Remember last year when Bank of America (and other ‘banks too big to fail’) tried to levy a monthly $5 debit card fee on its customers? BOFA backed off, not because it wanted to do the right thing, but because the public outcry was so huge. There was a petition on Change.org that collected literally thousands of signatures (I signed as a BOFA customer) and there were apparently many calls and complaints made directly to this fine financial institution by customers. Ever inventive, BOFA has a new way to screw its customers.
BOFA has a new pilot plan in place being tested in three states: Arizona, Georgia and Massachusetts. Under this plan, customers will be charged anywhere from $6 to $25 a month to maintain their bank accounts. The low end is the “essentials” account; the high is the “premium” account. Let me tell you how this works because, living in Massachusetts, I have personal experience with this new scheme…and I do mean scheme.
I have three accounts at BOFA, one checking and two custodial accounts for my children who receive Social Security payments. When they switched over to this new pilot system, they simply chose to place all three of the accounts in the “premium” bracket which meant that I would be paying $25 per month on each account. Now, here’s reality on the checking account. My average monthly deposit averages between $650 to $800 depending upon how many hours I work. I get two direct deposits from my employer twice a month. Done. I do not use checks. I don’t even order them. I don’t use overdraft protection. I’m a pretty simple person. I use my debit card to go food shopping, purchase gas for my car, and pick up other things for the house. The rest of the month, I live off my tips. That would be cash. No banking involved. That’s what they consider a $25 premium account? Really?
Here’s how the custodial accounts work: There is one for each child. On the first day of every month, Social Security direct deposits about $500-$600 per child into each account. (Again, what they get depends upon what I make in a given month.) Custodial accounts are required by the Social Security Administration unless you are getting paper checks. I go direct deposit because the money gets into their accounts faster. What can you do with a custodial account? Not much, frankly. You are not allowed to use a debit card. You can use checks, but I do not. What I do is immediately transfer the money that is in the custodial account into my checking account so that I can take care of the things my children need. This amounts to two transactions per account: One direct deposit in and one transfer out. The notion that I should give BOFA $50 a month for this pathetic amount of transactions is patently absurd. It’s not like I live the life of Donald Trump.
With the three accounts, I cough up $75 a month in fees to BOFA. That’s not just absurd. It’s highway robbery. I’m stuck in this system right now and working to change my status at the bank. The reason it is not easy for me to change banks? If there’s one government organization that can’t handle change it’s Social Security. If I were to open new custodial accounts in other banks or a credit union, it would literally freak them out. I can tell you this after eight years of working with them. Not only would I have to report to my local office and explain myself, but they might actually stop payments until they can absorb the change. That would be a disaster for my family. But I digress.
Back to BOFA. According to David Trainer of Market Watch, hiking fees on basic checking accounts signals that Bank of America has all the earmarks of an institution in trouble. Again. Here’s what he writes:
“In my opinion, there are four actions taken by financial services that signal the company is headed to serious trouble.
- Management shake-up and major layoffs – lots of layoffs over the past year
- Exploiting accounting rules to boost earnings – SFAS 159
- Drawing down reserves to boost earnings: to the tune of $13.3 billion in 2011 and 2012
- Bilking customers with new fees: tried it before and trying it again
Bank of America has taken all four steps. Bilking customers with new fees is a desperate measure of last resort because it requires exploiting the one asset the bank has left, namely its customers.”
The whole SFAS 159 deal is a new accounting rule that basically allows an institution, like BOFA, to artificially restate its earnings when its credit quality hits the skids. In other words, it’s smoke and mirrors. Or the more things change, the more things stay the same.
Nothing really has changed much with Wall Street and the too-big-to-fail banks. All you need to do is take a look at last year’s MF Global failure. All the talk about reigning in the bad boys of Wall Street was just that: Talk. So, is BOFA bilking its customers a sign that it is going bankrupt? You can bet we’ll be the last to know. If it does, will Obama use our tax dollars on the massive bail-out that will be required to save it? Time will tell.