There's only been one bank that has consistently treated me like cow poop all these years and that's Bank of America. When I saw its shares dip to $6.5 (-45% YTD) during our S&P downgrade meltdown, I couldn't help but wonder whether it was just karma striking back. Granted, Bank of America has some wonderful people working for the firm. I guess it just so happens that I hardly encountered any of them.
During the financial crisis in 2008, I spread my money purposefully to Bank of America given that I was afraid any and all banks could fail, and the FDIC only insured up to $250,000. Before BoA, I had been banking with Citibank, USAA, First Republic, and a little bit at Chase. As the markets began to recover in 2010, I withdrew all my savings and expiring CDs and refinanced a mortgage away from Bank of America because I just couldn’t take how uncompetitive BoA's rates were and how poorly I was treated.
Banks are a commodity business that takes in money and pays you a certain rate, and lends out your money at a higher rate. It's what banking analysts call the net interest margin, or NIM for short. The bank should provide safety, liquidity, and access. You know what the differentiating factor is in a commodity business? Good service. Someone forgot to tell Bank of America!
I HAVE FEELINGS TOO BANK OF AMERICA BAILOUT
Here are some examples of poor service and uncompetitiveness:
- I was stood up by the Bank of America mortgage refinance guy not once, but twice. For the second time, he even confirmed with me 45 minutes prior that he would be at his office waiting. When I got there, I waited for 30 minutes and his boss had to apologize on his behalf. Being late is a pet peeve of mine already. But, to actually flake on a customer after confirming just moments ago is inconceivable.
- When I successfully refinanced away from Bank of America at a rate much more competitive, Bank of America made me fill out extra forms and charge me several hundred bucks for access to my own records. I remember thinking what a bunch of crock, and unnecessary delay in paperwork because no bank had ever required this when I refinanced in the past. I also wondered to myself why the hell they just didn’t give me a rate mod, or offer to match the refinance fee so that they could still make a spread off my loan?
- I lost my online password, and when I went to reset it, they said I needed to input my ATM card number, even though I destroyed it 18 months prior and didn’t have it. Instead, I had to call customer service for 30 minutes to retrieve.
- Their CD and savings rates were simply uncompetitive. We’re talking at least 0.5%, and often a full 1% lower than other banks at that time. You’re losing out on $1,250 to $2,500 a year on $250,000 for example. When you can simply move your money to any other bank that is offering more, you might as well, especially since the financial storm had passed.
- My personal banker was let go. She was actually really good and responded quite quickly over e-mail. She tried her best to push things along and get the best rates possible for me, but she was running into internal walls everywhere. When she let go of her, I decided I definitely have not one shred of allegiance to Bank of America anymore.
IS BANK OF AMERICA TOO BIG TO FAIL?
After the massive bailout, I never thought that Bank of America would get back into financial trouble. However, with its poor service, uncompetitive rates, and more poor service, perhaps there might very well be a good old fashion bank run again. All these settlements ($8.5 billion on June 29th with mortgage bond holders), limits on what it can do (government denied the bank could pay a dividend), and massive drag on earnings (Countrywide), make Bank of America a lame duck company to own. We all know about its empire building history, but now, the world is seeing what poor management and customer service can do to a company.
With AIG filing a $10 billion dollar lawsuit on mortgage-bond investment fraud, it's hard to see Bank of America getting out of its mess anytime soon. If an average Joe like me fled the bank 1.5 years ago when it was supposedly on its upswing, how many folks are fleeing the bank now on a downswing? There were certainly some good people at Bank of America too. But for the most part, I felt like such a second class citizen that I had to go.
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