As FinTech startups bring more transparency and convenience into an industry that has operated on the same principles since modern finance began, banks have had to decide whether they were going to move in that direction, too, or dig their heels in and get ready for a fight.
It appears that at least one bank has chosen the latter.
The New York Times reported on a peculiar trend taking place around the banking industry, with companies taking lines of credit out on customers who regularly overdraft their accounts. However, when debts increase enough and consumers start paying interest on those loans, they find that they are now financially liable for a line of credit they never knew about or wanted in the first place. Citibank was cited by NYT as a notable participant in this new style of remediation, though a spokesman denied the practice as anything out of the ordinary.
“Customers who choose overdraft lines of credit must enroll, and any line of credit balance appears on every monthly statement,” the spokesperson said. “Citibank customers pay in fees a small fraction of what customers of other big banks pay.”
As if that wasn’t enough tomfoolery from banking institutions with customers’ debit and checking accounts, NYT also zeroed in on TD Bank for its continued use of reordering to maximize overdraft fees. By processing larger amounts and transactions first, TD Bank (and others who have ceased the practice after crackdowns in 2009) raises the likelihood that personal accountholders get dinged with fees. However, since TD Bank explains this process in its checking account agreements, it appears that its customers have little ground to stand on.
“Their position is: ‘If we disclose it, we can get away with whatever the hell we want,’” Mark Mangan, a TD Bank customer in New Jersey, told NYT.