Questioning the Integrity of Banks

At the White House, President Barack Obama met some banking executives to demand transparency and clarity – he is hoping to end what he calls “abusive fees and rates” especially coming from the financial institutions bailed out through TARP (Trouble Asset Relief Plan).

Both the Senate and US House are pushing to pass the consumer protection bills right away. An example would be HR 5244 (Cardholder’s Bill of Rights). Key protections of this bill are:

• Barring the issuance of credit cards to minors
• Shielding consumers from subprime credit cards with high fees
• Preventing banks from using damaging consumer’s credit ratings and misleading terms
• Protecting cardholders from gimmicks on due dates
• Requiring consumer payments’ fair allocation
• Stopping penalties for those cardholders who pay their bills on time
• Letting consumers set credit limits to prevent excessive over-limit fees
• Ending arbitrary or unfair interest rate increases

However, according to Ed Mierwinski, US PIRG consumer program director, these new penalties or rules won’ t take effect until July 2010. “Right now, banks are taking advantage of the economy to raise money through these tactics. We think that’s wrong, unfair, dishonorable, and disappointing.”

Not only this, the services, charges, and rules of savings accounts, checking accounts, and loans are getting more complicated too. Don’t be surprised if a number of banks derive almost half of their revenue from penalties and fees.

Meanwhile, the banking industry insists that their services should be used entirely at the discretion of the customers. They say that the penalties and fees are fair since they have fixed costs to pay too. Their services cannot be free and it’s the customer’s responsibility to honor due dates and keep track of balances.