BankThink

M&A consolidation, improved portfolio performance and legislation leveling the playing field provide incentive for midsize banks to relaunch card programs.

Receiving Wide Coverage ...Overzealous Overdrafts: As if it weren't tough enough to be a commercial banker these days, the Consumer Financial Protection Bureau is taking aim at account overdraft fees—a $32 billion source of industry revenue. In a report released early Tuesday, the agency criticizes U.S. banks for everything from confusing consumers with overdraft fee rules to reordering transactions to increase the fees individual customers pay, the Wall Street Journal reports. "What is marketed as overdraft protection can, in some instances, put consumers at greater risk of harm," Richard Cordray, the CFPB's acting director, told reporters during a heads-up briefing prior to the report's official release. "Consumers need to be able to control their costs and expenses, and they deserve clarity on those issues," he added. Cordray said the consumer bureau is not making a policy recommendation per se but will continue to examine the issue, the Washington Post said. The CFPB found that heavy users of overdraft coverage pay about $900 a year more than consumers who don't incur overdraft fees. The bureau over a year ago put out a request for information and began studying how the banks it supervises were charging the fees. Banks with less than $10 billion in assets were excluded from the study. The CFPB's just-released report zeroes in on the big banks, which usually charge higher overdraft fees than smaller banks. At banks with more than $25 billion in assets, the median overdraft fee was $35 at the end of 2012, the Journal says, citing statistics from Moebs Services. Banks with less than $100 million in assets charged a median price of $25. Even so, community banks are even more heavily reliant on overdraft fees to generate revenues than are their larger rivals, the CFPB said, citing industry research. The bureau's latest scrutiny of overdraft fees comes three years after a Federal Reserve crackdown, which prohibited banks from allowing customers to automatically overdraft checking accounts and incur high fees in the process. The move was portrayed at the time as seeking to prevent consumers from getting hit with $35 overdraft fees for $3 lattes. Bad publicity and the 2010 regulatory squeeze have prompted many big banks to reduce their reliance on overdraft fees and encourage customers who rack up a lot of them to take their business elsewhere, the Journal says. Since 2007, nearly 24 million checking-account customers have switched from big banks to small banks and credit unions, it adds, quoting Mike Moebs, chief executive of Moebs. "They've lost checking accounts and they've lost them on purpose," he said. Wall Street Journal, Washington Post, Politico, American Banker

A dubious story about double-charging in Marks & Spencer, the retail home of the British middle classes, is worth examining to make sure similar misconceptions don’t spread in the U.S.

Research indicates education from a counselor who helps homeowners understand the terms of their mortgages should be part of the formula for sustainable homeownership.

Receiving Wide Coverage ...Big Brother and Banking: The financial services industry has made a few cameos in the unfolding story of the National Security Agency's vast surveillance of phone "metadata" and Internet communications. First, Edward Snowden, the (probably now former) Booz Allen contractor who leaked NSA documents to the Guardian and the Washington Post, says he grew disillusioned while working for the CIA in Geneva in 2007. "CIA operatives were attempting to recruit a Swiss banker to obtain secret banking information. Snowden said they achieved this by purposely getting the banker drunk and encouraging him to drive home in his car. When the banker was arrested for drunk driving, the undercover agent seeking to befriend him offered to help, and a bond was formed that led to successful recruitment." A Times article notes that Palantir, a tech firm founded by PayPal vets including Peter Thiel, has been a key partner for the spy agencies. The same article says U.S. privacy laws "offer virtually no protection to … non-telephone-related data like credit card transactions." And the Journal reports the NSA has indeed "cataloged credit-card transactions," though it's unclear if the "credit card companies" giving the agency this data are issuers or networks, since none of those "credit card companies" are named.

John Bogush, EVP with Alexander Proudfoot, explains how an emphasis on human cpital can pay off for credit unions.

There was a striking contrast about credit unions on full display last week that might be best summed up as "There are a lot more than one way to grow."

The constant pillorying of banks can hardly inspire public confidence in them. Regulators should focus, instead, on peer comparisons and the encouragement of effective policies and procedures.

A recap of the informed opinions (and the discussions they generated) on BankThink and AmericanBanker.com this week.

Rising rates can expose lurking dangers across the industry.