March 31, 2023

Bucks Blog: Banks Lag on Consumer-Friendly Checking Practices

Two of the country’s largest banks scored well on a ranking of the consumer-friendliness of their checking accounts, but no bank met all of the recommended criteria, a new analysis found.

The report, from the Pew Charitable Trusts’ Safe Checking in the Electronic Age project, assessed 36 of the country’s largest 50 banks, ranked by deposits, on their policies for clear disclosure of terms and fees; overdrafts; and dispute resolution. (Fourteen of the country’s 50 largest banks were not included because they didn’t offer a way for consumers to learn about their policies without visiting a bank branch).

Pew defines “best” practices as those that are most effective in giving account holders clear, concise information about costs and terms; reducing the number of overdrafts, and eliminating practices — like transaction re-ordering – -that maximize overdraft fees; and providing a meaningful alternative to mandatory binding arbitration for consumers to solve problems with their bank.

The report identified seven “best” practices and 11 “good” practices. For instance, Pew’s “best” practice for disclosures is the adoption of a simple “summary box” or a page that lays out the basic terms and fees associated with the account in simple language. Eight banks meet this criteria, Pew found. (Pew has worked with banks to help them design the simplified disclosures).

The top-ranked bank overall was Ally Bank, an online-only bank that met six of the seven “best” practices identified by Pew, and nine of 11 “good” practices.”

Two of the biggest banks, Citibank and Bank of America, ranked in the top five over all, with five “best” practices each. [Read more…]

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BUSINESS: Business Day Live | Cable’s New Ally

September 24, 2012

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Audit of TARP Faults U.S. Over Executive Pay

Federal auditors said that the government failed to rein in executive compensation at the biggest companies it bailed out during the financial crisis because its main concern was simply getting its money back.

Months after the emergency rescues began in the fall of 2008, the Obama administration announced pay caps of $500,000 for executives of seven companies that received major assistance from the taxpayers. Congress then passed a law requiring the Treasury to establish a special master to administer the cap and other new compensation rules for those that received the most money from the Trouble Asset Relief Program, or TARP.

Though Kenneth Feinberg, the special master, had been appointed to oversee the pay, a report released early Tuesday said that he had been pressured by both the companies and the Treasury to get around the caps.

Forty-nine people received packages worth $5 million or more from 2009 to 2011, according to the report.

Two of the seven companies that were singled out, Bank of America and Citigroup, were so eager to avoid the pay caps that they paid back their bailout money long before anyone expected them to be able to.

The other five companies were the American International Group, Chrysler, Chrysler Financial, General Motors and Ally Financial, which was formerly the General Motors Acceptance Corporation.

Negotiators for the companies told Mr. Feinberg that their top people needed big cash salaries, or at least payment in stock that could be sold right away. Otherwise they would quit, the argument went, harming the companies’ profitability and the likelihood they could ever pay back the government.

In one bargaining session, the chief executive of Ally Financial offered the example of an employee making $1.5 million, with $1 million of it in cash.

“This individual is in their early 40s, with two kids in private school, who is now considered cash poor,” Ally’s chief explained, adding that such people “would not meet their monthly expenses” if the new rules were followed.

A.I.G., G.M. and Ally still collectively owe the taxpayers about $87 billion.

“Under conflicting principles and pressures,” Mr. Feinberg approved multimillion-dollar packages for many executives, the audit said. Mr. Feinberg developed a system for approving or rejecting the requests.

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Mario Draghi, Into the Eye of Europe’s Financial Storm

MARIO DRAGHI was working the room as only Mario Draghi can.

The occasion was a gala at the Old Opera House here in honor of Jean-Claude Trichet, the most powerful central banker in Europe. But in some ways, the evening belonged as much to Mr. Draghi, the Italian who will succeed Mr. Trichet on Tuesday as the president of the European Central Bank in the midst of an economic maelstrom that threatens to tear apart the euro, if not Europe itself.

European leaders took a step toward resolving the crisis last Thursday, with an agreement from banks to take a 50 percent loss on the face value of their Greek debt. Far from heralding an end to the problems, however, the plan ushered in a crucial new phrase in the battle to avert financial disaster.

But despite the challenges awaiting him, Mr. Draghi was in fine form that night earlier this month. Over here, he chatted quietly with Angela Merkel, the chancellor of Germany and a main ally. Over there, he met with Christine LaGarde, the managing director of the International Monetary Fund. And everywhere, Mr. Draghi vowed that there would be no surprises on his watch.

It was vintage Draghi, a performance so subtle and politic that it seemed to please everyone. Which, it turns out, is the Draghi way: people often seem to see what they want to see in him.

One European central banker, for instance, predicted that Mr. Draghi would try to curtail a controversial central bank program intended to prop up financially weak nations like Greece, Ireland, Portugal, Spain and Italy — Mr. Draghi’s native country — by buying those nations’ government bonds on the open market.

The tactic, which in effect has turned the central bank into the lender of last resort from the Baltic to the Mediterranean, is deeply unpopular here in Germany, the Continent’s economic engine. Many here view the program as tantamount to a taxpayer-funded bailout of nations that should never have been let into the euro club to begin with.

But another high-ranking monetary official in Europe predicted just the opposite for Mr. Draghi: that he would be more willing to unleash the full power of the central bank. Both officials spoke on the condition they not be identified to avoid alienating him. Mr. Draghi declined to be interviewed for this article.

The question is whether Mr. Draghi, 63, can satisfy his competing constituencies as he confronts a euro-zone crisis that keeps testing the limits of policy-making.

“I can only guess where he will go with monetary policy,” says Carl B. Weinberg, the chief economist at High Frequency Economics in Valhalla, N.Y.

UNTIL last Thursday, when leaders outlined their latest plan, Mr. Trichet had long argued against a severe reduction in the value of Greece’s bonds. He had maintained that euro-zone economies must pay their debts, even if they are on the verge of insolvency, as Greece is.

Last July, in one of his first big speeches after his appointment had become official, and just before Greece would need a second bailout, Mr. Draghi seemed to break with Mr. Trichet.

“The solvency of sovereign states has ceased to be a foregone conclusion,” Mr. Draghi told bankers in Rome. It is too soon to tell whether he will adopt a more pragmatic, flexible approach at the central bank, which under Mr. Trichet came to be seen as rigid. It is the only major central bank that has not reduced interest rates to near zero.

Those closest to Mr. Draghi say his economic views have been shaped by his challenges at the Italian finance ministry in the 1990s, when Italy was expelled from the euro zone’s predecessor, the European Exchange Rate Mechanism and, like Greece today, came close to bankruptcy.

His record is not without controversy. In Italy and later, as a vice chairman for Goldman Sachs in Europe, Mr. Draghi was a proponent of nations and other institutions like pension funds using derivatives to more efficiently manage their liabilities. In some cases, many experts now contend, these transactions helped mask the finances of Greece and Italy before those nations were allowed into the euro.

People who know Mr. Draghi point to his time at the Massachusetts Institute of Technology in the late 1970s, when economists there emphasized taking a practical approach to solving economic problems, rather than hewing to a particular ideology.

“He is a pragmatist,” says Olivier J. Blanchard, the director of research at the International Monetary Fund who received his economic doctorate from M.I.T. in 1977, a year after Mr. Draghi.

Even so, Mr. Draghi is unlikely to challenge the founding dogma of the European Central Bank, which demands that it adhere to its German-inspired mandate to fight inflation. That he has been endorsed by Germany’s political and economic establishment suggests that he will be constrained from taking an unorthodox approach.

“I have a very high regard for him,” says Otmar Issing, the influential German economist and a former member of the central bank’s executive board.

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Bucks: A New Type of Reward With Your Debit Card

Many banks are canceling or scaling back debit-card rewards programs, due to a pending cap on the swipe fees that bigger banks can charge merchants for processing transactions. USAA Bank, for instance, is canceling its debit rewards program as of Sept. 1.

But there’s a new kind of debit rewards option cropping up at some banks, this time, offering customer discounts that are funded by retailers eager for business, rather than by the banks themselves.

So-called “merchant debit rewards” are programs in which retailers team up with banks, with the help of an outside contractor, to offer discounts to debit card users. But instead of getting rewards points or cash back from their bank, card-holders get discounts funded by the store selling the goods. The merchants pay a small fee to the bank for sending the customer their way, so it actually can make some money for the banks.

That’s why you may soon be hearing about the program from your bank, says Alex Matjanec, co-founder of, a bank comparison site.

There hasn’t been a huge rush yet by banks to offer the programs. They may have been waiting to see what happened regarding the swipe-fee caps, he says. But a few online banks and regional financial institutions already offer the programs, including Ally BankBeneficial Bank and the South Carolina Federal Credit Union.

The systems operate through the banks’ online banking sites via third-party servicers, like Billshrink, for instance, which calls its offering Statement Rewards, and Cardlytics. Bank customers receive the offers via their online bank account.

Here’s an example of how it works: Say I like to shop at Macy’s, using my debit card. So Macy’s offers me a deal of $10 off my next purchase, if I spend $50. I shop at Macy’s and later get the $10 deposited into my account; Macy’s pays my bank a percent of the total sale as a fee, and the bank pays a portion of that fee to the company that manages the service. (In some options, the discount is automatically applied at the point of purchase; it depends on how the bank wants the service to work).

Details of the systems vary, but in general, to get your offers, you log on to your online banking account and click on an “offers” tab, or something similar. If you see a deal you like, you click to activate it, shop at that merchant, and the discount is applied the next time you shop at that store.

In addition to department stores, other merchants testing the service include Subway, Apple’s iTunes, Amazon and Sports Authority, says Mr. Matjanec. If consumers use the deals carefully, he said, they can eke a bit more benefit out of their checking accounts, beyond the paltry interest they may be earning.

In addition to rewarding existing customers, the rewards also can be used as a way to attract new customers. For example, if I frequent Starbucks, a local coffee shop may offer me a discount to try their brew instead.

The question is whether customers want a service that, essentially, brings advertising to their bank statement. And the  programs may make some consumers wary, because it involves making offers based on their purchase patterns. But Schwark Satyavolu, chief executive of BillShrink, says no information is revealed to outside vendors. “Our platform is built so no information is exchanged,” he said. “Merchants cannot see who bought what.”

Billshrink’s research shows a majority of consumers are interested in the service and would even switch banks to gain access to it, he said. He says many more banks will be rolling out the program in coming months.

The marketing consultant Adam Hanft, though, says he thinks the new rewards programs may be a hard sell. Consumers watching their pennies during tight times may not be eager to see pitches to spend more, even if it’s couched as a discount at stores they already frequent, while looking at their checking account balance. “I think it’s a gimmick,” he said.

Would you use a merchant reward service, if your bank offered it?

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