Banks Offering to Reiumburse Customers for Inconvenience
California’s splashy, often gimmicky retail banking war is heating up again.
Last spring, major banks in the state started keeping offices open Saturdays and extending hours weekdays. Now, they are offering $5 for inconvenience.
Last week, Wells Fargo Bank in San Francisco started offering $5 to any customer who stands in a teller line for more than five minutes. On Thursday, First Interstate Bank of California said it will pay $5 to customers for a broader range of inconveniences, such as automated teller machines that are out of commission, bank statement errors, waiting more than five minutes in a teller line and taking more than a day to respond to loan requests, questions and problems.
But consumer activists are unimpressed because banks continue to charge numerous fees. One survey by a consumer group released in July found that the annual cost of maintaining a regular, non-interest-paying checking account over the past two years increased by 11% to 43% at major banks and thrifts in the state.
Harry Snyder, director of the West Coast regional office for Consumer’s Union in San Francisco, compares the $5 offers to a “shell game.” Banks are offering $5 for inconvenience, he said, but are nicking customers elsewhere with numerous fees.
“Everything in the banks has become a profit center. They’ve started charging us for everything up to parking in their lots. That will be next,” Snyder said.
Programs like the one First Interstate announced are part of the scrambling for the consumer’s attention going on in California in the wake of banking deregulation, the prospect of full interstate banking in slightly more than a year and the savings and loan mess, which has shaken consumer confidence in weaker thrifts.
In addition, banks, burned by bad Latin American loans and real estate loans that went sour in Texas and Arizona, are increasingly looking for profits in consumer banking activities such as credit cards, home equity loans, mortgages and car loans.
William E. B. Siart, president of First Interstate Bank of California, said the Los Angeles bank had planned to introduce the program announced Thursday in January, but moved it up after Wells Fargo announced its program last week.
At least one competitor, Security Pacific National Bank, vowed that it would not be drawn into the battle. In a statement, the Los Angeles bank said it won’t “resort to short-lived, attention-grabbing campaigns” to prove its quality of service.
Donald M. Routh, Wells Fargo vice president and senior product manager, called First Interstate’s plan “interesting, but rather complicated. Ours is simple and straightforward.”
May Cost $1 Million
Leigh Stokes, vice president for checking products at Bank of America in San Francisco, said B of A has had a service-guarantee program in place for four years “and it goes beyond $5.” She said that dissatisfied customers can get as much as six months’ checking and credit card fees refunded, which can far exceed $5.
Siart said that First Interstate expects the program will cost the bank $500,000 to $1 million a year, which he said is about what the bank spends on a typical radio advertising campaign. He said the advertising campaign that will accompany the program will cost from $1 million to $2 million.
The previous attention-getting moves by California banks, opening on Saturdays and extending hours, has been a mixed experience. Some bank executives privately bemoan the cost of staying open Saturdays but say they are resigned to doing it because of competitive pressure.
Siart said it costs First Interstate about $5 million a year to stay open Saturdays and to extend hours. He predicted, however, that major banks next year will start closing select branches on Saturdays in areas where few customers use it.
