Posts Tagged ‘Banking’

Regulating Banks

Now that the CFPB has somebody in charge despite Republican efforts to the contrary, it can actually start getting into the business of what it was created to do: protect consumers by regulating financial products. And it just so happens that some news I read today provides a handy example for thinking about what exactly needs to be regulated.

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Consumer Financial Protection

Unfettered competition is the lifeblood of the free market. So you would expect that those businesses that love the free market would love as much competition as possible, right? Not always. Competition is certainly good for consumers, but more competition is often the last thing that businesses want, precisely because it is good for consumers. Most of the time, despite what businesses may desire, the market is full of competition and the free exchange of information. Take fast food: all prices clearly spelled out, all products clearly described and manufactured, no gotchas. Or most retail. It’s easy to compare products based on price, quality, and preference, and then decide what you want to get. Consumer surplus galore, and we all win!

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U.S. Bank and customer choice

Predictions of the end of free checking seem to have come true, at least for U.S. Bank: I recently received notice that my free checking account, which I’ve had for over a decade, will now have a monthly fee attached if I don’t carry a minimum balance or do enough in direct deposits. Since my main account is with ING Direct, I use my U.S. Bank account for two things: the odd check that I have to deposit at an ATM (ING doesn’t do ATM deposits), and the one check I write a month that I can’t send electronically (thanks, bus pass!). So I will not be maintaining those accounts balances, and since I don’t feel like paying anything, U.S. Bank will lose a customer.

What I don’t get, though, is why banks aren’t coming up with more flexible options. Pretty much every bank that is getting rid of free checking is doing the “maintain a minimum balance or pay a set fee each month” approach. Why not have a variety of options? How about a fee per ATM use, or a fee per check? I’d be much happier to select an option like that. Seems like it wouldn’t be that hard for banks to put together a cafeteria-style menu of account options and let customers choose what they would prefer (with limitations, of course, on how often you can change things, so you can’t game the system too much). A flat fee for unlimited ATM use and checking doesn’t appeal to me because I don’t need those things.

So now, the question is where to go. I could go to a credit union, or just use my wife’s account. But for lack of account options and flexibility, U.S. Bank will be losing a customer.