As fees and profits escalate, banks still pursue deregulation
The American Bankers Assn. has been running TV commercials patting various lawmakers on the back for supporting “much-needed regulatory relief to help banks better serve their customers and communities.”
One such ad praised Rep. Lou Correa (D-Santa Ana) for his vote in favor of a bipartisan bill that rolled back portions of the landmark Dodd-Frank financial reform law.
Correa, the ad said, “knows banks help communities thrive,” so he voted in favor of “cutting needless regulations” and “allowing banks to support families.”
What he did was cast a “yes” vote for the Economic Growth, Regulatory Relief and Consumer Protection Act, which President Trump called “a big deal for our country” and which 85 consumer advocacy groups said will “stack the deck in favor of banks of all sizes.”
What’s striking, though, is how the banking industry has been busily spinning a myth about being crippled by overregulation, and how banks are yearning to breathe free of rules that prevent them from funding small businesses and investing in local communities.
A report this week from Bankrate.com highlights the deceptive nature of the industry’s violin playing:
Banks are now charging a record $4.68 on average for each out-of-network ATM transaction, up 36% over the last decade.
The Los Angeles aver-
age fee is $4.44. The highest ATM fee nationwide is Detroit’s $5.28.
The average overdraft fee is $33.23, down a smidge from a year earlier, but 54% higher than two decades ago.
The Federal Reserve may be raising interest rates, but the average interest-bearing checking account pays out a mere 0.07% annually.
Only 8% of interest checking accounts require no monthly service fee or minimum balance. The most common such service fee is $25 a month.
All that nickel-anddiming adds up. In fact, banks have never made more money. Ever.
After posting a record $56 billion in profit in the first quarter, banks stuffed their pockets even more in the second quarter with a new profit record of $60.2 billion, marking a 25% increase from a year before, according to the Federal Deposit Insurance Corp.
A big chunk of that was thanks to Trump’s tax cuts. The FDIC estimates that banks were $13 billion richer in the first half of the year because they had to share less with Uncle Sam.
Yet another profit record is expected to be set Friday, when banks report their third-quarter results.
“It’s simply not credible that banks are crippled by regulation and need regulatory relief,” said Sally Greenberg, executive director of the National Consumers League. “They are making money hand over fist on fees of all sorts — ATMs, overdrafts, minimum balances.”
She called bank regulation “absolutely critical to ensuring that the banking sector doesn’t take risks with other people’s money, something this industry has consistently done when the regulations are loosened.”
Jeff Sigmund, a spokesman for the American Bankers Assn., said the industry’s call for regulatory relief isn’t about making banks happy — it’s about making America happy.
“Bipartisan regulatory reform enhances banks’ ability to serve creditworthy borrowers and meet the needs of their communities, as well as the broader economy, without compromising safety and soundness,” he said.
“Finding the right regulatory balance helps both banks and their customers, and that should be the primary consideration regardless of the economic cycle.”
To which Emily Rusch, executive director of the California Public Interest Research Group, responded: “Banks should be able to treat consumers fairly and invest in their communities. It shouldn’t be an either/or proposition.”
The Economic Growth, Regulatory Relief and Consumer Protection Act that banks are so enamored of represents the first meaningful tweaking of DoddFrank, which was signed into law in 2010 after financial firms’ reckless behavior helped usher in the worst economic crisis since the Great Depression.
Critics said Dodd-Frank, which was aimed primarily at big banks, created an unfairly rigid regulatory burden on smaller institutions. The new law, signed by Trump in May, remedies this by raising the financial threshold for many of DoddFrank’s rules to apply.
However, it also leaves consumers with fewer safeguards, such as preempting tougher state rules in some cases and limiting consumers’ right to sue.
Rep. Correa told me the bill was about “access to capital and economic resources in our underserved and underbanked communities.” He called it “a modest regulatory relief bill” that “provides relief for community banks as well as local credit unions.”
Consumer advocates say the bill was a first step toward rolling back all Dodd-Frank reforms.
“The banking industry wants to return to preDodd-Frank,” said Joe Ridout, California legislative advocate for Consumer Action. “They want to go back to doing whatever they please.”
That would suggest a belief on banks’ part that they’ve earned back our trust. But once again, the numbers say otherwise.
Boston Consulting Group reported last year that banks worldwide have paid about $321 billion in fines since the financial crisis, many related to the meltdown, but others connected to subsequent screwups.
Nearly two-thirds of those fines were levied on North American banks.
Ridout said the combination of high fees and low interest for savings and checking accounts are a double whammy for customers.
“It’s a kind of two-handed pickpocketing,” he said. “They’re paying nothing for use of people’s money while at the same time running up their fee income.”
Some steps you can take: Decline overdraft protection from your bank. This means if you don’t have enough money in your checking account, the transaction simply won’t go through at the cash register.
As much as possible, avoid out-of-network ATMs. It’s a double insult to have to pay a fee to the operator of the cash machine plus an inexplicable second fee to your own bank just for, what, hurting its feelings?
Shop around. It’s highly likely a credit union will offer better savings rates than big banks. Online banks such as Ally Bank and Axos Bank are also keen to win your business.
The American Bankers Assn. says its ads “draw attention to legislative issues that are critical to banks” and “help ensure that key lawmakers hear their voice.” Why stop there? Maybe Trump could apologize on behalf of the nation for all the pain and suffering banks have experienced.