When banks merge, be wary and reassess your banker
By Holden Lewis • Bankrate.com

The world is full of things to fear: car crashes, job layoffs, bank mergers.

When banks combine, "the only thing I tell people to do is run," says Denise Richardson, who went through years of litigation following a bank merger that led to errors in her credit reports.

Mergers are uneventful for most customers, but they can go spectacularly wrong for an unlucky few. If your bank plans to combine with another, heed the advice of those who endured mergers before you:

• Shop around.
• Trust no one.
• Document everything.
• Monitor, complain and negotiate.
• Favor paper.

Shop around
An impending merger is also a good time to:

• Shop for a better deal.
• Find out the fate of your favorite banker
• Make sure that you'll have access to your money at an important time.

Not everyone is going to follow Richardson's advice to abandon a bank just because it's involved in a merger. But it's a good time to check out what other banks can offer. If you seek the best place to park your checking account, Bankrate.com's semiannual Checking Account Pricing Study is the best place to start.

Merging banks usually close branches and lay off employees to save money. If you have a good relationship with a loan officer or branch manager, find out if he or she will remain in that job. If the combined bank plans to fire your favorite employee, consider firing the bank.

If you are about to make a major withdrawal -- for a house down payment, for example -- consider transferring the money to a bank that's not about to go through a merger. Tell the folks at the new institution exactly what you're up to, and find out what you'll need to do to guarantee access to your money when you need it.

Shelley Norbeck learned this lesson when NetBank's acquisition of CompuBank tied up $6,000 she was planning to spend at a house closing. As the deadline for the closing approached, she feared that she wouldn't be able to get to her money. If a bank delay could seriously disrupt your life rather than merely inconvenience you, it might be safer to have your accounts at a bank that's not going through a major change.

Most bank mergers are announced weeks or months before they happen. Don't wait until the last week to move to another bank. It takes about a month to switch accounts smoothly.

Trust no one
Don't count on anyone beside yourself to look after your welfare.

Beau Ruland learned to trust only herself after First Union bought CoreStates in 1998. "You can't trust anybody, even the consumer advocate branch of the bank you're dealing with. Only you can look after your best interests," she says.

Through Consumer Credit Counseling Service, Ruland was paying off a student loan from CoreStates when that bank was bought by First Union. Somehow, the co-signer came to be listed as the borrower, and Ruland's name was dropped from the computer database. First Union stopped crediting payments to the account.

Here's the kicker: When Ruland got the loan, the co-signer was her father-in-law. Later, Ruland and her husband divorced. Now, after the merger, bill collectors were calling Ruland's ex-father-in-law, demanding payment.

Ruland asked someone at the credit counseling service to resolve the mix-up, but the problem remained. She finally tackled it herself. She complained to the bank and to federal regulators, sent letters, and spent a lot of time on the phone. She sent monthly checks to her former father-in-law to reimburse him for payments he was making on the loan.

"This was two, two-and-a-half years of agitation for something as simple as a computer glitch," she says. "Even if you're working with Consumer Credit Counseling Service, you still have to be totally on top of what's happening with your creditors."

Document everything
Ruland finally saved herself because she had kept her paperwork: statements from CoreStates that proved that the loan was in her name and a letter from CoreStates agreeing to the CCCS repayment plan.

"I'm confident it's been fixed only because I have it in writing now," she says. She also asked for, and got, a receipt from her ex-father-in-law for the payments she had made to him.

Take a cue from Ruland: Keep copies of receipts, promissory notes, invoices and monthly statements. If you have lost or thrown away key papers from a bank that's about to combine with another, request copies before the merger goes through.

Take special care if you have an account at an online bank that doesn't mail monthly statements. Print your own monthly statements and save them. If a computer glitch prevents you from looking at your account information, you'll be able to review your paper copies.

Monitor, complain and negotiate
Bank mergers usually are big news. If you find out through the news media that your bank is involved in a merger or acquisition, expect to get something in the mail -- a timeline, a description of changes to expect, maybe a "welcome packet" explaining why you should keep your account there.

If you don't get something in the mail, call and find out why. Maybe the bank lost your address. Maybe some other glitch is holding up things.

Check your credit report before the merger. Correct any errors, especially mistakes in your name, address and phone number. Check your credit report again a few months after the merger. If an account has disappeared from your credit report, or a loan is listed as delinquent but you've been paying on time, call the bank and find out why.

Reconcile and review monthly statements promptly and thoroughly. If a bank debits someone else's check from your account, or you're assessed a late payment fee for a payment you made on time, you don't want much time to pass before you complain.

See if you can negotiate reimbursements for your expenses resulting from the merger. For example, if you bought a box of checks shortly before the merger was announced, and you won't be able to use all the checks before you're required to switch to checks bearing the new bank's name, ask for some of your money back. At the worst, the bank can say no, and maybe that's your signal to switch banks.

Know how to complain.

Favor paper
If you stay with your bank through a merger or acquisition, everything will probably turn out all right. If you prefer to put yourself through a little inconvenience rather than risk having major problems, consider doing the following:

• Canceling direct deposit temporarily.
  You especially might want to cancel direct deposit if your account is with an institution that is being acquired. Chances are that there won't be problems with direct deposit. But if something goes awry and your electronic deposit is misplaced, your bank and your employer's payroll department probably will blame each other and you'll waste time ironing out the problem.
• Canceling automatic debits and online bill paying.
  Many people pay their utility, insurance or health-club bills automatically with electronic debits from their checking accounts. A similar service, online bill payment, is increasingly popular. Both services probably will weather a bank merger just fine. To be on the safe side, you could cancel these automatic payments for a couple of months and pay by check, then resume automatic debits later.
  If you don't cancel automatic debits and online bill paying, it's a good idea to confirm with your biller that it received payment.
• Just before the merger, withdraw plenty of cash.
  Take a lesson from CompuBank customers who couldn't use their ATM cards for weeks after NetBank acquired their accounts. At least one unfortunate CompuBank customer had to scrounge change from his friends so he could do his laundry at a laundromat. "It's almost kind of comical," he said.

He wasn't laughing.

-- Updated: Jan. 15, 2004