Unless you use a local bank, your bank probably creates all sorts of unfair bank charges like excessive overdraft fees. And this is just one reason that I, Philip Tirone, am going on the record to say this: Your bank’s policies suck.
Here are five bank policies that I think should be changed, and changed immediately.
#1: Banks Regularly Report Inaccurate Information
Your credit score is determined by information banks and other creditors report to the credit bureaus. But according to a United States Public Interest Research Group study, 80 percent of you have errors on your credit reports, 25 percent of which are so bad that you would be turned down for a loan or a job.
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Let me repeat that. You might be denied a job because the banks report inaccurate or false information to the credit bureaus. With a 10.2 percent unemployment rate, the banks should be a little more concerned for your welfare.
But your bank does not take the time to make sure the information it reports is accurate—the burden is on you. Unfortunately, most people do not know about the mistakes until they have been denied a job or a loan.
And here is the kicker: If you have an artificially low credit score due to bank error, the bank will charge higher interest rates if you apply for a loan.
Why would the bank bother checking to make sure information is accurate when they benefit from these unfair bank charges? Basically, they get to legally rob you of your hard-earned money!
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#2: Stingy Guidelines, Loose Morals
In days past, the banks lent money to everyone, even if they were unqualified; nowadays the banks won’t give anyone a loan, even if they are qualified.
A client of mine is looking for a $300,000 loan on a $2 million piece of property. Her loan-to-value ratio is 15 percent, a figure that offers almost no risk.
So why are the banks refusing to give her a loan?
They say that because she is self-employed, she is a risk.
But she is clearly a picture-perfect borrower. She would never default on a $300,000 loan when she has $1.7 million invested in the property. She has enough money currently in reserves to pay the loan for five years. She has a crystal-clean credit report.
The banks were more than happy to take hundreds of millions in TARP money (a.k.a., taxpayer dollars), but now they are stingy when it comes to providing these very same taxpayers with loans.
And I think this sucks.
#3: They Intentionally Keep You in the Dark about Credit
You would think that bankers would be trained to tell their clients everything about credit card scores, how to build credit, and how to bounce back from bankruptcy. After all, wouldn’t banks want to help their customers secure the best interest rates?
Banks intentionally keep customers in the dark. In my opinion, they do this so your interest rates will remain high and they can keep pocketing money (as if the unfair bank charges aren’t enough). When I went into a bank with a SpyCam to ask how to improve my credit score, the banker gave me incorrect, misleading, and incomplete information.
To be fair, I do not think it was the banker’s fault. The bank failed to train him.
So not only do the banks levy unfair bank charges and refuse to provide loans to qualified taxpayers, they also charge high interest rates and keep silent about how you can improve your credit score and lower your interest rates.
Unfair? I think so.
#4: Unfair Bank Charges in the Form of Overdraft Fees
One of my colleagues, a sole proprietor, told me this story about unfair bank charges.
The day after my colleague deposited a large check from a client, the full amount of the deposit was reflected in her business account. Per her normal routine, she completed her budget that night, cut checks to cover business expenses, and transferred extra money into her personal account.
A few days later, she logged onto her account and was shocked. The account was overdrawn substantially, and she had incurred nine—nine!—overdraft fees over the course of three days. The overdraft fees alone were $315.
So what happened?
The client’s check bounced.
Okay, to be fair, she should have overdraft protection. She should have paid a little closer attention.
But the bank has her email address. They have her phone number. They could have simply alerted her after the first bounced check so that she could transfer money from her personal account. Banks have all sorts of systems in place to contact their clients with promotions. If they put their heads together, I feel certain they could create a system to alert customers the minute their accounts become negative.
This would be basic customer service, in my opinion, but banks fail to do this. After all, all those unfair bank charges put money in their coffers.
And making matters worse, banks currently can approve point-of-sale transactions even if you do not have money to cover them. Then they can turn around and charge you an overdraft fee.
Imagine this: Unbeknownst to you, you have $7 in your account. You go to a drugstore to by some cleaning supplies totaling $14, which you pay for via debit card. Even though the money isn’t there, your bank approves the transaction, charging you a $35 overdraft fee! When you check your account, you are overdrawn by $42, all because the bank approved a transaction when you did not have money to cover it.
Come July, the federal government will require banks to stop doing this unless you “opt in.” But be sure, they will find other unfair bank charges.
#5: They give loan modifications to people who break the rules and refuse to modify loans for those who follow the rules.
Now does this make sense at all? To qualify for a loan modification, you have to be behind on your payments. If you are responsible, cut corners, and take a second job so you can make your loan payments, the bank probably will not give you a loan modification.
This irks me more than all those unfair bank charges. In fact, this is a moral outcry. If you play by the rules, you receive harsher treatment than those who cannot fulfill their obligations. And I think this stinks to high heaven.