Bailed-Out Banks Face Probe Over Fee Hikes - WSJ.com

Back in September of '07, I was in London when they Northern Rock bank there ran into trouble and people started withdrawing money from their accounts. Over night, the bank had £1.5 billion and it went downhill for Northern Rock from there. Here's what I wrote back then:

It does beg the question as to how much loyalty Northern Rock created with it's customers before this all began. Too many brands use a crisis as the first real time they reach out to say "Hey, we're here for you. Help us get though this and we'll be there for you when it's all over." But when the crisis is over, they go back to business as usual. Do you think they'll offer to drop the interest rates on their mortgages for people who leave their money where it is? Or will they send your nasty notes when you're a day late with your mortgage payment?

You know, since I started reading about all of this, I can't help but think about Jimmy Stewert and the Bailey Savings & Loan. I can just picture him stuttering as he asks people to leave their money in the bank because it'll be safe. Trust me, he says. I live here too and I'll take care of you.

Watching the news today and they just had Ron Insana talking on msnbc about a report in the Wall Street Journal about how banks are now raising fees on everything and, with some banks now charging up to 29% interest rates, he used the term usury rates. But it's not just interest rates going up (and in some cases doubling, according to the WSJ article), every fee is going up. Late fees, charge fees, every thing's going up while the banks take our tax dollars. Look at this example:

Regional banks U.S. Bancorp and Wells Fargo & Co. offer "checking account advance" loans that allow customers with direct-deposit accounts to access funds before they are credited to a customer's account balance. The short-term loans carry annual interest rates of about 120%. (Emphasis mine)

Think about that. They're charging a huge interest rate to get your money faster. It's direct deposit. It's electronic banking. Why should we have to wait at all to get access to money that's direct deposit? Sure, they get your money right away and make a ton off the float, but if you want it, they'll charge you for it.

Of course, what's frustrating about this whole thing is that we're still not breaking one issue that got us into this mess in the first place. Wall Street is still pushing the banks for profit, which it seems they're delivering right now. So, they get our tax dollars to bail them out. Then they fee us to death to generate more profits. Then a relatively small group of people gets to make a lot of money off of their stock. This is just wrong.

But, from a brand perspective, it's really wrong. But it might also show something that we really don't want to admit. Because no amount of tweets and blog posts is likely to produce a single big bank willing to stop raping us with fees. So, is this really a time when consumers are in control? Can I challenge the social media universe to put their collective might into getting banks to stop treating us this badly? Will any bank step up and say "Hey, we'd rather have loyal, life-long customers by treating people right then by charging them 120% annual interest to get their own money a little faster."

Sure, we can get Skittles to change their home page, but I'm not thinking we have the strength to battle this beast. The gauntlet is thrown, who's ready to pick up the challenge?

The committee overseeing federal banking-bailout programs is investigating the lending practices of institutions that received public funds, following a rash of complaints about increases in interest rates and fees.

Since the Troubled Asset Relief Program was launched last October, banks bolstered by capital infusions have boosted charges on a wide range of routine transactions, hiked rates on credit cards and continued making loans criticized as predatory by consumer advocates. The TARP funds are intended to open lending spigots and make it easier for people to borrow money.

Last week, for example, Bank of America Corp. told some customers that interest rates on their credit cards will nearly double to about 14%. The Charlotte, N.C., bank, which got $45 billion in capital from the U.S. government, also is imposing fees of least $10 on a wide range of credit-card transactions.

Citigroup Inc., another recipient of government cash, is trying to entice customers to borrow at high rates. "You could get $5,000 today," Citigroup's consumer-finance unit wrote in fliers mailed to customers. The ads don't disclose that the loans often carry annual interest rates of 30%.

The interest rates "compare competitively to similar offers in the market" and vary depending on the creditworthiness of borrowers, a Citigroup spokesman said. Citigroup has received $50 billion in capital from taxpayers, and the U.S. government will soon own as much as 36% of the company's common stock.

"To continue to offer competitive products and services and responsibly lend in this current environment, we must adjust our pricing," said a Bank of America spokeswoman about the company's new fees and interest rates.

The U.S. government's ownership stakes in hundreds of banks, as well as political ire stoked by lucrative pay and perks, are raising the specter of new regulation on basic banking practices. First-quarter results due starting this week will be scrutinized for signs of how much taxpayer-funded capital is being funneled into loans.

Elizabeth Warren, chairwoman of the Congressional Oversight Panel, the body named by Congress to oversee the federal bailout, said the panel is working on a report examining instances of potentially inappropriate lending by banks that got taxpayer capital. "The people who are subsidizing the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending," Ms. Warren said in an interview. "In a sense, we're asking taxpayers to pay twice."

Last month, a Senate committee narrowly approved a bill that would rein in many credit-card marketing and pricing policies, including ballooning interest rates. Proponents of the legislation say many of the largest card issuers have received government aid and so should be subject to greater scrutiny.

Banks say that raising fees and rates, even on low-risk customers, is a legitimate way to recoup some of the costs of the bad loans still on their books. They also say taxpayers have a financial interest in seeing the industry quickly return to profitability. Any revolt over price hikes could intensify the crisis by depriving institutions of a key income source, say banks. New restrictions on these lending practices "may truly have an impact on profitability," said Gerard Cassidy, a bank analyst with RBC Capital Markets.

Bailed-Out Banks Face Probe Over Fee Hikes - WSJ.com.

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[CommonSensical]

"Banks say that raising fees and rates, even on low-risk customers, is a legitimate way to recoup some of the costs of the bad loans still on their books." Now there's a thought. Let's make the good customers pay for the bank's bad decisions in taking on bad customers.

"They also say taxpayers have a financial interest in seeing the industry quickly return to profitability." Of course, if the taxpayers are being saddled with the costs of companies making bad decisions, we certainly do want them to be profitable. But here's a thought, why don't they, like us, take financial responsibility for their poor decisions? Sorry, not PC? Well then ...