Difficult Times at Our Credit Union • Hacker News Board

Re: Difficult Times at Our Credit Union

#61

Post by TorKlingberg » Wed, Nov 25, 2015, 3:03 PM UTC

humanrebar wrote: post #53

bko wrote: post #49

Earlier quoted context omitted.

I agree there should be less regulatory hurdles for credit unions. Unfortunately this would require essentially some form of deregulation which is unlikely in this political environment. Banks don't charge outrageous surcharges and fees to be evil. They do it because providing banking services, especially to small accounts is expensive. In 2011 an average checking account cost $349 for a bank to maintain [0]. Anytime…

> In 2011 an average checking account cost $349 for a bank to maintain From the article: "The single biggest cost, Israel says, is the cost of bank branches and ATMs. Another 20% is spent on back-office functions, including maintaining call centers and payment operations." It seems like this is all about bad workflows and customer service... which are technical issues, not inherent business needs. There are probably…

Sure, you could run a bank with no branches and no support phone number.

Re: Difficult Times at Our Credit Union

#62

Post by rahimnathwani » Wed, Nov 25, 2015, 3:03 PM UTC

jawns wrote: post #28

My guess is that, given the choice, practically everyone would prefer to bank with a member-owned cooperative, i.e. a credit union, than a for-profit bank owned by outside shareholders. I mean, think about it: sneaky fees and outrageous surcharges are anathema, because it's more important for members to be satisfied with their experience than to wring out every nickel and dime of profit at the expense of customer sat…

It's funny that you mention the UK, which used to have a number of mutual bank-like institutions called 'building societies'. Many of these became banks about 20 years ago, and former members (holders of mortgage or deposit accounts) received windfall cash payments in exchange for their shares.

I don't recall what drove the transformation, but It wouldn't be surprising if those who made the decisions had some upside from either their current or future compensation packages.

Re: Difficult Times at Our Credit Union

#63

Post by bko » Wed, Nov 25, 2015, 3:05 PM UTC

rahimnathwani wrote: post #60

bko wrote: post #49

Earlier quoted context omitted.

I agree there should be less regulatory hurdles for credit unions. Unfortunately this would require essentially some form of deregulation which is unlikely in this political environment. Banks don't charge outrageous surcharges and fees to be evil. They do it because providing banking services, especially to small accounts is expensive. In 2011 an average checking account cost $349 for a bank to maintain [0]. Anytime…

That $349 figure is misleading. It is comprised almost 100% of fixed costs, like executive salaries and buildings, which do not vary with the number of accounts. Banks charge fees because they seek to maximise profits. Those fees don't have to relate closely to costs. I'm not saying this is good or bad, just that it is so.

I don't know if you read the website or want to provide some kind of source for the cost breakdown, but my source suggests it's 50% branches and arms, 20% call centers and payment, 20% security and compliance and 10% product development and sales.

I guess you can call those fixed costs. No mention of executive salaries, maybe product development? If they were just fixed costs, and banks were making money off small accounts, why are they discouraging them so much with minimum balances and fees? I cancelled a small account recently and the bank seemed happy to let me go. Not even a question of why I was leaving.

Re: Difficult Times at Our Credit Union

#64

Post by colanderman » Wed, Nov 25, 2015, 3:06 PM UTC

bko wrote: post #49

jawns wrote: post #28

My guess is that, given the choice, practically everyone would prefer to bank with a member-owned cooperative, i.e. a credit union, than a for-profit bank owned by outside shareholders. I mean, think about it: sneaky fees and outrageous surcharges are anathema, because it's more important for members to be satisfied with their experience than to wring out every nickel and dime of profit at the expense of customer sat…

I agree there should be less regulatory hurdles for credit unions. Unfortunately this would require essentially some form of deregulation which is unlikely in this political environment. Banks don't charge outrageous surcharges and fees to be evil. They do it because providing banking services, especially to small accounts is expensive. In 2011 an average checking account cost $349 for a bank to maintain [0]. Anytime…

Banks don't charge outrageous surcharges and fees to be evil.

Yes they do. It's very common for commercial banks to intentionally order transactions which cause an overage such that they result in the highest amount of fees possible, and then charge an extra fee because you couldn't cover the overage fee.

If this were simply banks trying to be profitable, why wouldn't they simply raise overage fees and charge them predictably? Is there a regulation which disallows this?

Sorry, I'll stick with keeping my money with an institution that's not legally bound to engage in an adversarial relationship with me.

Re: Difficult Times at Our Credit Union

#65

Post by bko » Wed, Nov 25, 2015, 3:10 PM UTC

cwmma wrote: post #57

bko wrote: post #49

Earlier quoted context omitted.

I agree there should be less regulatory hurdles for credit unions. Unfortunately this would require essentially some form of deregulation which is unlikely in this political environment. Banks don't charge outrageous surcharges and fees to be evil. They do it because providing banking services, especially to small accounts is expensive. In 2011 an average checking account cost $349 for a bank to maintain [0]. Anytime…

A corporation at the end of the day has it's owners interests at heart, with a large bank like Bank of America their owners and their customers are separate groups and their interests may be odds. When the customers AND the owners are the same interests tend to align and you are less likely to be in a situation where you feel your bank does not have your best interest at heart.

Can you expand? It's easier now that ever to switch and compare banks. It's fairly competitive. But my original point was that the banks are losing a lot of money on small accounts, so obviously they're not trying to compete for them and merely offer and service those accounts due to pressure of regulators and to earn public good will.

Re: Difficult Times at Our Credit Union

#66

Post by ZeroGravitas » Wed, Nov 25, 2015, 3:11 PM UTC

rahimnathwani wrote: post #62

jawns wrote: post #28

My guess is that, given the choice, practically everyone would prefer to bank with a member-owned cooperative, i.e. a credit union, than a for-profit bank owned by outside shareholders. I mean, think about it: sneaky fees and outrageous surcharges are anathema, because it's more important for members to be satisfied with their experience than to wring out every nickel and dime of profit at the expense of customer sat…

It's funny that you mention the UK, which used to have a number of mutual bank-like institutions called 'building societies'. Many of these became banks about 20 years ago, and former members (holders of mortgage or deposit accounts) received windfall cash payments in exchange for their shares. I don't recall what drove the transformation, but It wouldn't be surprising if those who made the decisions had some upside…

In part the de-mutualisation was driven by the short term gains that could be realised if it happened (at the expense of the long term customers). This led to people signing up as customers, purely so they could vote for this to happen and receive a windfall, so you're right, though it sounds like you thought it was a small number of decision makers at the top, rather than an insurgency of outsiders taking advantage of the co-operative model's democratic structure.

Re: Difficult Times at Our Credit Union

#67

Post by aembleton » Wed, Nov 25, 2015, 3:13 PM UTC

rahimnathwani wrote: post #62

jawns wrote: post #28

My guess is that, given the choice, practically everyone would prefer to bank with a member-owned cooperative, i.e. a credit union, than a for-profit bank owned by outside shareholders. I mean, think about it: sneaky fees and outrageous surcharges are anathema, because it's more important for members to be satisfied with their experience than to wring out every nickel and dime of profit at the expense of customer sat…

It's funny that you mention the UK, which used to have a number of mutual bank-like institutions called 'building societies'. Many of these became banks about 20 years ago, and former members (holders of mortgage or deposit accounts) received windfall cash payments in exchange for their shares. I don't recall what drove the transformation, but It wouldn't be surprising if those who made the decisions had some upside…

A lot of the transformation was caused by those who moved to building societies with the intention of changing them to banks and cashing in on the windfall. They were known as carpetbaggers: https://en.wikipedia.org/wiki/Carpetbagger#United_Kingdom

Re: Difficult Times at Our Credit Union

#68

Post by [deleted] » Wed, Nov 25, 2015, 3:13 PM UTC

rm_-rf_slash wrote: post #54

jawns wrote: post #28

My guess is that, given the choice, practically everyone would prefer to bank with a member-owned cooperative, i.e. a credit union, than a for-profit bank owned by outside shareholders. I mean, think about it: sneaky fees and outrageous surcharges are anathema, because it's more important for members to be satisfied with their experience than to wring out every nickel and dime of profit at the expense of customer sat…

These "regulatory hurdles" that prevent credit unions from competing with banks were not created in a vacuum, they were created by the banks. No amount of Kickstarting will solve the problem of our political system's fetish for financial domination. The cause is obvious: as a for-profit institution, a bank has the money to lobby for preferable laws, let alone the laws they write themselves. If people began switching…

[deleted]

Re: Difficult Times at Our Credit Union

#69

Post by javajosh » Wed, Nov 25, 2015, 3:16 PM UTC

George Orwell noted in 1984 that to really control a population, you control their language - eliminate the words that describe the behaviors and views you disagree with.

Economically, businesses provide "words", degrees of freedom that people exercise when they spend or act. Banking is ugly because there are some "words" we don't want people to use, like derivatives, or over-leveraging. But the banks themselves then use this safety mechanism to eliminate or weaken the words that would threaten them, like cooperative banks.

In the end, it boils down to Congress. The Executive has a lot to say about it too. Perhaps as technology improves we can install a Panopticon in Wall Street and Washington, reducing the cost and risk of regulatory enforcement. And if they protest we can say: well, what do you have to hide?

Re: Difficult Times at Our Credit Union

#70

Post by cmdkeen » Wed, Nov 25, 2015, 3:16 PM UTC

jawns wrote: post #28

My guess is that, given the choice, practically everyone would prefer to bank with a member-owned cooperative, i.e. a credit union, than a for-profit bank owned by outside shareholders. I mean, think about it: sneaky fees and outrageous surcharges are anathema, because it's more important for members to be satisfied with their experience than to wring out every nickel and dime of profit at the expense of customer sat…

The UK is also a slightly dodgy example because the Cooperative Bank managed to implode in spectacular fashion mainly because the board didn't have many people with any idea about finance, and their Chief Executive, who had a politcial background, ended up being arrested after being caught by the papers trying to buy drugs. There are some really good examples of building societies over here, Nationwide seems to consistently do retail banking very well. But they are not a panacea.