Big banks admit tricking customers

by: Mike Lux

Fri Nov 12, 2010 at 18:00

Take the Bank of America's spokesperson Anne Pace' recent statement that "Customers have never had free checking accounts. They always paid it for in other ways, sometimes with penalty fees." Good to know, Anne. For about thirty years, I have been hearing banks advertise free checking accounts, spending ungodly amounts of money to tell Americans over and over and over again (because advertising only works with repetition, after all) that customers should come to X bank because of their free checking accounts. Thanks for admitting that the entire industry has been lying their butts off for all that time.

Of course, it's not just free checking accounts. The big banks on Wall Street seem to mislead about a great many things. Their fine print credit card forms were so abusive to consumers in so many ways that even Congress, as dominated as it is by banking lobbyists, came around to passing a bill stopping some of the worst abuses. Banks lied about what was going in the housing market, and it led to an economic collapse. They hid overcharge fees on checking accounts from customers, and gouged them with penalties. They illegally phonied up so many false documents on foreclosure proceedings that we may have a full scale legal and economic crisis on our hands. And now they are lying about financial reform causing new fees for customers, when they are quite clearly just trying to shift costs to customers to make up for their other bad business decisions.

Here's another quote that I love. TCF Financial recently filed a lawsuit against the Federal Reserve to stop the new swipe fee regulations from going forward. TCF CEO William Cooper was pretty blatant in his analysis of the lawsuit, saying to a group of investors that they needed to overturn the new law/regulation because "Most of that revenue drops directly to our bottom line." Which is funny, because that is precisely the argument I have been making: the biggest banks and their credit card companies (which control over 80% of the market) pocket about 40 billion dollars a year of pure profits on swipe fees. As with most other aspects of banking in our too big to fail banking system, they have such enormous market power that they are in a take it or leave it non-negotiable environment with the small businesses all over the country that use debit and credit cards. All us folks on the other side (an oddfellows coalition of retailers and consumer advocates like myself) are asking is for some basic regulation of the industry so that they can't set the terms on the swipe fees.

I am heartened that bankers like Pace and Cooper are coming clean, and making such open admissions about their past lies and profit margins. Keep it coming, friends. It sure does help folks like me make our case.