Bank of America - Facts, Controversies, Conclusions

In choosing a company for the week 5 assignment, it seemed natural to choose a commercial bank to monitor because I have been employed in the banking industry for over 30 years. I decided to discover which bank was the largest commercial bank in the U.S and to monitor it. I did a Google Web search in order to determine which was largest. My search, largest us bank, provided results 1 - 10 of about 35,000,000 for largest us bank (0.24 seconds). The first two of the initial ten results displayed were infoplease.com and Wikipedia. The infoplease.com site provided a table of the 30 largest commercial banks in the U.S. It was from this table that I learned the largest commercial bank in the U.S. is Bank of America Corp. with total assets (in millions of dollars) of $1,082,243. It was also interesting to discover that 5 of the largest 30 banks in the U.S. are based in Ohio. The Wikipedia information about Bank of America consisted of 11 pages. I found them to be well written, easy to read and understand, and helpful.
In week 2 of our class we wrote about business debacles. Knowing that debacles take place in many businesses, and knowing that they also are likely to take place in the banking industry, I wondered if Bank of America was involved in any debacles. I conducted another Google Web search, bank of america debacles. The search results were 1 – 10 of about 74,700 for bank of america debacles (0.5 seconds). In scanning some of these, I did not find what I was really searching for, which was more information about a debacle entitled The Matthew Shinnick incident, found in the Wikipedia information obtained earlier. Google Web search results for matthew shinnick were 1 – 10 of about 22,900 for matthew shinnick (0.10 seconds). I found the most well written article about the Matthew Shinnick incident written by David Lazarus of the San Francisco Chronicle at SFGate.com. The introductory paragraph was very much an “attention-getter”. According to Lazarus, “San Francisco resident Matthew Shinnick tried to sell a pair of mountain bikes on Craigslist late last year. He attracted a buyer, received a check in the mail – and ended up handcuffed by police in a downtown Bank of America branch and jailed for almost 12 hours.” The article continues on to describe how the victim was strip-searched, sat in jail, and his family was forced to provide bail until he could prove his innocence. To make a long story short, in a good faith effort Shinnick asked the teller if the account on which the check he was given for payment had sufficient funds prior to presenting the check for cash. The teller advised that sufficient funds existed. Shinnick then endorsed the check for cash. Unfortunately, while sufficient funds existed in the account, the check was bogus and Matthew Shinnick was an innocent victim of an attempted scam as bank personnel alerted the police. Bank of America publicly stated that they regretted the incident but claimed they had a responsibility to report suspicious activities. Shinnick said, “. . . it’s up to banks not to call the police until they’re certain that a crime has been perpetrated – and that the person standing there is a crook and not a victim.” San Francisco malpractice attorney Jennifer Becker observed, “that incident of wrongful arrest could get totally out of hand with online commerce and eBay and all the opportunities for fraud.” Shinnick paid approximately $14,000 to clear his name. Bank of America paid him nothing.
I wondered what other potential or actual lawsuits might have involved Bank of America. Google searching thus far had been rewarding, so my next Google Web search results were 1 – 10 of about 1,230,000 for bank of america lawsuits (0.25 seconds). Here I discovered an interesting lawsuit involving excessive overdraft fees. Bank of America’s policy is to pay the largest debits first. This means that if a customer has $1,000 of collected funds in his/her account, and debits presented for payment are say $5, $20, $30, $75, $110 and $900, only the $900 debit is paid and the others are all deemed NSF. A fee for each NSF is assessed. More overdrafts, more NSF fees. I found this practice to be common among many banks because it is simply a way to generate increased fee income. I was reasonably sure this practice would create a “stir” among consumers who were victims of large NSF fees that alone oftentimes exceed the individual check amounts. My next google search was excessive NSF fees bank of america. Results were 1 – 10 of about 165,000 for excessive NSF fees bank of america (0.05 seconds). I was correct in my assumption that this topic has created quite a “stir”. The first result was quite graphic – Bank of America sucks : : The Daily Journal : : Jay Allen.org. What I thought might be quite interesting was a result labeled Rip Off Report: Bank of America steals my money in OVERDRAFT . . . This site, Rip-Off Report.com, is a blog where consumers voiced their complaints and others commented and/or rebutted. I found it interesting to note that the first posting was back on 10-15-06. The most recent posting was 3-21-07. People have been commenting on this same topic for over five months! I work in the lending area for my employer, so I am not as knowledgeable in regard to our policies, fees, etc. in connection with deposit services. The negativity associated with the practice of paying the largest checks first immediately prompted me to investigate whether or not our institution engages in this practice. I was happy to learn that we do not.
I had not yet visited Bank of America’s company web site, so I decided to go here next to see what I could learn. Under About Bank of America, Bank of America News, Newsroom, Press Releases, Special Incident Announcements, I thought I might find official statements in regard to hot topics such as the Matthew Shinnick incident, excessive NSF fees, etc. I did not find anything, and releases were archived for several years. When reviewing these press releases, my conclusion is that Bank of America is doing a good job “selling itself” on its positive accomplishments. It appears, at least at the company web site, they avoid addressing negative public relations.
In searching around, I also had previously discovered that Bank of America had made a name for itself by providing credit to illegal immigrants. My google search, illegal immigrants bank of america was expanded to a Google blog search. The blog search resulted in 1-10 of about 12,964 for illegal immigrants bank of america (0.06 seconds). I chose a blog search because it was my belief that I would find bloggers “letting it all hang out” on a hot topic such as this. I believe my assumption was correct. I found a blog where a boycott of Bank of America was being promoted (Americans for Legal Immigration). Other bloggers were quite “pronounced” as well (Bank of America competes with Loan Sharks – naked capitalism.com).
As I reflect on Bank of America - what I have learned about them, and conclusions I’ve drawn - my simple conclusion is that Bank of America is an example where biggest is not always best in institutional relations with its customers. I found bloggers making continuous reference to difficulty in being able to express concerns to a human company representative. This then led to a feeling that the bank’s relationships with its customers lacked desired necessary human elements. I believe this argument can be supported by several examples. In the case of Matthew Shinnick, while the bank expressed regret, it would not compensate Mr. Shinnick for expenses in clearing himself. In the issue of excessive NSF fees – the bank continues the practice. In the issue involving illegal immigrants, the bank defends its position by saying its product offerings to immigrants is legal, and seemingly disregards public perception. When viewing the company web site, no responses to negative publicity are provided here. Bank of America seems to choose to predominantly only focus on its business successes at the press release area of its web site.
I somewhat draw a comparison to Enron. Bank of America is very large and powerful, as was Enron, and appears to be almost “too big for its breeches”, seemingly snubbing its consumer market. Has Bank of America become so large that it feels it can never fail, the same perceived mindset that Enron once seemed to portray?
After reading and studying a vast array of negative communication in connection with the activities of Bank of America, I lastly needed to assess the company’s financial performance. Anyone can go to www.FFIEC.gov and find UBPR (Uniform Bank Performance Reports) provided by the FDIC (Federal Deposit Insurance Corporation). In reviewing certain areas of the UBPR of Bank of America, my assessment is they are doing very well. Their growth rates in total assets have been trending very positively over the last five years. Net income has also increased each year, as has cash dividends declared.
My employment has always been in small community banks. From my experience, community bankers are always very concerned with their image in the marketplace. They are also concerned whether or not their activities will impact the performance of the company. Obviously, negativities surrounding certain activities of Bank of America have not impaired its financial performance. I find them lucky!