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Banks stall to keep customers

By Claes Bell, CFA · Bankrate.com
Friday, December 2, 2011
Posted: 12 pm ET

Bank clinginess is an underrated factor in why a lot of people stay with banks they don't like. Between the difficulty of transferring bill pay and other services, and banks' fussy rules on how exactly an account can be closed, banks tend to get all "Fatal Attraction" (or "Fear," if you prefer your psychotic paramours to be male) on you when you try to break things off.

From Robin Sidel of The Wall Street Journal:

Consumers are discovering that it isn't always easy to break up with a big bank.

When Ray Parente decided to pull his money out of Wells Fargo & Co. last month, he was told that he would have to discuss the decision with a personal banker at his local branch in Orange City, Fla.

Rather than wait in a long line to see the banker, Mr. Parente went to a teller window and withdrew all his money -- except for two cents. "I kept as little as I could in there to keep it open just to screw with them," says the unemployed real-estate broker in Deltona, Fla.

From stall tactics to unexpected fees and awkward conversations, other customers of big banks are running into similar snags when trying to move their money elsewhere.

Forcing a customer to show up in person to say goodbye may seem innocuous, if a little inconvenient. But what if you're disabled or bedridden? Or you've moved to a city where the nearest branch of your old bank is 100 miles away?

And that's not even including the overdrawn-with-fees death spiral that can happen with accounts like the one mentioned in the WSJ article. If Parente fails to close that account with 2 cents in it, he'll probably begin incurring a monthly maintenance fee, as he probably won't meet the minimum balance or direct deposit requirements needed to waive the monthly maintenance fees on a typical checking account these days.

After that happens, his account will become overdrawn, and then he won't be able to close it without getting it back to zero, which will mean another trip to the bank and more money out of pocket. If he fails to do that, the bank will continue hitting the account with monthly maintenance fees, until it closes his account for him. Then Parente will probably be reported to ChexSystems, which will prevent him from getting another checking account for at least five years.

That type of spiral can have serious financial consequences, possibly consigning Parente to the ranks of the unbanked, who typically pay more than bank customers for things like cashing paychecks and making cash withdrawals.

I blogged about a bill introduced in October that would have made it easier to switch banks by banning just these sorts of shenanigans. The comments I got were interesting. Some were supportive of the legislation, but a few were more of the "less QQ, more pew-pew" variety; they were basically of the opinion that switching banks is easy enough and why don't you stop whining already. An example, from a reader who frequently posts on the banking blog under the nom de plume "Wolverine":

What's so hard about switching accounts now?

If we really need governments to make this easier, than there is something REALLY wrong with us. I've done this before and it was simple.

The problem with that line of reasoning is, what may be true in Wolverine's experience may not be for other bank customers. There doesn't seem to be any set standard for what banks can require from customers to close an account, and that opens customers up to tactics that can cause everything from annoying inconveniences to serious financial consequences for the crime of not wanting to be bank's customer anymore.

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2 Comments
BanksRCrooks
January 02, 2012 at 8:34 pm

We are a family of 3 generations of international bankers. It took us over a week to get six figures out of our Bank of America branch in a small town. We didn't close the account, it still has thousands in it. They did everything possible to keep us from taking our cash, including having the FBI review the account and determine if the bank could release our money to us. We told them, go ahead...and recommended a top official at the FBI in Washington DC to call for a reference. That shut the bank manager up. They even turned off the power to the building right before our appointment to pick up our cash and we had to wait 2 more days. We called the Power company manager, they said nothing wrong at the Power company and the bank should have electric service. Really!

Disreputable bunch of thugs...BofA and Wells Fargo. We actually sued Wells Fargo a few years back on a phony reverse mortgage they did for an old family member with Alzheimers and WON. These people use the laws to circumvent ethics and morals and are nothing more than professional criminals.

Cole
December 04, 2011 at 1:27 pm

Closing an account isn't hard. Sure there may be examples of bad service out there, but it isn't the norm.

Yes you have to show up in person (generally, although an exception is possible) to prevent fraud. Yes the bank is going to try to keep your business just like a gym or any other business. If you're disabled and cannot make it into a bank then you need someone with power of attorney to conduct your business- not just for banking but other things as well. Of course, not everyone has a power of attorney so going back to the exceptions for showing up in person, it is still possible, but perhaps a bit more challenging. And if you're bed ridden, what isn't more challenging?

If an account is closed with a negative balance do to bank fees, it probably won't be sent to collections or reported to chexsystems.

People are far too hyper-sensitive to banks right now do in large part to the villification of said institutions by politician seeking a scapegoat for their ineptness. Sure banks aren't perfect, but what orginization in this country is?