Increasing fees to address new banking regulations isn't the answer

April 13, 2011

Satirical newspaper, The Onion, recently had a bit of fun with the banking industry and its response to sweeping regulatory changes taking effect this year. In the short “infographic,” The Onion detailed new fees planned by industry big boys, the so-called “systemically important” institutions by the Dodd-Frank Act (more on that in a moment).

There was the ten dollar Felix the Cat opt-out fee, which would assess a monthly charge to any customer not choosing the famed cartoon character as the design for his or her printed checks. And there was the ten dollar Speak to a Real Teller fee. It jumped to twenty dollars should you want to speak to a cute one. The blurb was good for a quick morning chuckle at our offices in northwest Austin, but the laughter soon passed.

By definition, satire plays on the realities of the human condition, The Onion on the real news of the day. In this case, large banking institutions must think the joke hits a little bit too close to home.

If only it was enough to shake them from their doomed course.

You really can’t pick up a newspaper or get online today without reading about new banking fees for 2011. Many of the stories you’ll find speak of a “perfect storm” of recessionary spending, declining asset values, and the Dodd-Frank Act of 2010. For the uninitiated, or for those who just don’t want to read through 2,300 pages of voluminous regulations, Dodd-Frank admirably aims to protect bank customers while simultaneously preventing an industry meltdown. You know, like the one that occurred just a few short years ago.

The Dodd-Frank Act applies most of its considerable pressure to “systemically important” institutions, or, those with more than $50 billion in consolidated assets. Put another way, those institutions whose failure would irreparably harm the United States financial system as a whole bear the brunt. The downside is that we’re talking about institutions void of innovative thought, unable to rethink and, instead, simply react.

Today, Chase Bank is testing increased ATM fees in some markets, more than doubling them (up to five dollars) for non-customers. Bank of America will offer free checking if your promise never to use a human teller, otherwise, expect an $8.95/mo fee. In short, if Dodd-Frank is going to cap and significantly reduce revenue from merchant card transactions, for example, then the big banks will have to get revenue elsewhere – from you.

References in the news to a “perfect storm” are apropos, but they leave out one far too crucial component: you, the customer. In an industry where cries for better customer service grow louder by the day, the large banks are reacting to Dodd-Frank by offering less customer service and actually charging more for it. You don’t have to be Warren Buffet to see that’s an unsustainable model.

The banking industry is on its way to a bit of a renaissance. The old policies no longer apply. In the end, those with the vision, innovation and drive to commit, fully and equally, to sound fundamentals and superior customer service will prevail. It’s about balance, a commitment to using every available resource we can to control costs while ensuring that customer service is not only maintained but improved to match your rightfully high expectations.

When we’ve accomplished that, everybody wins.

Topics: Featured, Blog Posts, The Corner Office, Customer Service, Accounting & Finance

Ed Lette

Business Bank of Texas

Ed Lette is a Founder of Business Bank of Texas. Serving as a licensed CPA since 1983, Ed’s extensive experience in the banking industry has led him to become the founding president of four national bank charters including Business Bank of Texas, N.A., and the chief financial officer of five national banks during his 45 year career. Ed serves as director of the Texas Bankers Association District 4, chairman of the Executive Advisory Council to the School of Business at Texas Lutheran University, and is a life member of the Texas Association of Business.
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