Sunday’s column: Bank’s increased fee shocks school officials
Coolcaesar | Wikimedia Commons
Perhaps you have overdraft protection for your checking account. I do. The Roanoke City Public Schools have had it since 2008.
They arranged for $10 million worth with Wachovia Bank, and they’ve renewed it each year since then, though like me they’ve hardly ever used it.
The first year, the “administrative fee” to have the account was $1,000, not counting the interest the schools agreed to pay if they used it.
After Wachovia failed in the 2008 financial crash, it was taken over by Wells Fargo, one of the largest banks in the country.
The next year the overdraft fee also was $1,000. Then last year it doubled, to $2,000. In June, when school officials sought to renew it again, Wells Fargo demanded $35,000, exclusive of interest.
This raises a number of questions including “Why?” but first let’s back up a little.
The school system obtained the overdraft protection because it seemed like the fiscally prudent thing to do, School Board Chairman David Carson told me.
The schools’ annual budget is around $140 million and almost every dime comes from the city government, the state government, and the federal government.
The school system cannot control when those payments arrive, nor can they easily control the dates that they must pay teachers, administrators, etc. Payroll is by far their largest single cost.
If a payment to the schools came in late, then hundreds or thousands of paychecks could bounce, and so could the checks employees wrote believing they had money in their accounts. So that’s why the schools established the overdraft. They have never had a balance on it for more than one day, Baker said.
Now $1,000 or $2,000 a year for such convenience is one thing, but $35,000 is quite another. Especially for a financially strapped school system that has been closing schools, laying off teachers, selling its buses, raising class sizes, cutting health insurance benefits and more to save money.
$35,000 equals a little more than half a teacher (including benefits), or a little bit less than half a school bus, or almost the cost of a head janitor in a school, or nine of those “smart” blackboards that are cropping up in classrooms, Carson told me.
The question isn’t, “Can the schools survive without the $35,000?” Of course they can. But there will be a bit less instruction or perhaps a dirtier school or more strain on the transportation system or nine fewer of those whizbang blackboards installed this year.
Now back to the other question: “Why? What’s the justification for the 1,650 percent increase in the fee?”
Because that’s an eye-opener. It’s kind of like paying $50 to fill up your gas tank one day, and then finding out the next that a fill-up costs $875 at the same station.
Carson and Deputy Superintendent Curt Baker Baker each said Wells Fargo blamed the increase on recent financial reform. Baker provided me with an Aug. 11 letter from Wells Fargo that said so.
“I cannot underscore enough that the new cost structure of the line of credit is a direct result of higher current and expected capitalization requirements of the banking industry,” Patrick Dixon, senior vice-president for government and institutional lending, wrote. “Any year-over-year changes in our cost structures, policies and internal guidelines are reflective of our adaptation to the evolving financial landscape and regulatory changes.”
What he’s talking is the Dodd-Frank Wall Street Reform and Consumer Protection Act, which passed Congress last year.
That was designed to prevent debacles such as the 2008 financial crash, which required taxpayers to bail out Wall Street and the big banks because of wildly irresponsible bets they had made with their customers’ money. Wells Fargo got at least $25 billion in the bailout, which it repaid with interest.
Bankers have been squealing loudly about how awful the law is and how much money it will cost them and how they would have to pass those costs along their customers. They want you to believe it’s the source of every problem in the banking industry.
You see, it is “regulation,” one of the dirtiest words in certain circles around Washington and on Wall Street these days. Even though a lack of regulation is what led to the 2008 crash.
Harry Gural, a spokesman for Rep. Barney Frank, D-Mass., told me it’s “complete nonsense” that Dodd-Frank mandates such wildly increased fees.
I also put the “why?” question to a Wells Fargo spokeswoman, Kristy Marshall. Her answer was somewhat different from her company’s senior vice president. Here is what she wrote in an email:
“This is customary when clients have large unused lines of credit, such as $10 million. Capital is reserved and if the client does not use the line, we charge an unused fee. The usage is reviewed at the annual renewal period.
“These costs existed pre-Wells Fargo, but the bank was “subsidizing” the costs for Roanoke City Public Schools because of the City and Schools relationship; however, that is no longer a sustainable business model given the present financial landscape.”
I later asked Marshall specifically whether the financial reform bill required the bank to charge the higher fee, and what section did that. She responded she didn’t know the legislation well enough to answer the question.
The city has not renewed the overdraft protection. Baker is shopping around for a better deal.
I’m not sure what conclusion you have drawn from this, but here’s mine:
Wachovia was headquartered much closer to Roanoke, and had much longer ties to our region than Well Fargo, which never really cared much about doing business in Roanoke, or they would have expanded here before they bought Wachovia.
Now that they’re here, Well Fargo figured they could squeeze some extra profit out of our schools. They announced Wednesday that they will try something similar to checking account holders in five states: a new, $3-per-month charge for the privilege of having a debit card.
So it seems like it’s all about making more money, but they’re pinning the blame on financial reform, and meanwhile the bank seems to be having some trouble getting their stories straight.
If I was their spokesman I’d lay it out more bluntly. I’d say:
“You’re darn right we want more money from you dumb taxpayers. That’s part of our business model. And by the way, thank you for the no-fee $25 billion loan back in 2008.
“But seriously, didn’t you know you can’t shake hands with a rattlesnake? That we bite? That’s what we do!”
Such bluntness would probably not go over well with bankers, though. So I guess I’ll stick to writing.
Carson said he had received word Thursday night that locally-owned Hometown Bank was willing to grant the schools $5 million worth of overdraft protection for a $2,500 annual fee.
I reckon that’s a signal Hometown Bank cares more about our kids, this community and its schools. Perhaps Hometown will wind up with all the city’s business, though it’s too early to say.
Stay tuned.
August 21, 2011 - 6:00 AM
smaller banks are worth it, large banks suck enormously, I KNOW.
“They want you to believe it’s the source of every problem in the banking industry.”
Because they know that some people are so stupid that they’d let their hair salon blame a bad haircut on Obama…and believe it. Pathetic.
Banking has always – always – been subject to regulation, although it looks like enforcement has been spotty. Obama didn’t invent bank regulation, but if you’re going to be fail enough to buy their money-grubbing as anything other than that, knock yourselves out.
Harry Gural, a spokesman for Rep. Barney Frank, D-Mass., told me it’s “complete nonsense” that Dodd-Frank mandates such wildly increased fees.
Oh, well, hell. That seals it. A Barney Frank spokesman said so.
I guess it’s easier to demonize capitialistic institutions than to do research for a column. Dodd and Frank should be in the penitentiary instead of writing bills, BTW..
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Even though a lack of regulation is what led to the 2008 crash.
Fact Check INCORRECT. The 2008 crash was caused by GOVERNMENT agencies Fannie Mae and Freddie Mac buying up bad loans made to unqualified people that undermined the grid on which derivatives were based.
Dan,
I think we sparred over this subject several months ago when you supported the financial reform for curbing credit card fees and rate increases.
My argument was the law was useless and would result in a shift in the fee structure. You argued I just supported big business.
Well here you go, you keep seeing new fees and shifted fees. I don’t think it’s fair but it’s just part of business and it is less fair now that essentially everyone that uses these banks will have to pay in some way, not just those who have late payments, over the limit balances, bounced checks etc.
I think the school system did the right thing, shop around. Similar to when you get an insurance policy renewal(home/auto) that increases or other bill that increases, you shop around for a better deal. That is the power of the consumer and the free market.
For what it is worth I bank with a regional bank, although I used to bank with Wachovia.
Are the mega-banks charging “unfair” fees? Seems like it. Is it due to regulation? To some degree, it probably is, though not entirely. I’m pleased that RCPS is using the method of dealing with this that all consumers should. Rather than complain or ask the government to get involved and “fix” the situation (fix is in quotes because the government rarely fixes anything – they tend to make the problem worse), the school board sought out a better alternative in the marketplace. Let’s hope RCPS rewards Hometown with all their business.
Finger pointing brings heat but little light. Corruption in gummint and in business basically fouls the human social experiment. Too few wield enormous power over too many–always have since we multiplied. Apparently most people, so long as they have their bread and circuses to distract them, like it that way. Fritz Schumacher had an elegant idea about this situation: Small is beautiful–economics as if people mattered. But mostly they don’t, aside from their value as a maintenance-free cash crop.
If the Wells Fargo debit card fee comes to this area, we’ll be out of there. Might be gone before then.
My wife tells me that Suntrust has notified checking acct customers that in November they’re instituting a $7/month fee for checking acct holders who don’t maintain a $500 average daily balance, and another $5 month fee for checking acct holders who wish to use debit cards at merchants.
When what is now Wells Fargo was First National Exchange Bank and later
Dominion Bankshares, it was a hometown, then rwegional based operation that was profitable, operated with some conscience, and prided itself on personal service and knowing and serving its customers. When it was taken over by First Union, Wachovia, Etc, that sertvice disappeared and it became increasingly difficult to deal with. I long ago took all my accounts away from them and put them where I can deal with real live people. And I’ve never regretted that move.
If I understand this correctly, you were told that Wells Fargo has 10 million in a bundle somewhere for the Roanoke Schools.
@5
“Rather than complain or ask the government to get involved and “fix” the situation (fix is in quotes because the government rarely fixes anything – they tend to make the problem worse), the school board sought out a better alternative in the marketplace.”
Great comment Katie. Consumers can vote with their feet, money and business. Customers walking away will prove much more effective than any attempted government fix.
Dan hailed the government fix for “unfair” credit card practices. Well the government fix for that and interchange fees are going to bite all customers in the rear.
Frank, please elaborate.
I think Frank is referring to the second paragraph.
“Perhaps you have overdraft protection for your checking account. I do. The Roanoke City Public Schools have had it since 2008.”
“They arranged for $10 million worth with Wachovia Bank, and they’ve renewed it each year since then, though like me they’ve hardly ever used it.”
What happens when the Fed. reduces banks’ debit card fees? We were warned they would have to re-coup the lost revenues elsewhere.
#14 HAVE to recoup the lost revenues?
When you act like a scumbag, blame the government. How very very convenient. The nerve of the banks is astounding. The ignorance of the people who simply accept that it is the government’s fault is sad.
Just like they blamed their unconscionable actions in the housing bubble/mortgage fraud crisis on the government wanting people to own homes, these folks are con artists extraordinaire! And because the right wingers have convinced us all that St. Reagan was correct and “the government” is the problem, they fall for it and defend the banks, polluters and non job creators. We deserve the butt-kicking we get on a regular basis for such stupidity.
Seems like RCPS has all sorts of problems other school districts don’t have.
“We can’t pay our bills so we need a meals tax. Football coaches at PH are racist, and that’s why we can’t keep them. Our bank is screwing us. Blah, blah”.
Are the county schools having this same problem? No? Maybe the problem isn’t the bank.
Suzie,
To borrow one of your own lines: Until you pay as much in city property taxes as I do, you have no right to comment on these matters.
To borrow one of your own lines: Until you pay as much in city property taxes as I do, you have no right to comment on these matters.
Mmm. I’d say we pay about ten times what you do in city property taxes, so you probably don’t want to go there, sport.
Except that in the past you’ve denied you live in the city, Suzie. So obviously you and hubby pay nowhere near what I do. So by your own reasoning you have no right to squawk.
Except that in the past you’ve denied you live in the city, Suzie. So obviously you and hubby pay nowhere near what I do. So by your own reasoning you have no right to squawk.
Dan, why do you think people on pay property taxes only on residences?
#17 “Football coaches at PH are racist, and that’s why we can’t keep them.”
Where the hell did this BS come from?
And, yes, the bank IS screwing them.
“My wife tells me that Suntrust has notified checking acct customers that in November they’re instituting a $7/month fee for checking acct holders who don’t maintain a $500 average daily balance, and another $5 month fee for checking acct holders who wish to use debit cards at merchants.”
You may want to check on what type of account you have. I just got a SunTrust account and all I have to do is have direct deposit and there are no fees.
23 Tell us again how PH doesn’t chase off effective coaches.
No, Scott – what Dan wrote is true: I just got the same letter from Suntrust about the new fees that go into effect in November.
I have direct deposit at Suntrust.
pammala – I have to agree with your post on here about large banks.
#24 Tell us again about the racist part? Where did that stupid part of your post come from?
Bradley was a good guy and it was sad to see him go. Everybody I know liked him and wanted him to stay. Now why the heck would you bring race into that one? Oh, because you bring race into everything, that’s right.
Now as far as “effective” goes, the guy before Bradley was 10-30. That’s your idea of effective? And he planned to stay at PH to teach (I don’t know if eh did), so he didn’t exactly flee. Before him, the coach was 3-17. Guess that’s what you think of as effective, eh? One of the coaches before that was effective but he got chased off after slapping around or jerking the head of a player. A white player.
Suzie, before you continue to make idiotic remarks about local sports, you might brush up on what you’re talking about. You’ve now embarrassed yourself attempting to talk about soccer, volleyball, track and field, and football.
gdad, that fee might happen
http://www.dailyfinance.com/2011/08/16/wells-fargo-3-debit-card-charge-a-sign-of-more-bank-fees-to-co/
#29 We knew they were rolling it out in a few states. We use our debit primarily to get money from an ATM. But, hey, if they want us to walk in and cash a check, taking up a teller’s time instead, we can do that. Or we’ll move on to another bank, maybe a local one.
Avoid Wells Fargo like the plague. I lived over West for a few years and they were the ONLY bank in the very small town, so I had no choice. 2 FREAKING YEARS after I closed my account they came back on my to try and collect fees they “forgot” (their word) to charge me when I was a customer. When I refused to pay them, they reported me to a collections agency. Took me weeks to get it settled. I hope everyone in Roanoke who is banking with WF closes their accounts ASAP.
#31 Considering what one of their employees has been telling me about the organization, we likely will. But it’s a pain in the butt switching.
It’s very easy to switch, and worth it. Call any local credit union and they’ll walk you through it.
The Suntrust checking fee is waived if you have direct deposit. The $5/month debit card fee is not.
I have a checking account with Suntrust but it’s my last remaining big-bank account. I’m moving it to Freedom First Credit Union, and will start using their debit card instead (at no charge) from now on.
Crickets from suzie about those PH coaches.
Yep, suzie had to drop that one after being destroyed yet again. Bye bye.
Why on earth would you bash one of the Roanoke Valleys largest employers? Why would you suggest customers leave? If customers leave, your neighbors, friends and others whom I’m certain you know will be JOBLESS!. The Roanoke area doesn’t need that! Get off Wells Fargo! Shame on you.
#36 When employers do stupid things to their customers or mistreat employees, they should get bashed. Carilion is the area’s LARGEST employer. Does that mean they should never be criticized. Oh wait, the RT employs hundreds, everybody stop bashing them.
Nanna, don’t kid yourself. Wells Fargo doesn’t give a rat’s butt about Roanoke.
I bank at Valley Bank…I will never use WF or BofA. They don’t give a fig for their customers and it shows.