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Potentially Interesting Financial Institutions

Page history last edited by rsb 3 years, 4 months ago


I'm looking for financial institutions that don't rip people off, and listing them here.

 

Short version:

 

At this point in my research, the following combination of services/organizations seems to offer the best combination of low fees, reliability, service, and reputation for good business practices:

 

Schwab - Brokerage/High Yield Investor Checking/IRA accounts - Use these for investment and recurring expenses only - not day to day purchases.  Pay into investment accounts automatically each month after recurring expenses, then pay spending money into simple.com each month.  (Also, Scottrade seems to be competitive.)

 

Simple - Use this for day to day purchases and spending analysis.  Pay into Simple from Schwab automatically each month the amount you want to spend.

 

You should end each year with zero fees and interest with that setup.

 

No idea as to what institutions might offer fair credit cards or loans, yet (I live debt free), but this site has some info on credit cards: nerdwallet.com.  Also, mint.com is a fine way to measure spending (at some security cost).

 

Other financial institutions:

 

What I will ultimately list here are institutions that are working on the right problems.  I suspect these leads are interesting:

 

 

Why? (Or, how I learned to stop worrying and love smart contracts):

 

I'm going to tell you a true story about my interest in this area.  Forewarned is forearmed:

 

What follows is an expose on one tiny aspect of the behavior of US banks, with a couple sidebars on bank-teller life.  If you know anything about the US banking industry, then you know that reading any treatment of them requires a Xanax and a beer, and maybe something to throw up into.  

 

The Story.

 

I worked as a bank teller for several years while I was in college.  I am now ashamed of this.  The only positive thing to come from it was my motivation to help fix the situation in some small way.  

 

Lets just call the bank I worked at Smells Fargo.  Way back machine - go to my bank teller days!: DooDaLooDoo DooDaLooDoo DooDaLooDoo...

 

Fairly often, someone would come in to the bank and ask me about exorbitant fees.  

 

Tellers were instructed to give these people a number to call to discuss their fees.  Basically, that meant: pawn the customer off on a machine that would frustrate them for hours so that they give up because they have jobs and don't have time to keep that job and still talk to a useless machine all day.  

 

But the situation always began the same way.  A naive young mom or dad, near panic, asking me to explain the fees.

 

I didn't really need to hear their story.  I knew it after working at the bank for a few months.  I was going to look at their account and see that the first thing that happened was a single overdraft - the fee was usually about 35 dollars.  Then, if the customer was poor, all hell broke loose in their life.   I'll explain how, but first, a sidebar:

 

Bank teller life could be stressful.  In the branches where I worked (Smells Fargo branches in san jose, ca. in the late 80s and early 90s),  there was always a list of the tellers names visible to staff but not to customers.  It was usually on a post or a cabinet facing away from the customers.  That list had some number of red or green dots next to each tellers name.  

 

Green dots next to a tellers name meant that, at the end of the day, that tellers money count was off in the banks favor.  Red dots meant that the money count was off in the customers favor at the end of that day for that teller.  Three red dots in a month and you were fired.  Oh, what happened to tellers with green dots next to their name?...no one got fired for those.  I mean, they were frowned upon, but...banks LOVE to make mistakes in their own favor.

 

A new list was started each month, and the (highly stressed out) tellers with two red dots breathed a sigh of relief.  At a busy branch, a teller can execute hundreds of cash transactions per day - under significant pressure to keep the lines short - no one was perfect in their count every time.  Over a long enough time period...everyone was expendable.

 

O.k. enough about bank teller life.  What happened to that young mom with the fee?  Well, an automated system checked to see how badly they could be ripped off.  If, on adding up their charges for the day, any more charges could be incurred by changing the order in which charges were made, then the algorithm set itself to work destroying them.  

 

This is just one way US banks have been ripping off the poor since the 80s:

 

First, the bank would take all the largest charges out of their account (some large charges are mistakes in the banks favor - very often the bank would double pay or otherwise "screw up" by paying a bill a few days early or late - I suspect this was algorithmic as well).  This would often coincide with mistakes on the vendor-side - vendors would charge a higher or incorrect amount - almost exclusively this would be a big company like ATT (I also suspect there was some automated logic to take advantage of such "innocent" mistakes).  

 

VERY IMPORTANT FOR THE BANK - These big charges would be taken out first, even though they might have been the last charge that customer made that day, chronologically.  These charges alone would bring the account to overdrawn or nearly overdrawn.  

 

ALSO VERY IMPORTANT FOR THE BANK - the customer could never tell the bank to refuse payment on anything - or advise the bank to do so - the choice of what to charge and what to refuse was always made by the banks profit-maximizing algorithms in real-time each day.  There is no transparency in US banking so we'll probably never know exactly what their algorithms do.

 

Second, the bank would look at the myriad of minor charges for that customer that day - most busy poor households have a dozen little charges each day on credit or debit cards, as they are coupon clipping and running around to little places to get deals and keep the kids clothed and fed.  Happily, the banks automated systems would allow all of those charges to go through, charging a 35 dollar fee for each one.  So, add a dozen 35 dollar fees to that family living paycheck to paycheck.

 

Now we're up to, typically, a few hundred dollars in fees, that day.  However, that wasn't the end for this average american family (that the bank would heretofore consider good-for-nothing deadbeats**).  Oh, no.  The bank had planned for this day when they signed up.  Things would not go well for them.  At all.

 

A second bit on bank teller life:  Banks always had me, and all the other tellers, if possible, sell everyone a credit card (they paid me five bucks for each family I signed up).  I sold a lot of them.  I didn't think about it.  Shame on me.  Shame.  The banks also had us suggest to each customer that they "link" their checking and credit card accounts, so that if one were about to overdraft, the other could "cover" the account, and vice versa, reducing fees!!!  Well, as you will see, not really.

 

The good news: A poor family, working as many minimum wage jobs as they can, but still living paycheck to paycheck, can either choose to have their kids starve and die of sickness, or they can use every available means to maximize their health.  You will be happy to hear that they always do the latter.  Good people will sacrifice anything for their kids.  That's the one positive piece to this story.  Take that in for a moment.  

 

The bad news: You will be unhappy to hear that their choice to max out their kids health and opportunity means that the poor family is riding their available credit at a high level all the time, often paying some crazy interest rate each month for that one extension of credit they had to use to pay a medical bill or a tuition fee, and taking about a year to pay off the last emergency at several times it's original cost, just before they get hit with the next emergency.  The bank loves them for that, but not enough to stop it from doing what it's about to do.

 

So what happens to our poor family, which, I will remind you, was probably double charged, or made a small screwup at the start of the day?

 

Maybe the total amount they were charged would put them fifty bucks over the room they had in their credit card, in a sane and moral world.  However, the biggest charges were charged first (even though they might have been made at the end of the day and not the beginning of the day) causing 12 fees and not one fee because that's the order in which charges can be processed to charge the most fees.  Awesome.  They are now overdrawn by the fifty dollars plus the twelve 35 dollar fees - lets say they are in the hole 470 bucks.  

 

But wait!  There's more!  They have overdraft coverage because the tellers "hooked them up" with that awesome money saving product because the bank really cares about them.  This is where it gets unbelievable.  Their rent check came through that day and they might have, say, 20 bucks left in checking.  Perfect timing (too perfect - algorithmically perfect) for this strike.  

 

Their credit card account, linked to their checking account, leaps into action.  It charges the checking account, pulling the 50 bucks out.  Unbelievably this incurs a fee as well...yes...the service that was supposed to save money on fees, incurred a fee of about the same amount as an overdraft on the credit card account.  Their checking account, which is covering their credit card account, is now overdrawn by 20-50-35=65 bucks.  And that's just what happens on the "first" overdraft.  The rest of the charges, through the magic of banking software, now incur overdrafts on whichever account can charge the highest fees.   Now the bank has insured that you are really, totally destitute - with both accounts at or below zero - aren't you glad you linked those accounts? 

 

Then, get this - the accounts sometimes start covering each others overdraws - in an attempt to get themselves back to zero balance, they incur a overdraft fee each time!  

 

If it ever went to court, this would probably be explained away as a "bug" in their software.  Cue giant eye roll.

 

At this point, they are just insulting the customer, who will obviously want to fight this illegal action.  The overdraw-loop-thing would be an endless loop if Smells Fargo had any hope that their customer (I mean deadbeat**) would ever pay back an infinite amount of money.  Instead, their algorithms, which surely knew the patterns of spending and income of that customer incredibly well, and had all the data on US households ability to pay down debt, created exactly the maximum amount of fees and debt that could be withstood without killing the family - allowing them just barely enough hope that they could pay down this debt at 49% or whatever interest rate Smells Fargo cared to charge.  (I think 49% was actually the max rate when I was a teller).

 

Smells Fargo, in this way, will siphon off assets at a calculated, ideal rate, allowing the family just barely enough air to keep their multiple jobs as indentured servants of the bank.  In the early 90s, Smells would start them at between a few hundred and maybe fifteen hundred bucks in the hole, payable at a very high interest rate.

 

What started with a very tight time on the customers part, plus an error on the customers part, or Smells Fargos, or a vendors part, became the death of the customer.

 

Hello food stamps.  Goodbye innocence.  Your credit rating will be ruined as the bank will keep doing this to you while you try to pay the debt off - they will report every late payment to credit reporting agencies, of course, browbeating you into selling assets to pay down your debt.  Goodbye hope.  If you ever scrape a little money together again, more mistakes will be made.  Stay down!

 

FINAL AND MOST IMPORTANT FEATURE OF US BANKS - You will never get your money back.  You can explain, prove, argue, or harass.  You can spend so much time arguing and suing that you lose your job and your home attacking them.  But you will never, ever, get your money back.  Your only option is to argue for about an hour with a "manager" on a phone (after spending several hours getting a "manager" on the phone) and they will "bargain" with you if they know you are right, giving you a few bucks back (usually a few of the most egregiously unfair fees).  When you do this, they will browbeat you and make you feel like you are the worst deadbeat** on earth.

 

Whew!  I needed to get that off my chest.  That's what I was involved in.  It feels good to admit it, but I still feel sick to my stomach for working in that industry back then.  Very shameful period in my life.  I was somewhat innocent at the time, until I wasn't.  I became a waiter shortly after I had my own first overdraft fee experience.  Waiting tables was a vastly superior job in every way.

 

Further confession - comparing banks to common fraudsters: Briefly (for a matter of hours), I unknowingly took a job ripping people off for a fake "non-profit".  It was one of those jobs that advertised on campus a ridiculous hourly wage for "salespeople".  I just had to check it out.  I took a flyer, showed up to a weird office full of mutants, and worked for a day.  When I confronted them about ripping people off, they at least partially admitted it.  Smells Fargo would have had me arrested for that kind of confrontation.  I quit the fake non-profit the same day I started.  That sliminess washed off.  But the bank teller stink is still with me a little.  To this day I see those mutants working in that fraudster office as more likable and *far* less dangerous than executives of US banks I have met.

 

I understand that there is at least some regulation in place today to curb some of this, but I have no doubt that banks in the US will find other ways to lie, cheat, and steal.  I'm pretty sure this kind of thing happens in a moral vacuum where greed is king.  A lot of people working in that industry are either good or naive, but some of them clearly act extremely immorally.  Like many others, I think a monster has evolved out of the greed of many individuals over time.  Hurting people is a side effect of a business model that no one has both the desire and power to change.  Maximize profits - exploit loopholes - lie - steal - automate - lobby - rinse - repeat.  

 

And that's just one anecdote about fees.  Imagine what a loan agent, or a CEO could say, if they would.  O.k. I'll leave you to your Xanax and beer.  

 

** Note on internal use of the word "deadbeat" within US banks.  Internally, they don't call people who pay a high amount of interest on credit cards deadbeats.  They call people who pay on time and never pay interest deadbeats.  I am not making that up.

 

Since you have read this far, you get a fun quote from the most decorated soldier in US history:

 

“I spent 33 years and four months in active military service and during that period I spent most of my time as a high class muscle man for Big Business, for Wall Street and the bankers. In short, I was a racketeer, a gangster for capitalism. I helped make Mexico and especially Tampico safe for American oil interests in 1914. I helped make Haiti and Cuba a decent place for the National City Bank boys to collect revenues in. I helped in the raping of half a dozen Central American republics for the benefit of Wall Street. I helped purify Nicaragua for the International Banking House of Brown Brothers in 1902-1912. I brought light to the Dominican Republic for the American sugar interests in 1916. I helped make Honduras right for the American fruit companies in 1903. In China in 1927 I helped see to it that Standard Oil went on its way unmolested. Looking back on it, I might have given Al Capone a few hints. The best he could do was to operate his racket in three districts. I operated on three continents.” 

― Smedley D. Butler, War is a Racket

 

 

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