Like many Democrats, Hillary Clinton has talked tough about reining in mega banks. But as her presidential campaign has gotten underway, she’s focused on the homier side of the financial industry: community banks.
At a roundtable in Cedar Falls, Iowa, Clinton spoke on Tuesday less about tightening oversight on Wall Street and more about loosening regulations for banks on Main Street. She argued that red tape and paperwork for small banks across the country are holding back small businesses by making it harder to get much-needed loans.
At times, listeners might have even mistaken Clinton for a moderate Republican.
“Today,” Clinton said, “local banks are being squeezed by regulations that don’t make sense for their size and mission—like endless examinations and paperwork designed for banks that measure their assets in the many billions.”
“And when it gets harder for small banks to do their jobs, it gets harder for small businesses to get their loans,” she said. “Our goal should be helping community banks serve their neighbors and customers the way they always have.”
Community banks tend have less than $1 billion in assets, are usually based in rural or suburban communities and are the kind of place your uncle in Idaho might go for money to open an antique shop. Touting small businesses is a tried-and-true trope for candidates on both sides of the aisle. For office-seekers from Barack Obama to Marco Rubio, the subject is as noncontroversial and all-American as crabgrass.
The difference, then, comes at how politicians want to handle bigger banks. Congress right now is debating how far to exempt banks from certain regulations. Democratic lawmakers generally want to reduce them only for smaller banks; some Republicans want to exempt all banks, an approach Clinton criticized.
Big banks in the United States have become increasingly large and powerful in the seven years since the financial crisis. Of the 6,000-odd banks in the United States, the five largest control nearly half of the country’s banking wealth, according to a December study. In 1990, the five biggest banks controlled just 10% of the industry’s assets.
Small banks complain that federal regulation in the aftermath of the Dodd-Frank legislation is contributing to a decline in their numbers. Annual examinations at a community banks, for instance, require staff to walk regulators through paperwork. Filling out paperwork and paying for compliance lawyers to deal with new Dodd-Frank stipulations are burdensome extra costs, banks say. And new rules can impose high damages on lenders who do make unsafe loans.
“There’s an inherent advantage in scale,” said Mike Calhoun, president of the Center for Responsible Lending, pointing out that small banks often have more trouble paying for regulation compliance. “Community banks, being smaller, have less business to spread the cost of regulations over.”
It’s an issue that resonates with Iowa bankers, says John Sorensen, president and CEO of the Iowa Bankers Association. “A lot of the banks we have across Iowa are small businesses with 10 to 30 employees that have been interrupted in their ability to serve their customers through a good part of Dodd-Frank,” he said.
But some say the discussion about scrapping community bank regulations as Clinton suggests is a distraction. Small banks were in steady decline for many years before Dodd-Frank, and they are protected from liability on certain loans that big banks are not. And regulators argue that preventing risky mortgages of the kind that brought on the financial crisis is a good thing.
Much of the push to deregulate community banks comes from bigger institutions who want exemptions from regulation themselves. “If you were able to somehow magically trace who is whipping up frenzy about regulator burden on small banks, you’d find its trade associations at the behest of bigger banks,” said Julia Gordon of the Center for American Progress, a left-leaning think tank that has supplied some top officials in the Clinton campaign.
During the roundtable, Donna Sorensen, chair of the board of Cedar Rapids Bank and Trust and a participant on Tuesday, suggested to Clinton that more U.S. Small Business Administration-supported loans come with no fees. Clinton took notes and nodded in assent.
“If we really wanted to jumpstart more community bank lending, part of what we would do is exactly that—raise the limits to avoid the upfront fee” for businesses that need loans, Clinton said.
Clinton did not say specifically what regulations she would remove if she were elected president, but locals in Independence, Iowa, where Clinton stopped by for a visit after her small business roundtables, asked her to hold true to her sentiments. Terry Tekippe, whose family owns an independent hardware store, walked onto the street as Clinton walked by. “Keep us in focus,” Tekippe said.
“I want to be a small business president, so I am,” Clinton called back as she continued down the street.
They've managed to narrow the list down to "only" 31 fees.
The website GoBankingRates.com has compiled a rogue’s gallery of the “most expensive, egregious, unexpected and just downright unreasonable charges” confronting American consumers today.
No fewer than 11 of the worst fees named on the list are related to banking. That’s not surprising considering each year we drop $7 billion on basic bank charges for things like failing to meet minimum balance requirements and monthly account maintenance. That figure is tiny compared to the roughly $32 billion consumers pay annually for overdrafts—which, of course, is another hated fee featured on the list.
Behind banking, travel is the category with the second-most hated fees—a total of 10 in all. Common fees for things like changing airline tickets, checking or carrying baggage on flights, renting a car, and flying with your pet are named on the list. Arguably worse are the fees travelers incur through no choice of their own, without any extra service provided, such as the vague “resort fees” added to bills at some hotels and resorts, and the mandatory gratuities charged by many resorts and cruise lines.
On the other hand, some of the fees in the roundup seem easier to accept because there’s clearly some service and value provided. What’s more, while the price of these fees may not be entirely reasonable, it’s easy enough for people to be well aware of them before signing on board. We’re talking about things like homeowner’s association fees and charges for belonging to sororities and fraternities in college.
What fee is the worst of the worst? GoBankingRates doesn’t rank them. Besides, it’s a matter of personal opinion. Obviously, the fees you hate the most are the ones you pay, without much in the way of choice, while getting little to nothing in return.
For what it’s worth, the checked baggage fee was named by our readers as the Most Hated Fee in a vote-off conducted a few years back.
Breaches have risen dramatically very recently+ READ ARTICLE
In a time when major data hacks are on the rise—think Target, Home Depot, Sony—it’s no surprise breaches on individuals are also up. According to FICO, debit-card compromises at ATMs rose 174% from January to April of this year, compared to the same period last year.
And that’s just breaches of ATMs located on official bank property. Successful breaches at non-bank ATMs rose 317% in that period.
In other words, withdrawing money from an ATM is more dangerous than it’s been in a long time—specifically, the worst it has been in two decades, according to the Wall Street Journal, which cites a prediction from consulting firm Tremont Capital Group that criminals will make more than 1.5 million successful ATM cash withdrawals this year.
As Fortune reported earlier this year, a majority of American corporations believe they will be hacked in 2015. The questions they are all dealing with is how to prepare for them and how to deal with them when they happen, because preventing these compromises has become increasingly difficult.
Banking institutions, as well as the payment companies that connect banks to consumers, like Visa and MasterCard, have beefed up their technology more aggressively than ever in order to both innovate and securitize. But for a private consumer who simply wants to take money from an ATM, stats like these are nonetheless sobering.
Read next: 5 Easy Ways to Avoid Getting Hacked at ATMs
Almost a quarter of bankers said they'd break the rules
Wall Street bankers are feeling a greater willingness to violate laws and ethics to get ahead, according to a new survey that finds no discernible impact from years of record fines and tightened regulations.
One-quarter of respondents said they would violate insider trading laws to make a $10 million return as long as they knew they wouldn’t get caught, according to a survey of 1,200 financial professionals conducted by University of Notre Dame at the behest of the law firm Labaton Sucharow. That was actually a slight uptick from the previous survey, when the percentage stood at 24%.
Respondents weren’t exactly impressed with regulatory oversight either. Nearly half deemed the regulatory agencies ineffective at detecting and prosecuting illicit behavior.
How not to be a chump
I would venture to guess that mine was the last generation that was taught how to balance a checkbook. (I remember a Junior Achievement course in the 8th grade, circa 1995, that provided me the skills to keep my cash flow in the black.) But there’s something to be said for the ease and convenience of mobile banking.
With that ease, however, comes errors — sometimes multiple errors — in the form of overdraft fees because we’ve overspent without knowing it. Keep those unnecessary expenses in check with these ways to avoid overdraft fees.
1. Get Familiar With Your Bank’s Policies
Before you choose a bank, it’s important to familiarize yourself with its policies. Not all banks are alike, after all. Some banks offer overdraft protection, while some offer no-fee transfers from savings to checking. All banks have fine print that you should absolutely read. Going into a financial situation educated will help you cut back on costly mistakes that can be easily avoided.
2. Use Mobile Banking to Track Spending
If you’re one of the few people in America who still use paper checks as a primary source of payment, thus constituting the balancing of a checkbook, I should introduce you to my grandmother — because I think you’ll have lots in common.
But if you prefer to be part of the majority who live in the 21st century, it’s wise to keep track of your finances via mobile banking. Most banks have apps that you can download to your phone to keep track of your finances anytime, anywhere. There are lots of cool features as well, like the ability to transfer between accounts and deposit checks with a few taps and photo image. The latter is a godsend for me as a small business owner, since I no longer have to take time out of my day to deposit checks at a banking brick-and-mortar.
3. Login Daily to Monitor Your Balance and Transactions
What’s the first thing you do when you wake up? When you asked this question in the 1980s, the answer was usually “Go to the bathroom.” Fast-forward 30 years and that answer is altogether different — for me, at least. The first thing I do in the morning is check my social media and bank accounts.
Because before I start my day, I want to make sure that 1,500 strangers still like me, and none of them have robbed me blind. Logging in everyday reminds me to check for erroneous charges, allows me make a mental note on recent charges that may not have posted yet, and informs me on whether I can afford to go out to lunch or I should reign in the spending a bit — all of which help me avoid overdraft fees.
4. Get Alerts When Your Account Dips Below a Certain Threshold
When researching the ins and outs of your banking institution — particularly the checking account services it offers — look for information regarding text or e-mail alerts that notify you when your account dips below a certain threshold. For instance, I have alerts set at $100. If I make transactions that cause my account to go below $100, I’ll receive an alert that serves as a warning to stop spending immediately and build my account back up.
5. Transfer Funds Immediately
If you think you’ve perhaps made more purchases than you have money, transfer those additional funds from your savings to your checking account immediately. I don’t recommend dipping into your savings often (it defeats the purpose), but you should deal with the issue at hand first, which is avoiding overdraft fees. It’s also wise to bank at an institution that offers no-fee transfers when you’re in a bind. Sustaining a hit to avoid a hit is sure to put a kink in your day.
6. Ask to Have Overdraft Fees Waived
Pull a page from my playbook and call your bank if you feel like you deserve a pass on an overdraft fee. If it’s been awhile since you’ve made that mistake, or if you’ve been a loyal customer to the bank for many years, it’s worth the effort. In most cases, the bank will work with you to eliminate the fee on a one-time basis.
7. Opt Out of Overdraft Protection
Overdraft protection is good on one hand because it lessens the fee you pay if you overdraw the account — usually a $10 fee instead of $25 or $35. On the flip side, overdraft protection will allow you to continue to make purchases for which you don’t have the money. This is an especially unfortunate consequence if you’re not aware that you’re overdrawn and you continue making multiple purchases. You’ll rack up a fee for every single transaction, which, by the time they’ve all posted, could become a significant amount.
8. Don’t Use the Credit Option on Your Debit Card
Back in the early days of debit cards, my bank would charge me a nominal fee for each purchase when using it as a debit card, kind of like a competing ATM does. Made absolutely no sense to me, but because of that I started using the credit option when making purchases, which had no fees attached. Nowadays, debit charges are fee-free, so I try to remember to push the purchases through using that method, for one reason: Debit transactions post immediately, whereas credit transaction could take a few days to post. The former will help you stay on top of your financial situation in real-time while the latter could have you overdrawing your account unknowingly.
9. Keep X Amount of Dollars in Your Checking Account at All Times
The best way to avoid overdraft fees is to keep your bank account in the black at all times. To help ensure that you don’t go into the red, choose a self-imposed amount at which you’ll always keep your account — $100, for instance. If you mentally make it standard policy that your account consistently has at least $100 in it, you’ll rarely overdraw, if at all.
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Spending money you don’t have gets expensive fast. Whether it’s racking up balances (and interest) on credit cards, missing card payments because you can’t afford them or overdrafting your checking account, even one-time slip-ups can seriously strain your finances.
It’s true that spending too much on your credit cards can hurt your credit, but relying solely on debit cards comes with its own risks. Many people say they prefer debit cards because it helps them control their spending — at the same time, that can leave little room for error in estimating your expenses, potentially causing you to overdraft your account.
There are several overdraft services banks provide. First of all, you have to opt into overdraft protections, as mandated by federal law. By default, consumer accounts are set up so a transaction is declined if the cardholder’s account doesn’t have enough cash to complete the purchase. The transaction is declined at no cost to the consumer.
If you want the ability to complete transactions, even if your account can’t cover it at that moment, you can opt into overdraft services, like connecting a savings account to cover any checking account overdrafts. You can also have the bank cover your transaction for a fee, called an overdraft penalty. Most banks charge between $35 and $38 per overdraft, which is the most expensive service banks offer, according to an analysis by The Pew Charitable Trusts of basic checking accounts at the 50 largest banks in the U.S.
If you allow overdrafts, you’re most likely going to have to pay some sort of fee, but there are six large banks that charge no overdraft penalty fees:
- Charles Schwab
- First Republic
Additionally, there are three banks that offer accounts that prohibit any kind of overdrafting, protecting consumers from fees as a result. Bank of America, KeyBank and Union Bank offer such accounts.
Overdrafts and associated fees can be a big deal for consumers, particularly those who live paycheck to paycheck. Nearly a third of households without a bank account said a reason they remain unbanked is because of unpredictable, expensive fees on checking accounts, according to a 2013 report from the Federal Deposit Insurance Corp.
Losing money to fees can make it difficult to pay necessary bills and make loan payments, which can end up damaging a person’s credit standing. (You can see how missed payments are impacting your credit scores for free on Credit.com.) Make sure you’re familiar with your bank’s overdraft policies, know what you’re signed up for and keep close tabs on your transactions to make sure you’re not overspending — or that someone else is, without your permission. Whatever your preferred form of payment, understanding your account terms and regularly reviewing your account activity will help you avoid unexpected penalties.
More from Credit.com
Changing the way financial institutions operate will require more than calculations and complex regulation
We live in an age of big data and hot and cold running metrics. Everywhere, at all times, we are counting things—our productivity, our friends and followers on social media, how many steps we take per day. But is it all getting us closer to truth and real understanding? I have been thinking about this a lot in the wake of a terrific conference I attended this week on “finance and society” co-sponsored by the Institute for New Economic Thinking.
There was plenty of new and creative thinking. On a panel I moderated in which Margaret Heffernan, a business consultant and author of the book Willful Blindness, made some really important points about why culture is just as important as numbers, particularly when it comes to issues like financial reform and corporate governance. As Heffernan sums it up quite aptly in her new book on the topic of corporate culture, Beyond Measure, “numbers are comforting…but when we’re confronted by spectacular success or failure, everyone from the CEO to the janitor points in the same direction: the culture.”
That’s at the core of a big debate in Washington and on Wall Street right now about how to change the financial system and ensure that it’s a help, rather than a hindrance, to the real economy. Everyone from Fed chair Janet Yellen to IMF head Christine Lagarde to Senator Elizabeth Warren—all of whom spoke at the INET conference; other big wigs like Fed vice chair Stanley Fischer and FDIC vice-chair Tom Hoenig were in the audience—agree more needs to be done to put banking back in service to society.
But a lot of the discussion about how to do that hinges on complex and technocratic debates about incomprehensible (to most people anyway) things like “tier-1 capital” and “risk-weighted asset calculations.” Not only does that quickly narrow the discussion to one in which only “insiders,” many of whom are beholden to finance or political interests, can participate, but it also leaves regulators and policy makers trying to fight the last war. No matter how clever the metrics are that we apply to regulation, the only thing we know for sure is that the next financial crisis won’t look at all like the last one. And, it will probably come from some unexpected area of the industry, an increasing part of which falls into the unregulated “shadow banking” area.
That’s why changing the culture of finance and of business is general is so important. There’s a long way to go there: In one telling survey by the whistle blower’s law firm Labaton Sucharow, which interviewed 500 senior financial executives in the United States and the UK, 26% of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24% said they believed they might need to engage in unethical or illegal conduct to be successful. Sixteen percent of respondents said they would commit insider trading if they could get away with it, and 30% said their compensation plans created pressure to compromise ethical standards or violate the law.
How to change this? For starters, more collaboration–as Heffernan points out, economic research shows that successful organizations are almost always those that empower teams, rather than individuals. Yet in finance, as in much of corporate America, the mythology of the heroic individual lingers. Star traders or CEOs get huge salaries (and often take huge risks), while their success is inevitably a team effort. Indeed, the argument that individuals, rather than teams, should get all the glory or blame is often used perversely by the financial industry itself to get around rules and regulations. SEC Commissioner Kara Stein has been waging a one-woman war to try to prevent big banks that have already been found guilty of various kinds of malfeasance to get “waiver” exceptions from various filing rules by claiming that only a few individuals in the organization were responsible for bad behavior. Check out some of her very smart comments on that in our panel entitled “Other People’s Money.”
Getting more “outsiders” involved in the conversation will help change culture too. In fact, that’s one reason INET president Rob Johnson wanted to invite all women to the Finance and Society panel. “When society is set up around men’s power and control, women are cast as outsiders whether you like it or not,” he says. Research shows, of course, that outsiders are much more likely to call attention to problems within organizations, since not being invited to the power party means they aren’t as vulnerable to cognitive capture by powerful interests. (On that note, see a very powerful 3 minute video by Elizabeth Warren, who has always supported average consumers and not been cowed by the banking lobby, here.)
For more on the conference and the debate over how to reform banking, check out the latest episode of WNYC’s Money Talking, where I debated the issue on the fifth anniversary of the “Flash Crash,” with Charlie Herman and Mashable business editor, Heidi Moore.
A handy guide to what to keep and what to throw away.
If you haven’t already opted to go paperless, you might be swimming in a flood of receipts, bills, pay stubs, tax forms, and other financial documents. But it doesn’t have to be that way. Some of those papers need to be kept, but others can be shredded and tossed.
Here’s a guide on what to keep and for how long.
Receipts for anything you might itemize on your tax return should be kept for three years with your tax records.
Home improvement records
Hold these for at least three years after the due date of the tax return that includes the income or loss on the home when it’s sold. If you plan to sell the house and you have made improvements to it, keep receipts for those improvements for seven years — you may need them to lower the taxable gain on the house when you sell it.
Keep receipts for medical expenses for one year, as your insurance company may request proof of a doctor visit or other verification of medical claims. If your medical expenses total more than 10% of your adjusted gross income, you can deduct them. If you plan to take that deduction, you’ll need to keep the medical records for three years for tax records.
Keep until the end of the year and discard after comparing to your W-2 and annual Social Security statement.
Keep for one year and then discard — unless you’re claiming a home office tax deduction, in which case you must keep them for three years.
Credit card statements
Keep until you’ve confirmed the charges and have proof of payment. If you need them for tax deductions, keep for three years.
Investment and real estate records
Keep for three years, as you may need the documentation for the capital gains tax if you’re audited by the IRS. These records help track your cost basis and the taxes you owe when you sell stocks or properties. Once you receive the annual summaries, you can shred your monthly statements.
You’ll need bank statements for up to three years if you are audited by the IRS. If your bank provides online statements, you can switch to receiving your bank documents online and cut down on paper.
The IRS recommends that you “[k]eep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later.” If you file a claim for a loss from worthless securities or bad debt deduction, keep your tax records for seven years.
Records of loans that have been paid off
Keep for seven years.
Active contracts, insurance documents, property records, or stock certificates
Keep all these items while they’re active. After contracts are completed or insurance policies expire, you can discard these documents.
Marriage license, birth certificates, wills, adoption papers, death certificates, or records of paid mortgages
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We want more attention, they want more money
In the wake of the financial crisis, the Feds put the kibosh on a whole slew of bank tactics pertaining to overdraft fees, interchange fees (which they charge merchants when you use a debit card and which stores say get passed along in the form of higher prices) and credit card interest rate hikes. To cope, banks closed branches, invested in technology so they could replace costly branches and tellers with computers, and started trying to coax their more affluent customers into shifting their borrowing and investing activities from other institutions.
At the time, these actions made sense. Banking industry trade publications and white papers were full of buzzword-y terms like the “360-degree customer view,” which encouraged banks to think of a checking account as the financial services equivalent of the $1.99 chicken breasts at the supermarket: A loss leader that could reel in customers who would then stick around and buy more profitable items (like, say, a home equity loan or brokerage account). And banks poured money into their online offerings, mobile apps and upgraded ATMs that — the thinking went — could deliver customer service at the fraction of the cost of a teller depositing money or checking a balance for a customer.
But it didn’t turn out like that, according to a new study from consulting firm Capgemini and banking trade association Efma. The World Retail Banking Report shows that positive customer experiences fell among North American bank customers. “Return on investments in the front- office and digital channels are struggling to keep up with evolving customer expectations,” the report says.
The advancements in technology just built up people’s expectations — especially for tech-savvy younger customers. “Across all regions, Gen Y customers registered lower customer experience levels than customers of other ages, reflecting the high expectations Gen Ys have of banks’ digital capabilities,” the report says. The fact that young adults are less satisfied than customers in other age brackets shows that banks aren’t keeping up with the technological times, and less than half of American Gen Y bank customers say they plan to stay with their current bank over the next six months.
And yet, customers’ embrace and expectation of digital banking didn’t put the kind of corresponding dent in branch usage banks were seeking. In fact, the number of people using bank branches in North America actually went up — hardly the kind of digital revolution banks were seeking. Seems we’d still rather deal with a human being for most kinds of banking activities because we don’t think the digital service is up to snuff. “Customers still perceived the branch to be offering better service than what could be found on the digital channels,” the report says.
Banks’ cost-cutting moves in the service arena did some serious damage to customer satisfaction, dampening customers’ inclination to deepen their relationship with their banks or recommend the institutions to others, another key component of banks’ post-reform moneymaking strategy. “Alarmingly for the banks, there was a significant increase in the percentage of customers who were unlikely to buy additional products or refer someone to their banks,” the report says. In North America, that figure jumped by more than 20 percentage points in just a year.
The report blames this on growing competition to banks from other products and services like Apple Pay, LendingTree and Starbucks’ prepaid payment platform.
What could this mean for customers? If you said, “more fees,” you just might be on the right track. According to research company Moebs $ervices, financial institutions have collectively lost roughly $5 billion a year in overdraft fee revenue alone (although, if this sounds like a lot, keep in mind that they still made roughly $32 billion off these fees in the year that ended September 30, 2014, compared to around $37 billion just before the new laws kicked in.)
Moebs also says bank and credit union net operating income as a percentage of assets fell by nearly 7% last year from the year prior, driven by a drop in revenue from fees. “Financial institutions need to assess why fee revenue is falling and develop additional sources of fee revenue to get net operating Income back on track,” Moebs economist and CEO Michael Moebs wrote earlier this month.
And that technology we’ve grown to depend on might be the way to accomplish this. One recent study finds that a quarter of bank customers say they’d pay $3 a month just to use their bank’s mobile app, a figure that goes up to about a third for customers under the age of 35.
“Customers are willing to pay for services such as credit monitoring, person-to-person transactions, personal couponing, identity theft protection, and related other services,” a recent banking trade publication article notes, saying that if banks get on the ball, they could more than make up their losses from that declining overdraft revenue — probably not what all those already-frustrated customers wanted to hear.