The Quality Of Bank Relationships With Retail Customers

Golden says that he believes one of the most serious challenges facing our banking system today is "the quality of its relationships with retail customers." He continues:

Of all the things we hear about, nothing ranks higher on the list of consumer irritants year after year than the practices associated with credit card and related bank products. They account for forty percent of all complaints the CAG receives, and the specific practices that prompt those complaints are wide-ranging and ever-changing. Mandatory arbitration clauses. Universal default interest rates. The incredible shrinking grace period. And, always, the fees: late fees, overlimit fees, and balance transfer fees that seem to go only in one direction. That would be the same direction people’s blood pressure goes when they see that the outstanding balance on which they had been paying 15 percent APR is now going to cost them 32 percent because they were a few days late in paying an electric bill.

The OCC and our sister regulators have made it clear that we will take action when credit card and related practices cross the line into the territory that defines unsafe and unsound or abusive practices. We did just that in regard to credit card minimum payments that were insufficient to retire the fully accruing amount of interest and fees, plus at least a portion of outstanding balance, resulting in negative amortization. Again with the other agencies, we’ve issued several rounds of guidance governing the issuance of secured credit cards, repricing of credit card accounts, the use of promotional rates, and more. We have taken decisive action against individual issuers that have engaged in marketing of cards and assessment of fees and charges that fall within the FTC Act’s definition of “unfair and deceptive” practices.

But we have long contended that some consumer banking practices walk a dangerous tightrope between what’s impermissible and what is merely shortsighted, injudicious, and inadvisable. Where I grew up, they used to say, “Pigs get fat, but Hogs get slaughtered.” Your retail customer base should never be viewed as a feeding ground. But while overreaching for short-term gains is understandable, it is never wise.