I don’t know about you, but I’m sick of being taken advantage of by my bank. What do I look like, an ATM? “Hmmmm… let’s see what he will pay for now.” Each year banks make more and more money from fees. Some banks (Bank of America) have reported fee income as high as $1.5 billion per year. Fees on everything. They must have a creative war room somewhere deep in the bowels of the bank, perhaps near where the old vault used to be. In it they house a highly touted team of creative types; think the writers of 30 Rock on steroids. They sit around cooking up all sorts of ways to bleed that checking account of yours until you wish you were back in the day when money just went in the cookie jar or under the mattress.
The latest that has come across my desk is something called Wells Fargo Credit Defense Service. (Read Wells Fargo’s description of the program here.) No, it doesn’t really protect your credit; what would give you that idea? On the contrary, it exploits the fact that you have credit. Here’s how it works. Lots of people carry balances on their credit cards; I suspect it is more than half of all credit card holders. You’d think Wells Fargo would be satisfied with the enormous interest rate they charge on those balances; more than likely upwards of 15%. Not bad when the bank can borrow from the Fed for just north of 0% (around ½ of 1%).
Nope, they see those credit card balances as another potential revenue stream. So let’s say a Wells customer keeps a $5,000 balance. The guys down in the vault, led by the Manager of Creative Fees, Dewey Cheatham III, begin drooling.
- Hmmm. That kind of balance might make our customer a little nervous… yeah, nervous about losing their job and not being able to pay us back. Nervous is good team, people who are nervous do stupid things. Aha, we’ll sell them some insurance. Pay us every month and if you become disabled or lose your job, we’ll pay your credit card balance.
~ Dewey, that might not work, that’s a lot of money we may end up having to pay back.
- Yeah okay. On second thought, we’ll only pay 4% of your balance. That way a customer with a $5k balance only leaves us on the hook for $200. Unemployed or not, disabled or not, you’re on your own for the remaining 96%.
~ Huh? Don’t you think that’s a little greedy?
- You’ve got a point. Okay. If they die, we’ll pay the entire amount.
Classy, Dewey. Not surprisingly, this Credit Defense “service” is a tough sell. Why would someone with a balance on their credit card want to add monthly to that balance—simply for some overpriced and limited insurance? Nope, this is not going to work Dewey.
Well it is going to work if the bank, either by itself or through a marketing company, simply slips this “coverage” (read: monthly fee) onto their customer’s statement when they activate their new credit cards. “Say it fast, say it softly, do what you need, but sign people up,” says up-and-coming Vice President of Unconscionable Fees, Clarence “To Hell With Our Customers” O’Really.
And as they do so, thousands more find themselves paying for something they never agreed to pay for; they never even knew where the charge came from. Try to get the payment off your account? That’s when Cruella “I’m Placing You” Onhold, Head of Customer Disservice, swings into action. Her team will tie you up so tight even Houdini wouldn’t try to escape. All the while your account balance goes up to pay for so-called Credit Defense.
Oh by the way, a lawsuit is impossible as in-house counsel insisted on an airtight arbitration provision, banning any effort at bringing a claim in court or even class arbitration. So don't go there...
This caper makes robo-signing look like popcorn and a movie. Maybe the new Consumer Finance Protection Bureau will come to the rescue, but by then Wells will have cooked up a new way of wringing fee revenue from customers.
If you have any information about this service or would like to share your experiences with Wells Fargo Credit Defense, please feel free to contact us at email@example.com, or call us at (202) 232-7550.
This blog was written by Steben Berk on Feb. 15, 2012 and was originally posted on the Corporate Observer, a memeber of the National Association of Consumer Advocates.