Megabanks can afford to break the rules, but can the economy afford the risk?
Recent high-profile settlements involving some of the nation’s largest banks have consumers scratching their heads. Since 2012, banking giants like Chase and Bank of America have come under fire from regulators in an effort to discourage the kind of egregious behavior that drove the economy to the brink of collapse in 2008. While the sums collected thus far by regulators appear to be huge, they are little more than a drop in the bucket for the megabanks. Have a look at some examples of the fines and settlements these banks have reached so far:
- Bank of America has paid over $15 billion since 2007 to settle claims related to the financial crisis, including $11.6 billion to Fannie Mae in 2012 to resolve repurchase claims related to bad mortgages between 2000 and 2008.
- Since October of 2012, American Express has refunded approximately $144.5 million to 585,000 customers for deceptive marketing regarding add-on products like payment protection and credit monitoring, as well as charging unlawful late fees to customers’ accounts.
- Capital One paid $210 million to the Consumer Finance Protection Bureau in 2012 to reimburse customers that they deceptively charged for unnecessary services like credit monitoring, generally targeting unemployed people and those with poor credit.
- Last year, Citi paid almost $1 billion to Fannie Mae resolving claims over nearly 3.7 million subprime mortgages it sold.
- In addition to paying $1.32 billion to Fannie Mae and Freddie Mac over subprime mortgages, Wells Fargo reimbursed customers $203 million for organizing debit charges from highest to lowest, rather than chronologically, collecting excess revenues from overdraft fees.
These are only a few examples of settlements reached by banks and prosecutors. Consumer reimbursement accounts for only a small percentage of the fines paid; most of the time fees were collected by the FDIC and similar regulating agencies. Furthermore, these settlements account for a miniscule fraction of the damage done to the economy as a result of rule breaking or lax regulations and enforcement.
No one believes that the megabanks have learned their lessons, and several are once again engaging in speculative behavior and manipulating markets. For example, several megabanks are heavily invested in manipulating commodities. It was also recently revealed that Wells Fargo trained members of its staff to forge foreclosure documents. Despite continued efforts by regulators to control this sort of behavior, the banks employ massive legal resources to challenge regulations every step of the way.
If you believe that megabanks should be held accountable for deceiving customers and engaging in self-interested behavior at the expense of our society and natural resources, there are a few things you can do to make sure your voice is heard. First, you can move your account to a socially-responsible community development bank and stop supporting a megabank with your service and account fees – and let them know about it once you do. Second, you can stop using lines of credit offered by megabanks – each time you swipe your credit card, they collect a percentage of your charge. You can find a list of cards from banks that benefit communities and devote a portion of their interchange fees to environmental protection or community development here. And finally, you can take action and tell regulators to keep putting pressure on the megabanks by writing and implementing rules that discourage deceitful behavior. The more you know about what these banks are really up to, the more you can do to make sure they start working for the people and the planet.