This is not good PR for the banking industry. And I don't just mean the fact that banks are engaging in the practice of charging overdraft fees for debit card purchases. I'm actually talking about the industry responses in the article. They do nothing to ingratiate banks in consumers' minds (and boy howdy do they need some ingratiation...).
Backstory: Instead of declining debit card transactions, many banks let the transactions happen, take the account into overdraft, and hit the customer with (some would say exorbitant) fees for the overdraft. It's a well-known, "profitable" practice, and a bit shady in my opinion. The card networks have the embedded capability for the issuer to decline the transaction. In the case of credit cards, if the cardholder is over his/her limit, the transaction is declined. Same should hold true for debit cards (at least for those that run over the V/MC rails, and probably for those that run over the EFT networks as well). If the transaction will take the account into overdraft, the logical action on the part of the issuer is to decline the transaction.
So the response from the industry when confronted with this? (Granted, these are selective responses...but they are the ones that made it into the NYT article). Here are a few...
1. "Bankers say they are merely charging a fee for a convenience that protects consumers from embarrassment, like having a debit card rejected on a dinner date."
Personally, I'd rather be embarrassed and pay cash for dinner than not be embarrassed and pay the fees later. Yes...I'm joking around, but the cavalier response does nothing to indicate that the banking industry is backing the consumer. "Protecting them from embarrassment?!" Please...
2. "'Everyone should know how much they have in their account and manage their funds well to avoid those fees,' said Scott Talbott, chief lobbyist at the Financial Services Roundtable, an advocacy group for large financial institutions."
Seriously? That's what you got? "People should manage their own finances?" What about all the talk of financial institutions being a friend to the consumer and assisting consumers in managing their finances? What about the premise of the debit card as a vehicle to do that??? Not good. Definitely not good.
3. "Michael Moebs, an economist who advises banks and credit unions, said Ms. Maloney's legislation would effectively kill overdraft services, causing an estimated 1,000 banks and 2,000 credit unions to fold within two years. That is because 45 percent of the nation's banks and credit unions collect more from overdraft services than they make in profits, he said."
Again: SERIOUSLY?? "Banks will go out of business if they can't do this." Hey, I sympathize with needing to earn a profit. But you're not going to ingratiate yourself with regulators, Congress, and the American public if you're trying to turn a profit in an underhanded manner (and I'm being nice in characterizing it that way). Oh, and did I mention that the financial services industry is in dire need of ingratiation these days??
So...rather than sweeping this under the rug and hoping it will go away, let's at least make an effort to get the industry messaging right. Perception is reality. The FIs that can win the consumer perception battle are often the ones that win the customer acquisition battle.
Or so it would seem.
Leave a comment