Just when you thought it was safe, Bank of America and other large, national banks, are still finding ways to charge customers new fees. Only a few months ago, word of a new $5 monthly fee for debit card users sent Bank of America customers into a frenzy, threatening to move money away from the financial giant. Bank Transfer Day was largely a success, despite the complicated process of switching banks in today’s automated banking environment.

Hundreds of thousands of customers enrolled in credit unions, smaller organizations that are generally more consumer- and community-friendly than national institutions. Fees like Bank of America’s $5 debit card fee hit mainstream news outlets, bringing personal finance into the consciousness of the public once again. Bank of America eventually dropped its proposal for the new fee, but the bank didn’t stop looking for more methods of extracting funds out of its customers.

For the last generation, customers have grown accustomed to free or mostly-free checking and savings. These are considered deposit accounts. Depositing your money with a bank is more beneficial for the bank than for the customer. Doing business with a bank does the company a favor. The institutions should be paying customers for the banks’ benefit of holding the customers’ money. Sometimes banks do pay consumers, through interest on savings accounts, which as most people know have been at pathetic rates for the last few years.

With money on deposit, banks can go out and offer loans to businesses and individuals, earning money on the interest charged on those loans. That’s where banks should make money from their customers. Savings and checking customers are doing banks a favor.

Lately, the problem has been that banks aren’t making as much money from lending as they had previously, and shareholders demand consistently growing profits. That pressure results in even more fees. And banks are now counting on the fact that last year’s outrage has subsided, and the public is now willing to live with the idea that basic banking is not free. Additionally, it’s fair to say that the cost for a bank to manage checking and savings accounts may have increased, due to research and development into technology to provide all the banking conveniences (online access, mobile apps, person-to-person payments, etc.) that consumers have come to expect, although one could argue the lowered reliance on tellers and live customer services representatives should offset that cost.

Furthermore, the latest round of fees are designed to hurt lower income households more than those with higher net worth amounts. It’s been true in investing for a while that the better rates and lower fees are available to those with higher balances. This is due to the attempt to convince customers to invest as much money as possible with any one particular institution or brokerage. The same is true with fees; the more money you have, the more leverage you have to demand lower costs for the services you buy.

This leaves low-income families in a tough spot. If you can’t maintain a minimum balance in your checking account, a monthly fee will reduce that low balance even further, possibly even below zero, so you end up owing money to the bank or the bank decides to close your account. While the balance minimums encourage customers to leave more of their money with one institution, not all customers have more money to deposit.

Here are a few recent examples of how the latest round of new fees from big banks penalize those without the means to deposit more.

• Some Wells Fargo customers have been subject to a new $15 monthly fee if unable to maintain a $7,500 balance. And they’ve recently changed policies to prevent customers from suing the bank or being part of a class-action lawsuit.
• Citibank increased its minimum balance to avoid a $20 monthly fee from $6,000 to $15,000.
• Bank of America is testing new monthly fees of $6 to $25 in three states (Arizona, Georgia and Massachusetts).

At the same time, an informal poll of fans of Consumerism Commentary on Facebook and followers on Twitter indicates most engaged Consumerism Commentary readers, who generally earn more than the average internet user according to basic demographic research, pay nothing for their checking account, though some are still subject to a minimum balance or enrolling in direct deposit to avoid a fee. Finding free checking is still possible, especially with credit unions, but non-students still need to occasionally jump through hoops with major banks.

New regulations are often cited by the financial industry as the trigger for punishing low-income customers for handing their money to banks for safekeeping and lending. Others see these new fees as a way for banks to increase profits while using regulation as a convenient scapegoat. Of course, opinions on the matter are generally divided along political party lines as well as between industry lobbyists and consumer advocacy groups.

Low-income families might continue to avoid the banking industry, which may be the unstated goal of financial institutions in the first place. Unfortunately, that leaves little choice for low socio-economic status communities other than turning to non-bank financial products, like expensive payday loans and check cashing services. Not only do these communities need better financial role models (education alone will never solve the financial literacy problem), but they need to be guided toward better products and services.

There’s a real market opportunity for better products and services, for smart entrepreneurs who are looking to make a difference. In the mean time, here’s how to close your Bank of America savings or checking account when walking into the branch won’t work for you.

Photo: MoneyBlogNewz
KVAL / AP

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Many Consumerism Commentary readers have written in to let me know that they recently received a check for about $98 from Bank of America. This check is not a result of the Bank of America overdraft fee class action lawsuit, but it is the result of a similar lawsuit. First of all, the overdraft lawsuit has only recently entered an appeal process. It could be another year or more before customers see any benefits from this latest class action.

The check is the benefit that customers are receiving due to an earlier class action lawsuit, Closson v. Bank of America. Customers who are eligible had a Bank of America, Fleet Bank, LaSalle Bank or U.S. Trust Company debit card and paid an insufficient funds fee, overdraft fee or similar fee before December 31, 2007. In order to receive a benefit, customers would have needed to file a claim form before May 1, 2009. The deadline to receive any benefits has long since passed, so even if you fit this description, it is too late to become a member of this lawsuit.

This is one of many class action lawsuits against Bank of America, some of which pertain to companies that were purchased by the bank, like Countrywide Financial.

• Ross, et al. v. Bank of America, et al. This lawsuit pertains to the bank’s forcing of customers into mandatory binding arbitration, much like Wells Fargo is doing today. This is a new class action lawsuit.
• Closson v. Bank of America. This is the class action lawsuit I described above. Bank of America encouraged its customers to use debit cards that were designed to increase the number of fees. If you received a check in or around December 2011, and if the amount is $98, it is likely a result of this lawsuit.
• Bank of America overdraft lawsuit. Over 1,000 Consumerism Commentary readers have offered their thoughts about Bank of America’s processing of customers’ debits in a certain order that ensured that they could maximize fee revenue from overdrafts. Read more here.
• Homeowner lawsuits. Class action lawsuits in several states, including California and Washington, allege that Bank of America or its related companies withheld taxpayer money designed to help homeowners facing foreclosure.
• Foreign currency conversions. Bank of America was one of many defendants (also including Visa, MasterCard, Chase, Citibank, and more) in a class action lawsuit regarding a conspiracy to set fees for foreign currency conversions, eliminating competition in this particular aspect of business.

Class action lawsuits are usually settled by the defendants, often without admitting any wrongdoing. As a result of settlement, affected customers often only receive a small award while the lawyers representing the class receive significant payments for their work and time. For example, in the overdraft fee settlement, lawyers will receive $123 million, or 30% of the settlement fund, unless the verdict is successfully appealed. At the same time, each affected customer will only receive a portion of the overdraft fees paid. That could be $35 or less per individual.

Are you included in a Bank of America class action lawsuit? Have you received a check in the mail from Bank of America without knowing why?

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