Money is moving out of the country’s largest banks and into credit unions and smaller institutions. It’s rather ironic that the last straw was the relatively small fee, $5 a month, that Bank of America came up with for customers who use their debit cards at other sites than ATMs. But a generation the banks themselves have accustomed to using plastic instead of cash rebelled at, as they said, having to pay to use their own money.
Before that, the banks’ rap sheet included proliferating fees, most notoriously disproportionate overdraft fees; unjustified and improperly documented foreclosures; failure to lend even after receiving enormous government bailouts; and, looking farther backward, receipt and laundering of billions in deposits from dictators and drug traffickers (as when Wachovia and other banks in 2006 were caught failing to monitor laundered money that enabled Mexican drug cartels to buy airplanes to smuggle narcotics).
Consumers are realizing that they don’t have to wait for the government to downsize “too big to fail” banks; they can do it themselves, or at least take a stab at it that may draw blood. Last year the Huffington Post started an action called Move Your Money to encourage people to move their deposits out of the very largest banks and into smaller banks and credit unions. HP even provided a list of recommended banks; readers access it by typing in their zip codes (predictably, Valley residents will find Easthampton Savings Bank, Peoples Bank, Northampton Coop, Florence Savings, Hampden Bank and nearly all the local state-chartered banks on HP’s good list).
At the same time, churches, local governments and other institutions have been pulling accounts from the big banks. In a move that recalls South African divestment days, San Jose, Calif. last year removed some $1 billion in municipal deposits from Bank of America in protest against BoA’s foreclosure practices.
John O’Brien, register of probate in Salem, Mass., has asked the state to remove millions in deposits from his registry out of Bank of America because he is so outraged at BoA’s electronic title transfer system, which didn’t record title transfers according to Massachusetts regulations. O’Brien says Bank of America, Wells Fargo and other large banks have choked his registry with 30,000 or more invalid documents.
It’s difficult to tell how many people have withdrawn their deposits from the larger banks, but it’s known, for example, that since 2007, credit unions have grown. According to the National Credit Union Administration, their membership is up from 86.8 million four years ago to more than 91 million. Last week the Occupy Wall Street demonstrations set off a flurry of account closings.
Meanwhile, legislation filed in Congress by Sen. Dick Durbin (D-IL) and Rep. Brad Miller (D-NC) would streamline the process for people who want to close their accounts at Bank of America and other “too big to fail” banks. Among other things, it would prohibit the banks for charging fees to close the accounts, and would make the move of direct deposit and electronic bill pay accounts automatic (as it is when the government takes over a failed bank), so the customer could close the account in one action. It would also simplify the closing of accounts with negative balances and/or unpaid fees.
