Study: In some areas, risky loans punished the rich more than the poor

 

Five years into the housing bust, are rich or poor homeowners more likely to suffer foreclosure?

It all depends on which part of the country you're in, according to a Center for Responsible Lending study.

Low- and moderate-income borrowers have been most affected in cities such as Detroit, Cleveland and St. Louis, where weak economies meant home prices didn't rise much even while much of the nation was caught up in the housing bubble, the nonprofit CRL said.

However, in areas that had strong housing appreciation before the collapse, such as California and Nevada, the opposite is true. In these areas, middle- and higher-income borrowers have been most likely to fall into foreclosure, according to CRL's study of 27 million mortgages over five years.

The explanation, CRL said Thursday, is that higher-income borrowers in expensive boom states wound up with a disproportionate number of high-risk loans, as did the lower-income residents of cities with weak economies and housing markets.

The rich borrowers were stretching to buy homes by using supposedly prime adjustable-rate loans requiring interest-only payments at first, or pay-option mortgages that allowed them to pay so little that their loan balance rose instead of fell. 

Overall, the CRL said, there was remarkably little difference in foreclosure rates between low- and high-income people who took out home loans from 2004 to 2008.

Among lower-income borrowers in that group, 15.9% had been foreclosed on or were seriously delinquent (meaning 60 days or more in arrears) by February 2011, the CRL study found.

Among middle-incomes borrowers, 14.7% fell into those categories, with 14.6% of high-income borrowers in the same straits.

But those slight differences contrasted with big gaps when researchers sorted troubled borrowers by type of housing market.

In weak markets, more than 10% of low-income borrowers had lost their homes to foreclosure, while less than 4% of higher-income borrowers had homes repossessed.

In the topsy-turvy world of the boom housing markets, more than 9% of higher-income borrowers had lost their homes, compared to less than 4% of low-income homeowners.

The study also found that:

-- Among homeowners who received loans from 2004 to 2008, 2.7 million households, or 6.4%, had lost their homes to foreclosure as of February 2011. Another 8.3%, or 3.6 million households, were at serious risk, defined as in the foreclosure process or more than 60 days past due on their mortgages.

-- The majority of people affected by foreclosures have been non-Latino white families. However, African American and Latino borrowers are more than twice as likely to lose their home to foreclosure as non-Latino white households -- 25% compared to 12%.

-- Racial and ethnic disparities in foreclosures persist even among higher-income groups. About 10% of higher-income African American borrowers and 15% of higher-income Latino borrowers have lost their home to foreclosure, compared with 4.6% of higher-income non-Latino white borrowers, the CRL said.

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Fewer home loans going bad but foreclosures on rise

Far fewer borrowers are delinquent on their home loans these days, a Mortgage Bankers Assn. report shows, but new foreclosure actions are on the rise in states like California, showing the nation still has much pain to endure before the housing crisis subsides.

Private analysts say the nation is only halfway through the wrenching grip of the foreclosure epidemic. And that's reflected in the housing market, where home sales and prices continue to sag in many areas despite record low interest rates.

Five years into the crisis, 7.99% of all U.S. home loans were behind by at least one payment in the third quarter but not yet in foreclosure, the mortgage trade group said Thursday. That's down by nearly half a percentage point from the second quarter and more than a percentage point from a year earlier.

But the group's statistics showed how banks are reasserting themselves against troubled borrowers after slowing the process for nearly a year amid increased scrutiny from regulators.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.08%, up from 0.96% in the second quarter. California had the nation's fifth-highest rate of new foreclosures: nearly 1.5% in the latest quarter.

The percentage of U.S.loans somewhere in the foreclosure process at the end of the third quarter was 4.43%, up slightly from a year earlier. The rate of homes in foreclosure was highest in Eastern and Midwestern states that route all home repossessions through the courts, with Florida at more than 14% and New Jersey at 8%.

California, which for years had one of the highest rates of loans in foreclosure, has fallen to 19th on the list because its foreclosure process doesn't normally require court action and is among the most streamlined in the nation. In other words, even as the rate of new foreclosures increases, the repossessions are being handled quickly.

Of states that handle foreclosures without going through court procedures, Nevada was the only one high on the total foreclosure-rate list, with nearly 8% of its mortgages in foreclosure.  

In a separate report Thursday, mortgage finance giant Freddie Mac said the typical rate on a 30-year fixed-rate home loan early this week was an even 4.0%, a statistically insignificant rise from 3.99% a week earlier. The 15-year fixed loan rates rose to 3.31% from 3.30%.

Expressing some optimism, Frank Nothaft, an economist for the trade group, said the economy "is showing potential for further gains in the near term" as the near-record low mortgage rates persist.

Retail sales rose for the fifth straight month in October, consumer confidence rose for the third straight month in early November to the highest reading since June, and home-builder confidence exhibited a back-to-back monthly increase in November to the strongest level since May 2010, Nothaft said, citing various surveys.

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Freddie Mac: 30-year mortgage rate back below 4%

The typical rate that lenders are offering on a standard 30-year mortgage is back below 4% for the second time this year, Freddie Mac says.

The rate fell from an even 4% in Freddie's survey last week to 3.99% in the survey released Thursday. The 3.94% recorded in the Oct. 6 report was the lowest in the 40 years that Freddie Mac has been asking lenders across the country about the rate they are offering on the 30-year loan.

The typical interest rate on the 15-year fixed home loan dropped from 3.31% to 3.30% in the latest survey. Borrowers would have paid less than 1% of the loan balance in fees to obtain the loans, Freddie Mac said.

Solid borrowers who shop around often find slightly better rates than those in the survey, and paying additional points upfront to lenders also can lower the rate.

The mortgage rates are a huge boon for home buyers and refinancers with solid credit and income, 20% down payments or 20% home equity -- the kind that would qualify for the loans of up to $417,000 that the survey focuses on.

But they are available at a cloudy time. Foreclosures are rising again, and the rates are scraping bottom mainly because investors are so spooked by the European debt crisis. That has increased demand for U.S. debt securities, still presumed to be a safe haven.

That demand has depressed the yield on Treasury securities, and mortgage rates tend to track Treasury yields. And there is too little in the recent mixed economic news to suggest that inflation could reassert itself in the United States, driving interest rates higher.

"The economy added 80,000 net jobs in October, below the market consensus forecast, but employment gains over the prior two months were revised up by 102,000 and the unemployment rate fell to 9.0 percent, the lowest in six months," Freddie Mac economist Frank Nothaft said. "Factory orders improved in September, yet the expansion in the service industry slowed in October."

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Photo: Freddie Mac headquarters, McLean, Va. Credit: Pablo Martinez Monsivais / Associated Press

Wells Fargo settles bid-rigging case

Wells Fargo & Co. has agreed to pay at least $37 million to settle accusations that it and Wachovia Corp., which Wells acquired in 2008, paid kickbacks to win business from municipal governments.

In its regular quarterly filing with the Securities and Exchange Commission, made Tuesday, the San Francisco bank said it would pay the greater of the $37 million or "65% of the restitution amount of a future settlement, if any, with the various state attorneys general of their investigation of Wachovia."

The agreement, which Wells said was reached Oct. 21, stems from litigation with various municipal governments around the country and consolidated in a federal lawsuit in Manhattan.

The suit accused many investment banks of conspiring to rig the bidding process, “sharing their illegal gains through kickbacks to one another, and making other secret, undisclosed arrangements.”

A Wells spokeswoman said the case mainly involved events at Wachovia that occurred before Wells took over the Charlotte, N.C., bank.

Bank of America, JPMorgan Chase and UBS previously agreed to much larger settlements in the case.

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30-year mortgage rate drops to 4%, Freddie Mac says

Investor worries over the European debt crisis helped drive the average rate for a 30-year fixed home loan down to 4% this week, according to Freddie Mac.

The figure, down from 4.1% last week, was the second lowest in the 40 years Freddie has been conducting a weekly survey of the terms being offered by home lenders. The lowest average rate recorded was 3.94% four weeks ago.

Freddie Mac said lenders were offering 15-year loans, a popular choice for homeowners who are refinancing, at an average rate of 3.31%, down from 3.38% a week earlier. That rate was below 3.3% for three weeks in late September and early October.

To obtain the loans at the rates being offered this week, a borrower would have to pay upfront fees averaging 0.7% of the amount borrowed.

Worried about the possibility of defaults on European debt, investors rushed to buy U.S. Treasury securities early this week, driving down interest rates.

The low mortgage rates have created an opportunity for some homeowners who are current on their loans to trade them in for new mortgages, often lowering their interest costs dramatically.

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Bank of America abandons plan to charge $5 debit card fee

Bowing to a national flood of protests, Bank of America Corp. is calling off its plan to charge customers $5 a month for using its debit cards to make purchases -- a strategy that proved a public relations disaster for what once was America's biggest bank.

Analysts had believed the rest of the banking industry would follow BofA in imposing similar fees to make up for new rules restricting the fees banks charge merchants for accepting debit cards.

But instead, the Charlotte, N.C., banking giant finds itself following the lead of a host of rivals who decided last week not to incur the wrath of the American public with debit-card fees.

Bank of America lost its No. 1 ranking in asset size to JPMorgan Chase & Co. at the end of September, though it still has the most total deposits. It announced its decision on the debit fee Tuesday morning in a two-paragraph statement citing "customer concerns and the changing competitive marketplace."

“We have listened to our customers very closely over the last few weeks and recognize their concern with our proposed debit usage fee,” David Darnell, BofA's co-chief operating officer, said in the statement.

“Our customers’ voices are most important to us. As a result, we are not currently charging the fee and will not be moving forward with any additional plans to do so.”

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Photo: Bank of America headquarters in Charlotte, N.C. Credit: Getty Images / Davis Turner 

Another fee bites the dust: Wells Fargo backs off debit charge

Joining an industry's retreat in the face of customer protests, Wells Fargo has abandoned the idea of charging debit card fees -- the third major bank to back away from such plans in a day.

The San Francisco banking giant had planned to test a monthly $3 fee for users of its debit cards in five states. It said in a statement Friday that it had called off that pilot program "as a response to customer feedback the bank has received."

"We will continue to stay attuned to what our customers want," said Ed Kadletz, head of Wells Fargo’s debit card division.

A host of critics including President Obama have attacked Bank of America's plan to charge account holders $5 a month if they use their debit cards to make purchases. The populist outrage, highlighted by protests staged by the Occupy Wall Street movement, has caused other major U.S. banks to hold off on imposing similar fees.

Earlier Friday, Bank of America backpedaled, saying it would make it easier for its customers to avoid the fee by waiving the charge if they also used BofA credit cards, maintained minimum account balances or made certain direct deposits. Details of the revised plan had not been finalized, a person familiar with the changes said.

Also Friday, JPMorgan Chase said that after its own eight-month testing of $3 monthly debit card fees it had decided against imposing them on its customers.

Citibank, US Bank and Union Bank are among other major institutions that have now taken the no-debit-fee pledge. However, certain regional banks, such as SunTrust and Regions, already have implemented fees similar to those at Bank of America.

It will be interesting to see what other new charges the banks cook up as they try to make up for revenue lost to new regulations governing credit card, overdraft and debit card practices that were imposed in the aftermath of the financial crisis.   

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BofA backpedals on $5 debit fee

Bank of America plans to make it much easier for customers to dodge its planned $5 monthly fee for debit cards, a person familiar with the bank's strategy says.

The $5 fee, which has triggered a storm of criticism, isn't going away. But under proposed revisions to the plan, "most of our customers won't pay it," according to the person, who spoke on condition of anonymity because the changes haven't been finalized.

Bank of America initially had said it would waive the fee only if a customer had a BofA mortgage or $20,000 in accounts at the bank and its Merrill Lynch brokerage.

It's now planning on lowering the minimum balance requirement significantly, although the final figure hasn't been set. Customers also would be able to dodge the charge by using BofA credit cards or making certain direct deposits.

The bank is going to start charging the debit card fee at a yet-to-be-determined time next year.

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BofA will make it easier for customers to dodge $5 debit fee

Bank of America plans to make it much easier for customers to dodge its planned $5 monthly fee for debit cards, a person familiar with the bank's strategy says.

The $5 fee, which has triggered a storm of criticism, isn't going away. But under proposed revisions to the plan, "most of our customers won't pay it," according to the person, who spoke on condition of anonymity because the changes haven't been finalized.

Bank of America initially had said it would waive the fee only if a customer had a BofA mortgage or $20,000 in accounts at the bank and its Merrill Lynch brokerage.

It's now planning on lowering the minimum balance requirement significantly, although the final figure hasn't been set. Customers also would be able to dodge the charge by using BofA credit cards or making certain direct deposits.

The bank is going to start charging the debit card fee at a yet-to-be-determined time next year.

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Chase opts out of debit-card fee

Another bank seems to have figured out what Bank of America Corp. has found out: Charging for use of debit cards could chase customers away.

JPMorgan Chase & Co., which for eight months has been dinging its Georgia and northern Wisconsin customers $3 a month for using debit cards, said Friday it has decided to end the test next month and won't impose the fee anywhere.

There was no official announcement, but a person who had been briefed on the matter said the bank's customers preferred a program it calls Chase Total Checking.

That's a package that charges checking customers $12 a month ($10 monthly in California, Oregon and Washington) but waives the fee if they have at least $500 direct-deposited each month, or keep at least $1,500 in the account, or have a total of $5,000 in linked Chase accounts.

A host of critics including President Obama have attacked BofA's plan to start charging account holders $5 a month if they use their debit cards to make purchases (ATM transactions are free).

Citibank has said its tests, like Chase's, showed consumers really hate the idea of debit card fees. It has raised its fee for a basic checking account but has said it won't impose a debit fee.

US Bank also has said it has no plans for such a fee, although Wells Fargo has begun conducting its own tests of a $3 monthly charge and some regional banks like SunTrust, a big presence in the Southeast, have started charging a fee similar to BofA's.

Bank customers across the country have expressed "outrage" over the BofA fee, according to Norma Garcia, who heads up a financial-services program for Consumers Union, the advocacy arm of Consumer Reports.

"It's time for Bank of America to listen to its customers who are saying loud and clear: drop the fee or we'll drop you," Garcia said in a statement. "All banks that are considering debit card fees should ditch those plans."

BofA Chief Executive Brian T. Moynihan said this week that he’s “incensed” by public criticism of his company and is pushing back by reminding local leaders of its contributions to their economies.

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Mortgage rates flat, Freddie Mac says, but hike may be near

The typical fixed rate for a 30-year home loan edged barely lower early this week amid mixed economic data, Freddie Mac said.

But news that the U.S. economy is growing and that European leaders have reached a deal to reduce Greece's staggering debt load could push the cost of borrowing back higher.

Freddie Mac said Thursday in its weekly report that the 30-year rate averaged 4.10% this week for solid borrowers who paid 0.8% of the loan amount in lender fees and discount points. That was down a notch from 4.11% last week.

The typical 15-year fixed rate held steady at 3.38% with an average of 0.7% of the loan amount paid in extra fees upfront.

Freddie Mac asks lenders across the country what rates they are offering to borrowers who pay only small fees to get the loans. The rates are for borrowers with solid credit and 20% down payments or home equity.

Freddie Mac economist Frank Nothaft said housing market indicators were mixed, with consumer confidence soft, house prices largely flat and new home sales up -- but from very low levels.

However, today's good news on the European debt crisis and the U.S. economy, which the government said grew 2.5% in the third quarter, may exert some pressure for higher rates.

When things are looking better, fewer investors tend to seek shelter in U.S. Treasury securities. That in turn could send the yield on the 10-year Treasury higher, and mortgage rates generally follow the lead of that benchmark.

Sure enough, the 10-year Treasury yield was moving higher early Thursday.

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Photo: Homes for sale in Santa Clarita last month. Credit: Kirk McKoy / Los Angeles Times

City National profit rises 20%

City National Corp.'s third-quarter profit rose 20% despite the sluggish economy, with commercial loan balances up 15% from a year earlier and a continuing surge in deposits at the private bank and business lender.

The L.A.-based parent of City National Bank said it earned $41.4 million, or 77 cents a share, compared with $34.4 million, or 65 cents, in the third quarter of 2010. The bank's revenue totaled $269 million, up 6% from $255 million a year earlier but down 5% from the second quarter.

The results, which missed Wall Street's expectations of 83 cents a share, were announced after the close of trading Thursday. In regular trading, City National shares had risen 41 cents, or 1%, to $40.83. The stock is down more than 22% over the last year.

City National said it made its first provision this year for loan losses: $7.5 million. Like many other banks, it also is seeing tighter profit margins on its basic business of accepting deposits and making loans because interest rates are so low.

Chief Executive Russell Goldsmith said total assets were up 6% from a year earlier and had topped $23 billion for the first time at the end of the quarter. Deposits, at $19.7 billion, were up 8% -- a reflection of how cautious City National's clientele of business owners and other affluent individuals remain in what Goldsmith described as the tepid economy.

"Corporate America is hoarding cash," Chief Financial Officer Chris Carey said during a conference call with analysts. "And high-net-worth clients, I can tell you, are hoarding cash."

In other L.A.-area bank earnings, Pasadena's East West Bancorp said Tuesday that its net income rose 33% in the third quarter to $62.4 million on strong loan growth. Cathay General Bancorp of Los Angeles said its quarterly profit was up 51% at $26.1 million, with fewer delinquent loans and a jump in commercial lending.

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Photo: City National Bank branch at Wilshire Boulevard and Fairfax Avenue in Los Angeles. Credit: Eduardo Aparicio via Flickr

Average 30-year mortgage rate remains above 4%, Freddie Mac says

The typical rate for a 30-year mortgage has leveled off at a bit over 4%, a widely watched survey shows.

Lenders were offering the standard 30-year home loan at an average of 4.11% early this week, a statistically insignificant drop from 4.12% last week, Freddie Mac said Thursday.

The week before last, the survey showed the average lender offering rate at 3.94% -- the first reading under 4% in the 40-year history of the Freddie Mac survey. Not surprisingly, applications for mortgages have tailed off with the increase in the rate, a separate Mortgage Bankers Assn. report showed.

In the latest Freddie Mac rate survey, the 15-year fixed home loan averaged 3.38%, up from 3.37%. Borrowers would have paid an average 0.8% of the loan amount in fees and discount points to obtain the rates on the 15- and 30-year mortgages, Freddie said.

The survey asks lenders for popular combinations of rates and fees they are offering to borrowers who have good credit and can make at least 20% down payments or have at least 20% equity in homes they are refinancing.

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Photo: Freddie Mac says lenders were offering the standard 30-year home loan at an average of 4.11% early this week, a statistically insignificant drop from last week. Credit: Pablo Martinez Monsivais / Associated Press

Wells Fargo profit up, but stock falls as revenue slips

Wells Fargo & Co.'s profit jumped 21% as it sorted out bad-loan troubles and cut costs, but Wall Street slammed the San Francisco bank as its third-quarter revenue declined.

Some key measures of profitability also dropped at Wells Fargo amid the weak economy and falling interest rates. The bank's shares plunged $1.88, or 7%, to $24.70 in midday trading, although its stock-market value, at about $130 billion, remained the highest in the industry.

Wells Fargo, the fourth-largest U.S. bank as measured by assets but the largest consumer lender, said Monday it earned $4.06 billion, or 72 cents per share, compared with $3.34 billion, or 60 cents per share, in the third quarter of 2010.

Loans and deposits both rose during the quarter. But revenue fell 6%, from $20.87 billion to  $19.63 billion, as its income from interest, fees and trading declined.

Another megabank, New York's Citigroup Inc., said Monday it earned $3.77 billion, or $1.23 per share, up from $2.17 billion, or 72 cents per share, in last year's third quarter. Citi shares fell 36 cents, or 1.3%, to $28.04 at midday.

Archrival Bank of America Corp., which reports its earnings Tuesday, recently disclosed plans to start charging customers $5 a month for using debit cards, triggering waves of protest from consumers and politicians.

During the Wells Fargo earnings call, analyst Chris Kotowski of Oppenheimer & Co. suggested the $5 fee might become an industry standard. By his calculation, that would largely offset revenue big banks have lost as a result of the Federal Reserve cutting in half the amount they can charge merchants who accept debit cards for payments.

Wells Chief Executive John Stumpf was guarded in commenting on how his bank would proceed on that controversial front, referring to a pilot program, just started in a few states, of a $3 monthly fee for customers who make purchases with debit cards.

But Stumpf said Wells Fargo, while proceeding cautiously on raising fees, needs to be compensated for the cost of providing customers safe and easy access to their deposits, including online and mobile banking as well as debit cards and the biggest national network of more than 6,000 branches.

"Our customers are going to tell us ... how they'll pay for those services," Stumpf said.

Mortgage rates under 4% becoming harder to find, Freddie Mac says

Fixed-rate 30-year mortgages beginning with a "3" are becoming harder to find, as the latest Freddie Mac survey of lenders shows.

The big government-controlled loan buyer reports that lenders were offering the loans to well-qualified borrowers early this week at an average rate of 4.12%. That was a jump higher from 3.94% a week earlier, the only sub-4% rate recorded in the survey's 40-year history.

As usual in  the Freddie Mac survey, borrowers would have paid less than 1% in upfront lender fees to obtain the loan. Rates lower than those in the survey often are available to solid borrowers who shop around or pay additional points upfront.

Rates for 15-year fixed loans and adjustable-rate mortgages also rose, according to Freddie Mac,  which looks at loans of up to $417,000.

Jumbo mortgages, which vary by region but are defined as more than $625,500 in much of coastal California, were running more than half a percentage point higher, with Wells Fargo listing its jumbo rate at 4.75% Thursday morning.

Freddie Mac economist Frank Nothaft said a better-than-expected unemployment report had fewer investors running for the safety of U.S. government securities.

That pushed the yield higher on the 10-year Treasury note, and mortgage rates followed as they usually do.

"The economy added 103,000 workers in September, aided by the return of striking Verizon workers," Nothaft wrote. "In addition, revisions to July and August figures added a total of 99,000 jobs to payrolls."

Thus, as so often happens, better news for the economy meant higher rates for people buying or refinancing houses.

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Photo: Freddie Mac headquarters. Credit: Pablo Martinez Monsivais / Associated Press

Smaller banks pledge not to impose debit-card fees

Regional and community banks such as L.A.'s City National Corp. and Chula Vista's PacTrust Bank are lining up to take the anti-Bank of America pledge: no debit-card fees. For now, at least.

It's an appealing come-on following BofA's decision to charge customers $5 a month to swipe the cards -- even for bankers who say new Federal Reserve regulations have unfairly capped what they can charge merchants for accepting the cards.

"Given the state of the economy and the political environment, we think it's the wrong time to pass that cost on to our clients," City National Chief Executive Russell Goldsmith said in an interview.

Depositors "want to be valued as a customer," PacTrust Chief Executive Gregory Mitchell said. "This seems to be a forgotten principle among the major banks."

Forswearing the debit-card charge is easier for banks and credit unions with less than $10 billion in assets, such as PacTrust, since they are exempt from the new limits on the allowable fees charged to merchants who accept debit cards. City National Bank, with $22 billion in assets, gets no such pass.

Bank of America representatives said consumers should compare all costs plus factors such as ATM availability before deciding where to bank. Citibank, for example, has said it won't charge for debit-card use but is socking many customers with a $20 monthly fee for basic checking services.

PacTrust is expanding beyond its base in San Diego and Riverside counties into Los Angeles and Orange counties and is looking to pick up new customers. It offers a basic checking account that is free with no minimum deposit.

City National says customers can avoid checking account fees by keeping an average of $3,500 on deposit.

Bank of America customers can avoid the debit-card charges by using them only at ATMs and not for purchases, by having a Bank of America home loan, or by having $20,000 on deposit.

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BofA says website working properly again

 
Bank of America Corp.'s woebegone website appears to have perked up again after six days of sporadic outages and slowdowns.

"We're taking it day by day," spokeswoman Tara Burke said, characterizing the system as operating normally Thursday.

"It's getting better," Burke said, a statement affirmed by a dozen BofA customers who said the problems with the website had been corrected.

The nation's biggest bank, with 29 million online customers, has been getting ready to introduce new features and had switched many users to a new system in September, Burke said.

She said that process, combined with an end-of-the-month flood of payroll deposits and bill payments, caused widespread malfunctions beginning last Friday and continuing until Wednesday.

The foul-ups added to the headaches of BofA Chief Executive Brian Moynihan, who touched off fireworks of protest last week with his plan to charge customers $5 a month to make purchases using their debit cards.

That plan hit the news Friday just before the online banking hit the skids, prompting waves of speculation that hackers had retaliated against the bank for the fee. BofA has consistently denied that its systems were compromised by outsiders, blaming itself for the problems.

Bank of America stock closed Thursday up 51 cents, or 8.8%, at $6.28 but was still down by more than 50% for the year.

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Photo: Bank of America CEO Brian Moynihan's headaches include website woes. Credit: Bloomberg / Jeff Kowalsky

[Updated] Citibank slaps customers with $15 monthly fee for checking

Another day, another new bank fee.

As the uproar swelled over Bank of America Corp.'s planned $5 monthly charge for debit cards, megabank rival Citigroup Inc. was telling checking accounts holders that it would sock them with a $15 a month fee unless they maintain a balance above $6,000.

Customers such as Cheryl Holt of Burbank were complaining to The Times about the letters they received this week from Citibank, Citigroup’s retail arm. Holt said she opened the envelope and was confronted by what she called an "absurd salutation."

"Customers like you have told us that what they want from their banks are simple options and great rewards," the giant New York bank said. "We heard you and are writing to let you know that we are making some changes to your EZ Checking Package."

The demand for $15 a month -- $180 a year -- for a checking account sent Holt out Friday morning on a quest for free checking, an endangered service as big banks, awash in deposits, raise fees and cut costs to keep their profits up despite the sluggish economy.

"I’m on my way out the door right now," Holt wrote in an email to The Times, "off to start a new account at my nearest credit union.

"Should have done it years ago!"

Citi representatives didn’t immediately return a call for comment.

UPDATE: A Citibank spokeswoman said customers can avoid the fee by opting for a “basic” checking account, having at least one direct deposit made into it each month, and making at least one automated bill payment from the account monthly.

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Citibank slaps customers with $15 monthly fee for checking

Another day, another new bank fee.

As the uproar swelled over Bank of America Corp.'s planned $5 monthly charge for debit cards, megabank rival Citigroup Inc. was telling checking accounts holders that it would sock them with a $15 a month fee unless they maintain a balance above $6,000.

Customers such as Cheryl Holt of Burbank were complaining to The Times about the letters they received this week from Citibank, Citigroup’s retail arm. Holt said she opened the envelope and was confronted by what she called an "absurd salutation."

"Customers like you have told us that what they want from their banks are simple options and great rewards," the giant New York bank said. "We heard you and are writing to let you know that we are making some changes to your EZ Checking Package."

The demand for $15 a month -- $180 a year -- for a checking account sent Holt out Friday morning on a quest for free checking, an endangered service as big banks, awash in deposits, raise fees and cut costs to keep their profits up despite the sluggish economy.

"I’m on my way out the door right now," Holt wrote in an email to The Times, "off to start a new account at my nearest credit union.

"Should have done it years ago!"

Citi representatives didn’t immediately return a call for comment.

RELATED:

At many big banks, no more free checking

Bank deposits soar despite rock-bottom interest rates

 Dumping your big bank? How to choose a new one

-- E. Scott Reckard

 

BofA: Online banking outage was unrelated to debit fee uproar

 
Bank of America Corp. customers on the East Coast lost online banking services for about two hours -- an outage the bank says was not caused by hackers, malware or its hugely unpopular decision to charge customers who make debit-card purchases.

Bank spokeswoman Tara Burke emphasized that the outages, from 6:15 to 11:26 a.m. EDT Friday, were not related to the uproar over news of the $5 monthly debit-card fees. BofA's mobile and text banking services were unaffected, she added.

As the nation's largest retail bank, Bank of America also is believed to have the largest number of customers who use online banking services -- 29 million, Burke said. Reports of online outages are not uncommon, although Burke wouldn't say how frequently the system short-circuits.

She also wouldn't disclose how many customers were affected by Friday's outage or what caused it, saying only: "There were some issues, some customers have had trouble with access." 

Response to news of the debit-card fee has been huge and overwhelmingly negative, as the comments on the Times' blog post about the fee reflect.

Bank of America spokeswoman Anne Pace declined to characterize the attitude of the customers who were bombarding the bank with questions at its branches, call centers and via Twitter.

"Most of them want to understand what this means for them and how it will impact their accounts," she said in an email. "We are doing our best to explain the impacts, the value and convenience the debit card offers and how to avoid the fee if necessary."

Short of taking out a BofA mortgage or depositing $20,000 with the Charlotte, N.C., bank, the way to avoid the fee is to avoid making purchases with debit cards and using them only for ATM transactions, which remain free.

Customers also could jump to another bank, of course, although major institutions such as Wells Fargo and JPMorgan Chase have been testing $3 monthly fees for debit cards.

Bank of America stock, meantime, sank by 14 cents, or 2.2%, to $6.21 in early afternoon trading in New York. It has been the worst performing stock of the 30 in the Dow Jones Industrial Average during the third quarter, having fallen 42% as of Wednesday's close of $6.35.

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Photo: Bank of America branch in Times Square, New York. Credit: Mario Tama / Getty Images