The IRS imposes penalties and interest from the due date, no grace period--and at a much higher interest rate than banks would charge. So, are those not more egregious than a honestly earned late fee with a 30 day pay period? There is no real difference in why they are imposed, but one is probably less disclosed than the other. Plus, they make the claim they are hidden fees, but we disclose everything early and up front to the end user--so how is that hidden? And, on overdrafts--which is a service to the customer, can sometimes save the user from court costs and much higher fees from merchants.
I will say though, some of the convenience fees and resort fees are tough to take :)
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Andy Johnson
Chief Executive Officer;Chief Financial Officer;Co-CEO/CFO
The Bank of Vernon
Vernon, AL
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Original Message:
Sent: 02-09-2023 21:39
From: Rob Blackwell
Subject: Biden's Junk Fee Attack, Deposit Flight, and GOP Bank Anger: Banking's Top 10
The Swiss are holding a vote to determine whether they will ever permit a cashless society, China isn't happy after the U.S. popped its spy balloon, and despite all the talk of mass layoffs, last month's jobs report was white-hot, and the unemployment rate is at an all-time low. So what gives with the labor market? Here's what else you might want to read this week.
"President Biden Calls on Congress to Crack Down on 'Junk Fees'"
Not so long ago, it was rare for banking issues to make the president's State of the Union. I once wrote an entire front-page story on a single cast-off line by President George W. Bush about the need to reform Fannie Mae and Freddie Mac. But that changed dramatically after the financial crisis of 2008, and suddenly banking regularly finds its way into the SOTU address.
Such was the case this week, when President Biden reiterated a call for a crackdown on "junk fees," touting the Consumer Financial Protection Bureau's recent proposal to limit credit card late fees to $8. Arguably more worrisome for the banking industry-which called his message "misleading"-is that Biden lumped in those fees with other widely-disliked fees like the ones Ticketmaster charges. Why does this matter? Because the industry has a defense of credit card late fees. They are, after all, completely optional, disclosed prominently to consumers, and well regulated. Whereas some other fees, like Ticketmaster's nebulous "service-charge" fees, are opaque and unavoidable. Personally, I have never paid a credit card late fee, whereas Ticketmaster has gouged me many times on U2 tickets.
By wrapping these together, along with "resort fees," which are often undisclosed when hotel shopping, and cable company fees that prevent customers from changing providers, the banking industry's defense gets lost in the maelstrom. None of this means that Biden's call for a Junk Fee Prevention Act is going anywhere in the short term-it's not-but to the degree that consumers (voters) see all these fees as equate-able, it spells trouble in the long term.
Earlier this week, on Banking with Interest, I spoke with Ian Katz, managing director of Capital Alpha Partners and a former Bloomberg reporter, about how the "junk fees" issue could play out in the coming year. If you haven't checked it out already, you can do so here.
"Banks Borrow Unsecured Cash at Record Clip While Deposits Flee"
Fed-funds borrowing hit $120 billion on Jan. 27, the most in a single day since 2016. As more customers yank funds from savings accounts in pursuit of higher yields, banks are scrambling to borrow to meet regulatory requirements and improve liquidity. You probably know this by now, but we're having a webinar on February 23 to discuss deposit strategies with The CorePoint CEO Neil Stanley. Be sure to tune in!
"Fed's Powell Sees 'Significant Road Ahead' to Curb Inflation"
Last week's explosive jobs report indicates that the Fed's inflation fight is a long way from finished. While price pressures are likely to continue easing throughout 2023, they won't come down to the Fed's inflation target of 2% until sometime next year, Fed Chair Jerome Powell predicted earlier this week. Governor Christopher Waller echoed Powell's comments at an agribusiness conference on Wednesday, where he told farmers to expect higher rates for an extended period.
"Culture War Priorities Stoke Republican Hostility Toward Banks"
In a stunning break from the recent past, GOP lawmakers have become far more negative toward banks. According to a new study from Pew Research, 38% of Republicans and right-leaning Independents believe banks have a positive effect on the country, compared to 63% in 2019. The study also found that 41% of Democrats view banks positively, compared to 37% in 2019.
"Republicans in Congress aren't the reliable defenders of banks that they used to be," said Ian Katz (who seemingly had a busy week talking to current and former members of the press). He attributes the shift in sentiment to a perception among the GOP that banks are increasingly embracing Democratic values such as ESG and diversity and inclusion.
"Bank Executive Business Outlook Survey Q4 2022"
Fifty-one percent of respondents said their bank's loan demand decreased over the prior year, a 23-point increase from a year ago, according to a new IntraFi survey of bankers. Only 30% reported a rise in demand, with 19% noting no change. For the following year, 53% expect loan demand to decrease, a 41-point jump from a year earlier. With interest rates as high as they've been since 2007, banks are also seeing heightened competition for deposits.
Credit unions, on the other hand, are expecting strong loan growth in 2023 (but not as high as in 2022).
"The Unlikely Crypto Companies Using the Trump-Era 'Hot Money' Rule"
American Banker is one of the few media outlets able to dive deep on brokered deposits, and it shows here. This was the second of three articles last week reexamining a 2020 FDIC rule that changed the definition of brokered deposits. Ostensibly about helping bankers, the rule also ended up benefiting firms like Coinbase and PayPal, who claimed the "primary purpose exception" to the FDIC's brokered deposits rule, enabling them to place large deposits at banks without them being considered brokered. Particularly given companies like Coinbase's involvement and the use of the PPE exception to consider crypto deposits as core deposits, the rule is sparking concerns about possible bank runs and contagion.
John Heltman, American Banker's Washington Bureau Chief, dives further into what this means for banks in an op-ed here.
Over the past year, nearly all financial institutions made changes to their fraud policies to keep up with the changing landscape, and nearly three quarters of financial institutions spent more on fraud prevention, according to the results of recent benchmarking survey from Alloy. Read the full report here.
"Households Burn Through What's Left of Their Pandemic Savings"
Pandemic savings are drying up. Americans have already spent 35% of the extra savings they accumulated during 2020 and 2021, and by the end of the year, they will have spent down 65%, according to estimates from Goldman Sachs. Many are already cutting spending and running higher-than-normal credit card balances.
"Why It's Not Too Late for Interest Rate Swaps"
Swaps can help community banks exchange floating-rate uncertainty for fixed-rate certainty regardless of the interest rate environment, says one expert. He outlines three strategies for banks with access to interest rate swaps to consider.
"Most Top Office Lenders Upped Exposure in 2022"
Of the 17 banks with at least $400 million of outstanding office exposure at the end of 2022, just four had less exposure than at the end of 2021, according to S&P Global Market Intelligence.
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Rob Blackwell
Chief Content Officer and Head of External Affairs
IntraFi
Arlington, VA
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