Bank of America – Taking Advantage of Youth – Is that Ethical?

As my fingers rest on the keys of this keyboard, I have heard from colleagues that I should avoid writing on this subject – as Bank of America – might elect to be a client and wouldn’t appreciate negative publicity. My question back to them was – as an ethics speaker and author – don’t I have a responsibility to speak the truth?

“Yes” was their reply “but at what peril?”bank-of-america-logo

So…being honest I have debated for days whether to write or not. In the end…I have elected to as I feel that ethical choices – at times – may mean less money or less business – but in the end – doing the right thing will always pay off. If I am to discuss someone else’s ethics, I must stand behind mine.

THE STORY: My son, Alex, received his “check card” and bank account from deal ole dad (that would be me) sometime after he was 16 years old. Weekly I would place his allowance on it and tried to help him understand how to responsibly use this first intro into banking.

He kinda got the idea – in that he knew if he presented his card that if there were no funds it would not be accepted. Likewise, he knew that he could take the card to the ATM and check the balance anywhere. Simple – so he thought.

Quick Reality Check: What the bank shows as an available balance isn’t always THE available balance. You would think in this modern day of instant transactions that once you use the card the amount used would “immediately” be subtracted from your account. Most of us adults know – NOT SO. Young people don’t get that. Let me repeat – YOUNG PEOPLE DON’T GET THAT! They think that if you send a text (for example) and it arrives within seconds – then when you use your card the money is withdrawn in the same time. In their minds why would it not be?

Back to the story – So as Alex nears the end of his 17th year he overdraws his account. Seems that he didn’t know the balance in his account when he drove into the convenience store one weekend. He pumped gas and paid with his checkcard. A little later that day, he went to the Bank of America ATM and checked his balance. All seemed well. So he went to the movie, purchased some popcorn and a drink, later purchased a sandwich from Subway and got some gum from the convenience store. All purchases were made with his checkcard – against a balance he thought he had – afterall, the ATM told him his balance “after” he pumped his gas.

Adult readers know exactly where this is going. The gas purchase had not yet been removed from his account as it was done over the weekend…and all the other purchases exceeded the balance in his account. HE WAS OVERDRAWN.

Is that the ethical issue – Not a chance – that’s life. And at times life comes at you hard. For Alex the very real realization was that for each overdraft he owed $35. Yes – my son – you owe $35 for purchasing a $1.29 pack of gum. “That’s not right dad,” I remember him telling me. To which I replied, “Then take it up with the bank…you got yourself into this you can pay yourself out.”

HELP WITH AN INTERESTING TWIST: Up to this point the issue is my son screwed up. But, true to my suggestion he went to his local Bank of America branch to seek help. Oh, by this point he had turned 18.

He met with the Assistant Manager and told her his plight. She was kind in helping him (so it seemed) and “split the difference” on the overdraft charges – she forgave some and he paid the rest – then she suggested that he apply for a “STUDENT CREDIT CARD.” She told him that the credit card would provide him overdraft protection and keep him from having problems like he just had.

What do you think he did? He SIGNED UP! No questions asked…it just seemed like a good idea and (not knowing any better) he took her trusted advice. She did tell him that he would need to link it to his account when he got it. Reality check: Link it to an account when you’ve never had a card before doesn’t connect. That’s like telling a guy in his 20’s you need to have your PSA checked. They’ll look at you and say O.K., but not know what a PSA test is!

Reality Check: Likewise, she never told him that the suggestion she was offering was not “free.” Turns out that if the card is linked to the account it will advance funds to cover an overdraft (that’s what he was told). What he was not told was that there is a COST involved. Seems that Bank of America charges $10.00 per overdraft transfer. Hum…so let me get this straight – the $1.29 pack of gum which cost him $36.29 would now cost him $11.29. Great deal huh?

Back to the story… The card came in and he did exactly what he thought she told him to do. It said on the card – call this number to ACTIVATE your card. Well since it had been a week or so since he had been in the bank – he assumed that the instructions on the card were what she was talking about and so he did what he was told to do (or so he thought) and he activated the card.

BIG PROBLEM NOW: A month of so passes – no problems – then in July ’08 he overdrew his account again – and again it was the weekend nightmare. Minor purchases were made – 10 in fact – that each were overdrawn from his checkcard. POINT OF INTEREST: For any readers, if your children have checkcards – do they maintain a check register? My guess is NO! Most of them have never written a check in their lives and don’t connect with the “write it down and keep the balance” mentality of adults. The rest of this story – YOU GOT IT – HE WAS CHARGED $350.00 in overdraft fees.

He was devastated and I was furious. He went back to Bank of America and once again talked with the same Assist Manager who encouraged him to get the credit card (without full disclosure – that begs and ethical question). She told him that he was to “link” it. He thought by “activating it” he had. No…per this Assistant Manager it was his fault. There was nothing she could do to help him. Well, she could transfer the OVERDRAFT charges to his credit card and clear his checking account.

Faced with no acceptable option he elected to have the fees transferred over to his credit card. NOW LET ME GET THIS IN MY HEAD. A bank officer with Bank of America suggests a kid get a credit card to help with overdrafts. She doesn’t follow up to link the account of have it automatically link, she assumes that kids who have ZERO experience will know what to do. She doesn’t tell him that there are continued charges if he does overdraft. Oh, and she suggests the transfer of $350 of fees (profits to Bank of America) into a credit card where they will get MORE FEES. Sorry, but that just seems irresponsible, greedy and UNETHICAL.

THE REST OF THE STORY: It’s early October ’08 and my son is now in college. He and I visit another Bank of America branch seeking help for this situation. We met with another Assistant Manager who appeared to want to help. We shared the story and she was appalled. She said that anytime she suggested that a kid get a card – she would follow up to make sure the card was linked. That made sense to me.

With a Masters in Accounting – I understood the numbers. While I didn’t like the fact that my son was maneuvered into a credit card that still cost him should he overdraft his account, I accepted that fact.

So what would be a fair outcome? I suggested that if the card had been linked properly in the first place he would have been charged $10 for each overdraft incident or $100.00. He was charged instead $350.00. It would seem the fair, just and ethical response would be a $250.00 credit on his card. SIMPLE.

Nope…not so…you see there’s profit involved and which branch would “suck up” that loss? The branch in his college town called the branch in his home town. One Assistant Manager talked to the other Assistant Manager. At least the one in his home town told the truth – the facts are as I’ve stated. But she was unwilling to take the charge – afterall it would be charged against her branch. (And apparently Bank of American needs all the money it can earn from what ever source including unsuspecting young people). Of course, the Assistant Manager in his college town…well, she was sympathetic but unwilling to take the charge either – afterall she or her branch didn’t create the problem.

QUESTIONS: Does a bank have a responsibility to fully disclose all charges and possible pitfalls when suggesting to young people that they subscribe to a product of theirs?

Is it right to suggest to a young person that they should obtain a credit card for a specific purpose without first disclosing that there are fees for the application of that purpose?

Is Bank of America so motivated by profit at the branch level that they would elect to look past the obvious ethical choice in order to keep $250.00 profit from an 18 year old who knew no better?

Perhaps the last question: Am I the one off base here?

Oh…per the Bank of America Web Site related to their Code of Business Ethics the following is stated: The code, in effect, explains what we mean when we say one of our core values is “doing the right thing.” Somehow I can’t think that charging unsuspecting newly turned 18 year olds is “the right thing” – but perhaps I am off base?

Your comments are encouraged and welcome!

Chuck Gallagher is an international business ethics speaker and author. “Ethics requires us to make a good decision with a sense of moral duty and obligation.” This entry, while potentially costing Gallagher an opportunity to speak to Bank of America on ethics – is the right choice if it has the impact of helping Bank of America evaluate it’s procedures so that other youth are led properly in their banking transactions.

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6 Responses to Bank of America – Taking Advantage of Youth – Is that Ethical?

  1. ljk73 says:

    The predatory practices of Bank of America are not new and are not aimed solely at the naive youth population. BOA targets anyone who appears to live “paycheck-to-paycheck”. They have implemented advanced algorithms that watch accounts for situations to arise where they can make the most money through fees. I learned this for myself in August 08. Since then, I have done much research on the subject. It is unfortunate that the majority of BOA customers do not even realize the kind of institution they are doing business with. BOA is incredibly ethics-challenged. I have provided quite a few links, resources, and posts on my blog at http://kastal.net.blog.

  2. Scott says:

    In regards to Bank of America, I totally agree with your assessment of their ability to charge high fees without properly educating their clients. I am a former employee of the bank and was let go when I challenged the ethics of the bank. Now I am unemployed thanks to standing up for the right thing….Not sure my family agrees with my stand since I have been jobless for over 4 months now.

  3. jerseycpa says:

    Can a person hate a Bank? I realize that the BOA is not an individual, but a Corporation, yet, I detest that entity. I had a BOA account. When I looked at my statement and saw that they were paying .2%, yes, 2 tenths of 1 percent interest on my savings account, I knew this relationship was over. Yes, its true, I could have switched to CDs with some effort, but why tolerate a corporate culture of constant charges and inconvenience. So I did the right thing and voted with my feet and my dollars. I closed the account and moved on.

  4. marco barraza says:

    excellent article love when people speak the truth. People in these times tipy toe around subjects that they think are taboo. People only can understand this frustration with when they experience for themselves. With our economic times i wish us as americans one big family could exercise our unity and act in colusion. Against the banks unfortunately most bank behave exactly the same way. They uncovered a niche a racket. Same as the prepaid card for kids. Its the perfect storm right now and with email if everyone emailed 20 and so on and so forth told every to stop paying their cards . Also stop using debit and charge cards just cash if you can. shop at small buinesses no more malls and big companies we could maybe bring them down everything is already messed up. The banks are the root of all the economic problems . They are so big that people dont matter. Next time you read about a bank robber just laugh because they usually never get more than a thousand dollars.The real bank robbers are inside the bank. Robbing your piggy bank.

  5. Garrett says:

    I enjoyed this article. I sympathize for the victims within the stories that were shared on this page! I am doing a report on the internal ethical problems affiliated with B of A. Anyone with further information regarding these ethical issues, please e-mail at kingxcore@yahoo.com. Thank you!

  6. Mark says:

    [I realize this is an old article…and it’s the only thing I’ve read on your site.] In more than 30 years of banking (beginning when I was 16 or 17 – when debit cards and ATMs were first introduced and you could get 5% interest on your savings account) I have never received a bank debit card or credit card from any institution (including BOA) that did not come with the “small print” describing exactly what responsibilities the customer and the bank have, spelling out each fee and program regulation. I don’t know of any commercial institution that is responsible for educating its customers in the way things work – providing the information, yes, but explaining every detail of it to every client one-on-one? hardly. Should the McDonald’s cashier explain to the repeat customer that if he eats only fast food he’s liable to gain weight, get diabetes, and die young? Of course not, but McDonald’s has a responsibility to make the nutritional information about its menu available (and that’s only a recent standard in the food industry) – it’s the customer’s responsibility to read it. BOA would be unethical in the situation you describe if no written information regarding the accounts was provided to your son, or if it was provided and the AM told him, “It’s not necessary to read that – the details are unimportant.” If he (or you) chose not to read it and ask for clarification of what he didn’t understand, that’s on him. (Assumptions are costly.) Every parent should teach their kids the importance of “reading the small print” in every situation. Unfortunately, few adults bother with those details, to their own detriment (and the detriment of the US economy, some would say). And while keeping an account register may not be the practice among the young, it should be, unless they are mathematics and memory geniuses who can keep track in their heads. That’s just common sense. I have always balanced my checkbook from the very first statement – a necessity to catch that $25 register entry that should have been $52. Now that there is online banking, I can check my transactions with the bank’s records anytime, so my register is always balanced. I hope all this resulted in your son’s becoming an educated consumer. The age-old adage is “Let the buyer beware!” not “Let the seller make sure buyers understand exactly what they’re paying for.” If parents want to provide a safety net for their kids when they first get accounts, I suggest they deposit $100 into the account and explain to the kid not to consider it part of his available balance ever, and when the ATM shows a balance less than $100, he should consider his account overdrawn.

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