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New bank fees are aimed at lower income customers
Bank customer uses ATM machine.
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TEXT OF STORY
Kai Ryssdal: New financial regulations are nibbling away at some of the most profitable and reliable sources of income the banks have. Rules for credit cards and overdraft fees have cut tens of billions of dollars out of their profits. Proposed regulations for merchant fees would cost them billions more.
So maybe nibbled away wasn't the right phrase, and the banks aren't suffering silently. Instead, they've been finding new ways to make money: new fees charging for things like checking accounts and paper statements. That's hitting an already underserved segment of the financial population especially hard.
Marketplace's Stacey Vanek Smith reports from New York.
Stacey Vanek Smith: Things you can expect to pay a fee for this year: not having enough money in your checking account, not having multiple accounts with a bank, not doing your banking online. All of that could hit lower income customers especially hard, says Mike Moebs, an economist who advises banks.
Mike Moebs: They're basically shedding themselves of accounts that they can't make any money at.
Namely the checking accounts of lower income people. Those accounts used to generate a big chunk of overdraft fees, says Sarah Ludwig, co-director at the Neighborhood Economic Development Advocacy Project in New York. She says now that new regulations limit overdraft, banks are aiming fees at lower income customers.
Sarah Ludwig: The new round of fees that we're seeing by the large banks definitely fall disproportionately on lower income people.
Ludwig says her organization has spent years encouraging clients to use bank accounts instead of relying on check cashing and pawn shops. But new fees will make that harder.
Ludwig: So now we've got people who are told over and again you should have a bank account, that that's the responsible thing to do, that's the safe thing to do -- having to face the fact that, it can be quite prohibitive to do that banking with them.
Ludwig says that will drive lower income people out of the banking system.
Ludwig: Now we've got the further perpetuation of a two-tiered credit system where we have a separate, unequal system serving higher income people from the one serving lower income people, and this new round of fees is just going to push more people out of the banking system and continue that bifurcation.
Which is what banks ultimately want, says bank consultant Ken Thomas.
Ken Thomas: Banks cannot put a sign in the window that says 'We will give better service and charge lower fees to rich people.' They can't do that. So they tier their products, their pricing to have the same effect.
Bank economist Mike Moebs expects we'll see lower income customers leaving bigger banks for cheaper options like credit unions.
In New York, I'm Stacey Vanek Smith for Marketplace.
"...aiming fees at lower income customers."
Ridiculous. Banks are aiming new fees at customers who produce lower profit for the bank. It has nothing to do with the customer's income. You might want to brush up on the concept of "cause and effect".
"capitalism with a human face would look like."
If you replace "capitalism" with "service" then you are referring to a well funded government/non-profit.
For-profit will put up a multi-million dollar ad campaign with a 1,000 mega watt smile telling you how human they are while they deny your insurance claim.
Credit Unions are the silent subversives of the financial services industry. Without inventors/shareholders, these tax exempt non-profits can afford to think first and foremost of their members (i.e customers) and they almost always offer their members a better deal than the commercial banks. The shame in all this is that credit unions somehow haven't figured out how to market themselves. You would do listeners ( and the credit union industry) a favor by consistently presenting a credit union perspective on consumer banking issues. P.S. I am a credit union director in Philadelphia and work hard with our management to encourage more vigorous marketing.
If you are poor the banks don't want to serve you, but if you have a large balance account they constantly try to chisel and swindle you. And because they are on a swindle they treat you like an idiot, never thinking that perhaps that large balance was acquired because they customer is intelligent.
The worst offenders: Wachovia (now defunct) and Chase
I wish the FBI would throw some of those bums in jail.
