SunTrust and Distrust

A few weeks ago Bank of America announced that they were going to charge a debit card fee of $5/mo. The BoA got into financial difficulty started when subprime loans it got stuck with as markets for buying up such mortgages froze as default rates climbed. BoA’s difficulties increased as derivatives and other risky overly leveraged investments (many leveraged as much as 40 to 1) decreased in value. High flying profits turned into mega losses. To avoid the collapse of the American financial industry BoA, along with other major national and regional banks, were bailed out by the federal government.

With the downturn on the economy, many banks have had a downturn in their profits. Decreased retail sales means fewer transaction fees they collect from retailers on credit card and debit card transactions. Decreased bank deposits mean lower deposit value for the bank to use for investments. Decreased car sales and home sales create decreased income from loans. On top of that add increased loan and mortgage defaults.

Using changes in credit card regulations BoA decided to institute a $5 debit card fee by collecting from account holders a fee, thereby collecting on both sides of the transaction. The transaction fees are being instituted to help return the profit margins of the bank back to its pre 2008 levels. Let’s be clear BoA, who along with several other national and regional banks, is a major factor behind the current economic difficulties being experienced in the economy. Seeing an opportunity to increase their profits, several of banks followed BoA’s lead and quietly instituted their own debit card fees.

SunTrust was one such bank to follow BoA’s example. After SunTrust started to receive a high volume of customer complaints and account lost (many smaller banks were not following BoA’s lead), SunTrust announced Wednesday that it was refunding debit card fees already charged and have no debit card fees. The bank quietly engaged in a slight of hand…it modified its fee structure significantly, a modification that will yield it even more money. SunTrust increased is account maintenance fee to $17, from $15 (up from $10 in the pre-2008 period).

The account maintenance fee at SunTrust was waived if you had payroll direct deposit (that is only if the accountholder asked as some accountholders were still charged the fee when they had payroll direct deposit). Maintenance fee can still be waived if you maintain $5,000 in the account throughout the month (the account pays no interest).

Hence, through elimination of the payroll direct deposit waiver and the increase in the monthly maintenance fee, the bank will start to make even more money than just from the $5 fee. The changes hit the blue collar, entry level white collar worker and students. The changes keep goal of upper management at the bank intact, to keep their own mega bonuses as strong as possible.

Like the debit card fees, the new fee structure was not announced in any email to customers, posted on any signs at the bank or in any press releases. Instead, like the debit card fee, the new fees were quietly listed on the fee structure and customers will only discover the change in mid December, when they receive their November account statements are released.

Evie and I have been SunTrust customers since moving to DC from Iowa. On balance we were happy. In watching what has happened with debit card fees and the new account fee structure, we find ourselves unable to do what is central to SunTrust’s name, trust. If we cannot trust a firm with how it handles its fees then we cannot trust it to hold our accounts. Therefore we are moving all out banking to TD Bank, which is the American branch of Toronto Dominion.