Guest blogger Shannon Phillips, IBAT Deputy General Counsel, provides his observations in this Missing Linc post.

For over a year, American media outlets have lauded the Dodd-Frank Act’s (the Act) efforts to reform financial consumer protection. In particular, the print and electronic media seem to have fallen head over heels in love with the Act’s Consumer Financial Protection Bureau (CFPB).  When the media must report on something while swooning over it, it leads to something I like to call “Reporting While Infatuated.”  RWI is a very dangerous, incurable, and possibly fatal condition that can quickly reach pandemic levels among certain members of the media. (Remember the 2008 election?)  RWI has been directly linked to media coverage that extols the virtues of the Dodd-Frank Act and the CFPB while exposing how very little many in the American media know of the Act, the CFPB, state and federal banking regulators, operations and lending laws, and consumer protection laws.  We have been pleased with the meetings we have had with representatives of the CFPB and their understanding that community bankers are not the problem, but we have likewise been dumbfounded by the misinformation we have seen from members of the media who seem to be affected by RWI.  The latest example of this RWI comes from CNNMoney. com.

CNNMoney.com reporter Blake Ellis developed an interactive graphic showing how the CFPB can help consumers dealing with complaints against various industries, including banks and credit unions, debt collection, and credit cards.  The graphic has a balloon containing the phrase “Banks & Credit Unions.”  Connected to that balloon is another balloon with the number “29,967,” which is purportedly the number of consumer complaints the FTC received about banks and credit unions in 2010.  (Which we know is not where consumers should voice complaints against banks and credit unions.)  When you put your cursor on the balloon containing that number, a story pops up about Colleen Silvey’s complaint against her bank.  The inference is that the CFPB could have helped her with her problem.  However, what Mr. Blake apparently doesn’t know is that Ms. Silvey is merely complaining about her bank following federal law. Here is Colleen’s story:

Suddenly, I started seeing fees show up here and there in my checking account. I couldn’t understand what they were for. After this happened for awhile, I got a letter in the mail from my bank saying it charges a fee for transferring money between checking and savings accounts too often. I had never been told that before. I had always put my paycheck in my savings account – where I can’t see it – and then I would transfer some to my checking account when I need to pay a bill. Don’t I have a right to put my cash where I want?

If I had Colleen’s address, this would be my answer to her:

Dear Colleen:

I saw your name and picture with a graphic showing how CNNMoney.com believes the Consumer Financial Protection Bureau could have helped you with an issue you had with your bank.  Unfortunately, CNNMoney got it wrong. First, under the facts you gave, help from the CFPB or any other federal, state, or local governmental agency was unnecessary.  Secondly, if you had an issue that warranted government help, your bank is already heavily regulated by a federal agency and possibly a state agency as well.  And each of those agencies have consumer assistance divisions.

Your complaint is unwarranted. Let me break it down one issue at a time.

Suddenly, I started seeing fees show up her and there in my checking account I couldn’t understand what they were for.  After this happened for awhile…

It sounds like you noticed several of these fees from your bank without doing anything.  If you ever don’t understand something on your online account or on your bank statement—particularly if it is costing you money—don’t hesitate, contact your bank immediately.  You have an obligation to take care of your personal finances.  You are not fulfilling your obligation when you don’t act on something you don’t understand.  If you bank at an Orlando-area community bank, you could have simply called your bank and they would’ve gladly explained the fees to you and how to avoid them.  If you bank at one of the too-big-to-fail banks, your inaction is understandable because getting someone to help is nearly impossible.

I got a letter in the mail from my banking saying it charges a fee for transferring money between checking and savings accounts too often.

If you reread the letter you received from your bank, I think you’ll find that it did not say that you were charged fees for transferring money between checking and savings too often.  It said that you were charged fees for making too many transfers FROM SAVINGS to checking.  The limitation on transfers from your savings and checking account is not a restriction created by your bank, it is a restriction created by federal law.  And it doesn’t restrict transfers from checking to savings. Specifically, it is found in Regulation D (12 CFR 204.2):

“The term ‘savings deposit’ also means: A deposit or account, such as an account commonly known as a passbook savings account, a statement savings account, or as a money market deposit account…from which…the depositor is permitted or authorized to make no more than six transfers and withdrawals, or combination of such transfers and withdrawals, per calendar month or statement cycle  (or similar period) of at least four weeks, to another account (including a transaction account) of the depositor at the same institution….”

Your bank is required to ensure that no more than the permitted transfers are made. According to federal law, a bank can either prevent the excess transfers or adopt procedures to monitor the transfers and contact customers who exceed the limits on more than an occasional basis.  If a customer continues to exceed the limit after they were contacted, the bank must: (1) close the account, (2) place the funds in another type of account, or (2) take away the transfer capacity.  Additionally, most banks, to show that they are serious about discouraging exceeding the transfer limit, will charge the depositor a fee for each transfer that is over the limit.  Your bank has legally chosen to monitor transfers, charge them a fee to discourage the practice, and notify the customer when it happens on more than an occasional basis.

I had never been told that before.

I bet you had been told this before.  I can say with near certainty, that your savings account contract addresses the limitations on transfers and withdrawals.  You should have also received a disclosure of the fees.  My guess is that you didn’t read your account contract or fee disclosure. (Don’t worry; I think most depositors don’t read these.) Regulation DD requires your bank to disclose the fees charged on your account.  This is another federal law.  Here is what it says in relation to disclosing fees in the account disclosures:

(b) Content of account disclosures. Account disclosures shall include the following, as applicable:

…snip…

(4) Fees. The amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed.

So, if you can dig up the account contract and the account disclosures your bank gave you when you opened up your accounts and any disclosures and account amendments that you received after you opened it, I think you’ll find that you were told about the transfer limitation and the fees.

I had always put my paycheck in my savings account – where I can’t see it – and then I would transfer some to my checking account when I need to pay a bill.

Because you can certainly “see” how much you have in your savings account, I assume that what you mean is that you put the money in savings so you are not tempted to spend it. I can understand why you’d want to use this method, and transfer money from savings to checking every time you have a bill to pay. Unfortunately, regardless of where you bank, federal law is going to prohibit you from doing this, and the bank is likely going to charge you a fee if you do. If they don’t charge you a fee, they still will have to ensure that you don’t exceed the transfer limitation in federal law.  You’re going to have to find another money management technique. Your community banker will likely have some ideas.

Don’t I have a right to put my cash where I want?

Yes, Colleen, you do have a right to put your cash where you want. But, as I state above, federal law is going to restrict the number of transfers from your savings account.   I am glad that you chose to put it in a bank. I hope you chose a community bank, but if you didn’t, I encourage you to open an account at a community bank.

I’m sure your bank could have set things straight. If not, then each banking regulator has employees on staff to assist consumers. If your bank is a national bank, call the Comptroller of the Currency at (800) 613-6743. If it is a state bank, call the FDIC at (877) 271-3342 or you can call the Florida Office of Financial Regulation at (800) 848-3792.

Your bank was simply following federal law, and didn’t do anything for a consumer to complain about.  You did not have an issue that the Consumer Financial Protection Bureau could have assisted with.  However if you did have an issue that required assistance, there are already banking regulators who could have assisted you.

In the future, before CNNMoney.com and Mr. Ellis writes an article complaining about banks mistreating their customers, we hope they consult with a banker, a regulator, or a banking association .  And, in the future, if you ever have a problem with your bank, I hope you first contact your bank, and then if you and your bank can’t resolve the matter, contact your bank’s regulator.

 If you have any questions about anything I’ve said, please do not hesitate to call.

Sincerely,
Shannon Phillips

Cc: Blake Ellis, CNNMoney

Yes, if I were going to write a letter to Colleen, that is what it would say.

The views expressed in this blog belong to the author and do not necessarily represent the views of IBAT, its Board, or its members.