been in banking.


References:

Kaper, Stacy. “Dodd Preps Bill to Limit Fees on Overdrafts.” American Banker. 18 Sept. 2009. Viewed 27 Sept. 2009. http://www.prosperityagenda.us/node/1877.

US Bank's Mission Statement:

"We Put the Power of US to Work for You!"

US Bank Stock Quote

USB (Common Stock)
Price 22.82 Change + 0.65
Volume 17,747,803 % Change 2.93%
Intraday High 22.86 52 Week High 42.23
Intraday Low 21.99 52 Week Low 8.06
Today's Open 22.24 Currency US Dollar
Previous Close 22.17 Exchange NYSE

09/16/09 4:00 p.m. ET Pricing delayed 20 minute

US Bank's Core Values:

*Take Ownership

*Make it Personal

*Add Value to Every Interaction

*Make Customer Courtesy Common

*Share You Knowledge

*Hire the Right People

The World of Banking - Never a Boring Day!

Bank of America (BofA) entered into an agreement to purchase Merrill Lynch about a year ago. Merrill, with the knowledge of Bank of America executives, paid Merrill employees $3.6 billion in bonuses just before the deal closed on Jan. 1, 2009. When attempting to buy Merrill Lynch, BofA told shareholders that Merrill would not pay year end bonuses without BofA’s consent. What BofA did not share with their shareholders, at least according to The Securities and Exchange Commission (SEC), is that BofA had already authorized Merrill to pay up to $5.8 billion in year end bonuses.

Merrill lost $27.6 billion last year, which obviously impacted the earnings at BofA, not to mention that Bank of America was one of the largest recipients of government bail out money aka TARP funds. This type behavior is infuriating. So many of us in the banking industry are taking the heat, taking pay cuts, or losing our jobs, because of this type dishonest, immoral activity.

The SEC and BofA had reached a settlement agreement of $33 million dollars. Federal judge Jed Rakoff gave this proposed settlement a big no go today, Sept. 14, 2009. Rakoff said this settlement was unacceptable. It allowed the SEC to act as if they had exposed the bad guys, BofA, and allowed BofA to act as if they had been “coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth." Rakoff also wants the SEC to explain why they are not attempting to press charges against BofA executives. Good for Rakoff! This is unchartered water in the legal arena, but I am so glad that this judge is calling bullshit – it is about time.

In a separate court proceeding, New York Attorney General Andrew Cuomo's office is preparing to file charges against these BofA executives, as they failed to provide full disclosure in their purchase of Merrill Lynch.

These executives should be held accountable. It would appear they could certainly use any “reform” prison can offer.

References:

Bernard, Stephen. “Judge Overturns Bank of America-SEC Settlement of Merrill
Bonuses.” The Huffington Post. 14 Sept. 2009. Viewed 14 Sept. 2009. http://www.huffingtonpost.com/2009/09/14/judge-overturns-bank-of-a_n_285947.html.

Mobile Banking

A few weeks ago, as I was listening to NPR, I heard about a new iPhone application that would allow you to take a digital photo of a check, send it to your bank from your cell phone, and get the check deposited into your account.

My first thought was of the huge fraud potential of this iPhone application. Preventing, reducing, and recovering fraud losses are a significant part of my job, and this news made me more than a little nervous. So, I decided to investigate.

According to a New York Times article written by Susan Stellin, published August 10, 2009, the only bank currently offering this iPhone application is USAA, which is a privately held bank and insurance company. For the past three years, USAA has allowed their customers to deposit checks from home using a scanner. One reason USAA has such success with these scan and email type products is due to their clientele, comprised of mostly military personnel. A customer must pre-qualify to use the eProducts discussed above by satisfying eligibility requirements for credit approval and having some type of insurance through USAA.

US Bank does have a similar version of mobile banking that can be downloaded to a smart phone or an iPod, called Mobile Wallet. Mobile banking is typically used to check account balances, transfer money, make payments, and locating ATMs. All of these functions are available through US Bank's Mobile Wallet. A customer may also sign up to get alerts, or text messages, when their electronic statement is available, when their balance gets low, or when a payment is due. Mobile Wallet is not limited to Apple's iPhone; it is available for a variety of mobile carriers and phones including Blackberries, with additional allowable mobile devices being added each week. According to the US Bank web site, eventually, more than 100 mobile phones will be supported. A customer must sign up and download the application from the US Bank web site to their phone.

Regions v/s US Bank stock trends

After reading Richard Webb's blog on Regions bank, where he reviewed the bank's decline in stock price over the last two years, I was curious to compare the same trend at US Bank.

Richard's blog states the following stock information:

8-29-07 stock closed at $31.44
8-29-08 stock closed at $9.27
8-28-09 stock closed at $5.97

Regions' stock price has declined 81% over the last two years.

US Bank closing stock price:

9-3-09 stock closed at $20.95
9-3-08 stock closed at $32.95
8-31-07 stock closed at $32.35

These figures, taken from the US Bank web site, represent a 35% decline in stock price over the same two year period. Given the issues that have taken place in our economy, and in the banking industry in particular, I was glad to see such a comparatively small decline in value.