After a year filled with negative banking news from around the world — from deceptive practices, outrageously high fees, class-action suits and money laundering scandals — Americans are beginning to change the way they view their financial institutions.
After a series of scandals, which included Barclays $450 million settlement for manipulating rates and Bank of America’s $1 billion lawsuit filed by the U.S. Department of Justice (DOJ) for producing substandard home loans and selling them to Fannie Mae and Freddie Mac, people are reevaluating bank management, customer service and financial performance in the new year.
Majority of Bank Customers Not Satisfied
According to results published Dec. 11 by the American Customer Satisfaction Index, a substantial number of Americans are not completely satisfied with their banking institutions.
Bank of America received a score of 66 on a scale of 100, its lowest satisfaction score in 12 years. In fact, the Charlotte, N.C., company was named the least popular bank for the fourth year in a row.
JP Morgan Chase received a top score of 74, a 6 percent increase from last year. It was the only one out of the top four banks to increase its customer satisfaction score this year. Wells Fargo received a 71 in customer satisfaction, a 3 percent decrease, and Citigroup dropped 4 percent to a 70.
Smaller banks scored two points higher, a 79, than larger banks when it came to consumer satisfaction with checking, savings and loan services. Larger banks reportedly lost customers this year due to the significant increase in fees during an already challenging economy. An estimated $30 billion in overdraft fees were collected in 2011.
While credit unions saw a 5.7 percent drop to 82 this year, these not-for-profit institutions led the pack in banking for customer satisfaction. This year’s decrease has been attributed to the recent influx in credit union customers.
The Latest in Bank Scandals
A U.S. Senate probe has led to the discovery that the multinational banking giant HSBC has become a financial avenue for drug dealers and rogue nations.
The bank has been accused of processing cash for Mexico’s powerful and deadly drug gang known as the Sinaloa Cartel and the Norte del Valle Cartel in Colombia.
Assistant Attorney General Lanny Breuer said Mexican drug traffickers deposited hundreds of thousands of dollars per day into HSBC accounts. The bank even enlarged its windows at some locations to permit larger boxes of money to be accepted. It is estimated at least $881 million in drug trafficking money was laundered. The bank also assisted Iran, Libya, Sudan, Burma and Cuba in working around U.S. banking rules.
In an effort to avoid an extended legal battle and keep HSBC afloat, the United States agreed this week to accept a $1.256 billion fine in the scandalous money-laundering matter. The total fine is expected to reach $1.92 billion when additional penalties imposed by other agencies are included. Civil penalties are also possible.
The government decided to accept the record-making fine in lieu of taking the bank to court. If American authorities had gone forward with criminal charges, HSBC would most likely have lost its banking license in the United States, and the entire banking system could have been weakened.
The penalty, which includes a postponed prosecution agreement with the Justice Department (DOJ), also binds the bank to additional compliance policies.
Independent Monitoring and an Apology
As part of a five-year agreement with the DOJ, HSBC has agreed to assign an independent monitor to evaluate reformed internal controls. A portion of bonuses for top banking executives will be deferred as well.
HSBC confessed to not having strong control over the money laundering and issued an apology. The bank said it already had taken action within and committed to $290 million in system improvements intended to prevent money laundering.
HSBC Chief Executive Stuart Gulliver said in a statement that the bank accepts responsibility for its past mistakes. “We have said we are profoundly sorry for them, and we do so again,” Gulliver said.
This is not the first time HSBC has faced penalties for careless controls and been ordered by U.S. authorities to monitor suspicious transactions. The bank was directed to improve supervision in 2003 and 2010.
Bill “No Pay” Fay has lived a meager financial existence his entire life. He started writing/bragging about it in 2012, helping birth Debt.org into existence as the site’s original “Frugal Man.” Prior to that, he spent more than 30 years covering the high finance world of college and professional sports for major publications, including the Associated Press, New York Times and Sports Illustrated. His interest in sports has waned some, but he is as passionate as ever about not reaching for his wallet. Bill can be reached at [email protected].
- Reuters. (2012, December 11). Banking giant HSBC to pay record $1.9 billion in money-laundering case. NBC.com. Retrieved from http://www.nbcnews.com/business/banking-giant-hsbc-pay-record-1-9-billion-money-laundering-1C7541128
- Rushe D. & Treanor, J. (2012, December 11). HSBC's record $1.9bn fine preferable to prosecution, US authorities insist. The Guardian. Retrieved from http://www.guardian.co.uk/business/2012/dec/11/hsbc-fine-prosecution-money-laundering
- Rees, J. (2012, December 11). HSBC agrees to pay $1.92 billion to settle US money-laundering case. Allvoices. Retrieved from http://www.allvoices.com/contributed-news/13585001-hsbc-agrees-to-pay-19-billion-to-settle-us-money-laundering-case?utm_campaign=Outbrain&utm_source=Outbrain2Cents
- Benoit, D. (2012, December 11). J.P. Morgan Chase Jumps in Consumer Satisfaction. The Wall Street Journal. Retrieved from http://blogs.wsj.com/deals/2012/12/11/j-p-morgan-chase-jumps-in-consumer-satisfaction/
- American Customer Satisfaction Index. (2012, December 11). December 2012 and Historical ACSI Scores. Retrieved from http://www.theacsi.org/acsi-results/acsi-scores-december