Changing Unfair And Deceptive To Fair And Non-Deceptive

The banking industry is in a tight spot right now. Banks are working hard and creatively to compete with other banks and even harder to compete with non-banks. In this process, banks are thinking up new ways to do business. Unfortunately, bank customers are not always happy with the new ideas. Sometimes they are downright angry.

Ordinarily, we place a high value on "thinking outside the box" to come up with new ideas. But when it comes to banking, it is important to remember which part of the "box" the customers like and want. Perhaps even more important, we need to take into account what customers expect when dealing with banks.

Too often, the ideas for new ways of doing business are driven by a decision to increase fee income. And - with some anticipation that the customer may not like what is coming, the fees that get invented also tend to be hidden - until they are charged. So consumers discover only after the fact - and to their great dismay - that they have been charged for something. Usually the something that they got charged for was something that they figured should belong in the realm of unchargeable basic activities - such as breathing.

Consumers don't think that putting money into a bank or taking money out should be a chargeable transaction any more than they think they should be charged for going through the cashier line at the grocery store. How else, after all, do you get the product?

Also, most consumers - those that use banks, anyway - consider banking to be necessary. So certain banking activities are looked at as necessary rather something that is truly free choice. Using an ATM or a teller falls more in the category of breathing. You simply have to do it.

Increasingly, bank customers and bank critics are raising the cry of unfair when they are charged for activities that they consider to be basic bank functions (measured much like basic life functions in ADA). They holler "deceptive" when they are charged for something without plenty of prior notice and warning.

The level of concern on unfair and deceptive practices is rising. The Consumer Advisory Council has openly recommended that the Federal Reserve exercise its unfair and deceptive trade practices authority and issue rules to stop certain emerging banking practices.

Concerns about unfair and deceptive practices emerged as a theme at ABA's national Regulatory Compliance Conference. Many of the sessions dealt with unfair or deceptive issues - some directly and others indirectly. But you could not come away from the conference without a high level of concern about the way banks are currently treating their customers and the problems that this may bring upon banks.

Banks are doing this to themselves. And they should know better. If a fee for a service is fair, why are banks hiding them and revealing them only on the bill to the customer?

Customers are not dumb. We should never treat them that way. Instead, we should learn from the regulations that we already have. They are designed to create arms length transactions in which the customer has all of the essential information to understand the transaction and make an informed decision. Withholding information will only lead to more regulation.

Caveat emptor (Let the buyer beware) is not the rule of thumb for banks. Instead, banks should follow the rule: caveat vendor. That way, the business inventions of banks will be fair and non-deceptive.

Copyright © 1999 Compliance Action. Originally appeared in Compliance Action, Vol. 4, No. 9, 7/99