Comments for The Ethical Banker

Comment on Reader Question from Erik - Are Not Sufficient Fund (NSF) Charges Ethical? by Amos

Amos — Mon, 02 Mar 2009 14:44:57 +0000

I don’t think the problem that people are raising is the NSF fee itself it’s the way it is abused. For instance, if you have 5 items coming out of your account on the same day and the balance can only support either one large amount or 4 small amounts. The ethical thing would be cover the 4 small amounts and then charge a fee for the large amount. Instead thier practice is to cover the large amount then charge 4 seperate fees for the smaller amounts when in reality you were only short a few dollars.

Comment on Reader Question from Erik - Are Not Sufficient Fund (NSF) Charges Ethical? by Sud America

Sud America — Tue, 02 Dec 2008 05:57:21 +0000

Is there a way to combat ridiculous checking account fees, specifically speaking of Chile..
I have had an account with an international bank in Chile (the name is the same but the Corporate entity is Chilean) who required a “deposito a plazo” (term deposit) of about $3k US in order to open the account. I left the checking account empty (the $3k deposit reamained as a seperate account) upon leaving the country and for work reasons was not able to return for about 14 months. They now say that I owe 400,000CLP (about $800USD) for maintaining the empty checking account for 14months.
I attempted several times to contact the bank via email and telephone from the US to no avail, and only upon returning discovered the substantial fee..

The problem as I see it is that banks like these continually charge amounts of money as penalties that are exactly in a range where legal council is overkill; as in this case. But combining the penalties of a lot of people… well it becomes clear…

Any advice is welcome..
Thanks

Comment on Mark Wants Your Opinion About Banking Ethics by Sean

Sean — Thu, 30 Oct 2008 00:43:19 +0000

In my humble opinion, no.

A prime example of ethics not governing the banking industry is taking place as we speak. The US Treasury is pushing billions of dollars out the door for the expressed purposes of loosening credit and unfreezing main street businesses – and ultimately, the consumer.

Instead, money center banks are taking in billions of taxpayer dollars and hording them to purchase the next credit calamity victim (read = bank). I believe that is in direct conflict with the spirit of the rescue legislation, and the circumstances under which the legislation was passed.

From a legal perspective, ethical is not necessarily moral. If a law is written and someone follows the law, that person is being ethical.

But from a moral perspective, following the law, but twisting the intent of the law in order to increase shareholder value, is unethical.

Banks, brokerage firms and insurance companies have done that for years.

Where else but on Wall Street would you have the fox guarding the hen house (FINRA)?

Comment on Should Banks Pursue Profits Over Ethical Treatment of Customers? by Sanne

Sanne — Wed, 22 Oct 2008 06:36:36 +0000

Well written article.

Comment on Reader Question from Erik - Are Not Sufficient Fund (NSF) Charges Ethical? by Traciatim

Traciatim — Sat, 15 Dec 2007 15:29:33 +0000

At the point that the fee charged is larger than the agreed upon fee disclosed in the account agreement.

Comment on Reader Question from Erik - Are Not Sufficient Fund (NSF) Charges Ethical? by Nancy (aka money coach)

Nancy (aka money coach) — Sat, 15 Dec 2007 06:35:51 +0000

as someone who works part-time for a bank, which is in turn owned by a credit union - ie. there to provide banking service for the members, not gouge to make profits for people scatterered across the globe, i can say definitively at least on our end:
1. nsf fees have nothing to do with moralism or judgement. It’s a purely technical thing. It’s easy for people to feel judged when crappy experiences like Erik experiences occur. Don’t. It’s purely mechanical - there is no human being inside smugly metaphorically spanking anyone who muddled up on their account, via nsf fees!
2. nsf fees, in our case at least, are about recouping the loss of staff time. Each day, we get a list of accounts (and it’s long) of people who are overdrawn. They are charged $5 - and each account is personally reviewed. If they have payroll coming in within a couple days, they are removed from the list and the item is not sent back. The others have approx 24 hrs to get the funds in. The next day, the list is again reviewed by a live human being. If the person has got the funds in, great. If not, the (staff) human being has to enter the data into a system to get the money back from wherever it was originally sent ( a bill payment, or someone else’s checking account). And a $25 fee is applied to the account. The whole process spent on the nsf account is a good 30-45 min of staff time, plus system stuff.

That’s it, pure and simple. No judgement. It’s about recouping staff costs and minor system costs.

Regarding how the staggering of the items, the story above seems outrageous. There’s no way we would do that.

Comment on Reader Question from Erik - Are Not Sufficient Fund (NSF) Charges Ethical? by Steve Rhode

Steve Rhode — Fri, 14 Dec 2007 20:50:01 +0000

The EU and the UK have taken a different approach than the US and it is illegal for banks to profit from collection activity above and beyond the actual cost of the collection activity. I suppose this is a reflection of government finding it not right to kick someone when they are down.

For example in Germany Citibank charges â‚¬3 per returned item and Â£25 in the UK. Forget doing the currency conversion because this is about relative monetary units. Banks in the UK have been taken to court by the Office of Fair Trading and have been refunding millions of Â£ back to consumers. The OFT has been generous in saying that bank charges can be no more than Â£12 but the actual charge of processing a NSF item is a bit less than Â£4.

So at what point is a NSF fee a penalty fee or a punitive and unfair charge?

Comment on Reader Question from Erik - Are Not Sufficient Fund (NSF) Charges Ethical? by Traciatim

Traciatim — Fri, 14 Dec 2007 02:02:26 +0000

I agree mostly with Sundeepkumar. The NSF fees are needed as a punishment to those who lack financial responsibility. The only practice that I think is unethical is the reordering of the charges so that they post in the order that generates the most fees to the bank. They should be required to post them in chronological order, or if reordered then done in the way most beneficial to the client.

Comment on Why Are Banking Contracts Absolute When Life Isn’t And We All Recognize That? by Captain Nemo

Captain Nemo — Thu, 13 Dec 2007 19:53:08 +0000

It sounds like this is an ethical dilemma, involving two rights. It is ethical, and I think the law, for a company to protect the interests of its investors and make a profit. At the same time, it’s right to be a good corporate citizen and have a positive impact on the community in which the company operates. It seems though, that more value is placed on profit rather than the needs of the customers. The company who chooses to do that, however, will eventually endure a correction when consumers are allowed access to information or find a company who treats them better or is cheaper (think about the term life insurance business). But it’s all moot, because I don’t really believe that companies are really interested in profits for shareholders or doing anything good for the communities in which they operate. Deep down I think that corporate leadership for the most part is only interested in making sure they make big salaries and get big bonuses, even if it’s all smoke and mirrors (witness Enron). Again, I believe it’s all going to be self-correcting in the end–CEOs will eventually be prosecuted or dead like Skilling or Lay. The sad thing is that despite knowing what can happen, people still continue to do it again and again.

Comment on Why Are Banking Contracts Absolute When Life Isn’t And We All Recognize That? by stephenbeekman

stephenbeekman — Wed, 12 Dec 2007 10:22:20 +0000

The problem is more complex than just holding the client to the contract. Experience tells me:

1. There are many complacent and exuberant consumers that do not take time to review the contract they are getting into. That is specially true in private banking in Switzerland, where the prospect looks at the banker in the eye and says: “I won’t read the documents because I trust you”.

My rule was not to accept that statement. Not because I did not like it, but because that type of client is the most dangerous to deal with. Yet, that type of client resented it when I would read out loud the contracts (In Switzerland, 40 pages to open an account).

Why did I insist? Because complacent consumers have lost track of their function in society: create through the market a rating system through pricing. How do you explain otherwise the lack of risk margin between emerging markets and US T-Bonds?

The consumer who exhibits complacency deserves what he gets. The banker who goes after him is fully justified.

2. Sales staff in banks (CRMs and the like) are inadequately trained to analyse client profiles. The focus of their training is on sales. I admit to the fact that I had problems getting them to focus on client analysis rather than product sales.

Banks that are focussed on sales volume rather than on client relationships, ie banks that are transactional oriented, deserve to go bankrupt.

Unfortunately, government intervention promotes client complacency. As long as we assume that the consumer is too stupid to understand, the social bank is flawed.

We need to introduce again the concept of risk into the market for the social concept to make sense.