Banking Issues and Trends

Some Wells Fargo customers got a shock when they checked their accounts. Direct deposits they were expecting never showed up. At least in some cases, other deposits disappeared as well.

In a statement to the media, Wells Fargo said the issue affected “a limited number of customers” and that most of the cases were quickly resolved. The bank didn’t elaborate on what caused the problem but some customers had a similar experience earlier this year.

In March, some Wells Fargo customers complained that money disappeared from their accounts before eventually being returned. At the time, the bank blamed the issue on an unspecified “technical issue.”

Some problems with direct deposit may have appeared sporadically before this latest incident. In July ConsumerAffairs heard from David, a business owner from Woodland, Calif., who said his new “Direct Pay” account was suspended for two weeks as a precautionary measure.

“I found out when our payroll and rent didn't go out as scheduled,” David told us. “Missing payroll right after a rocky buyout didn't go over very well with the employees. Two weeks without online banking has been a nightmare in itself. It is mind-boggling that Wells Fargo had absolutely no way to resolve the issue sooner. The local bank manager thought it was absurd, yet couldn't do anything about it.”

Bumpy PR road

Wells Fargo has experienced a bumping public relations road over the last few years. The bank has paid out billions of dollars in fines and reimbursements for opening unauthorized checking and credit card accounts and wrongfully repossessing automobiles.

NBC News has reported that at least one consumer, who has never banked at Wells Fargo, received a statement from the bank for an account he never opened.

“Whoever did that had my name and Social Security number,” Jay Patterson, the consumer, told NBC News. “My date of birth was wrong, the driver's license information was wrong.”

Patterson believes the account was set up by a fraudster, who created a synthetic identity to establish an account to launder money. NBC News quotes security experts as saying Wells Fargo should have flagged the account as fraudulent.

Fears of bank failures have gripped the stock market in recent weeks with the collapse of Silicon Valley Bank (SVB) and struggles at First Republic Bank. In the case of SVB, the bank was taken over by the Federal Deposit Insurance Corporation (FDIC).

Deposits of up to $250,000 are insured by FDIC so depositors with less than that amount in the bank will be made whole. The problem, however, is the average SVB depositor had $2 million in the bank.

So, what if your bank were to fail? Assuming you have $250,000 or less in the bank you should have little to worry about. When a bank can’t meet depositors’ demands for their money, FDIC steps in to close the bank.

One of its first obligations is to protect depositors. Under federal law, the FDIC is required to make payments of insured deposits "as soon as possible" upon the failure of an insured institution. 

Money bank within two business days

“While every bank failure is unique, there are standard policies and procedures that the FDIC follows in making deposit insurance payments,” the agency says. “It is the FDIC's goal to make deposit insurance payments within two business days of the failure of the insured institution.”

In short, if your money in a failed bank is covered by FDIC and your account is less than $250,000, you can expect full reimbursement that is paid by the U.S. government. You don’t really have to do anything to retrieve your money. The money will be transferred to another FDIC bank and you’ll be notified about your new account.

If you have more than $250,000 in a failed bank, you’ll be reimbursed $250,000 but you may or may not get the excess amount. That’s one of the issues regulators are facing with SVB.

Is there a banking crisis and is your bank in danger of failing? It depends, but some banks are in the same situation as SVB. On paper, their deposits are worth less than what they owe depositors.

What banks do with your money

Here’s the reason. When you deposit money in your bank, the cash doesn’t just go into a vault. Some of it is loaned to borrowers but excess cash is usually placed in safe investments such as Treasury bonds.

During the pandemic, when Americans received more than $1 trillion in stimulus benefits, bank deposits grew rapidly. Banks used those deposits to purchase billions of dollars worth of bonds that, at the time were paying about 0.5% or less in interest.

Fast forward to today, when similar Treasury bonds are paying closer to 4%. If the bank needs to cash in the 0.5% bonds before maturity the bonds are worth much less because of the difference in interest rates.

Your bank may hold many of these bonds that are now worth less. If they don’t have to sell them, however, it isn’t a problem. 

It became a problem for SVB when its business customers needed access to their money to pay higher operating expenses. SVB was forced to sell many bonds at a huge loss and still didn’t have enough money to meet customers’ demands for withdrawals.

Bank customers are generally less satisfied with their financial institutions than in the past, according to the latest J.D. Power survey.

The survey found that most banks are missing the mark when it comes to making their customers feel supported, and the researchers are pointing to two potential causes. They say consumers are now feeling more financial stress in the form of inflation and are seeking personalized services that most banks have yet to provide.

“A customer’s definition of what support from their retail bank looks like is changing rapidly as we enter a new economic cycle and move further along the digital adoption curve,” said Jennifer White, senior consultant of banking intelligence at J.D. Power.

White says bank customers are looking for more. It’s no longer good enough to be fast, efficient, and convenient.

“The preeminent performance metric with the biggest influence on customer satisfaction is ‘supporting customers during challenging times,’ and that means customers are expecting a personalized mix of financial advice, hands-on help with problem resolution and guidance on how to grow their money,” she said.

However, the survey found that satisfaction increases substantially when a bank does provide this kind of support to its customers. Still, the findings show that only 44% of banks currently meet this challenge.

What ConsumerAffairs reviewers say

When we looked at how consumers posting reviews at ConsumerAffairs rate the major national banks, we found a fairly close ranking. On on 5-star system, here are the average ratings for six major banks:

• Capital One: 3.9 stars

• Bank of America: 3.5 stars

• Wells Fargo: 3.5 stars

• Truist: 3.5 stars

• Citi: 3.3 stars

• Chase: 3.3 stars

Capital One may have distinguished itself by providing the kind of technological engagement the J.D. Power survey says consumers want. Bill, of Santa Barbara, Calif., told us he is impressed with the features available on Capital One’s Quicksilver credit card that helps him keep his balance low.

“Their app lets you link bank accounts so you can pay electronically,” Bill wrote in a ConsumerAffairs review. “The cash back is very simple, there is no programming necessary. Cash rewards come up by itself. I use mine for a statement credit altho they can be applied to Amazon purchases or gift card.”

When our reviewers cite negative experiences with their banks, it often revolves around customer service -- something that the J.D. Power survey respondents also highlighted as a weakness. The data firm found that customer satisfaction scores “are lowest for helping retail bank customers save time or money, which has become a key priority for them.”

Consumers can get more insight on banks and read thousands of verified reviews in ConsumerAffairs’ guide covering the Best Banks and Credit Unions.

Rural communities from Appalachia to Alaska that are looking for a way to strengthen their economies have a new champion to help them get over the hump. The Consumer Financial Protection Bureau (CFPB) has launched a new initiative focused on discriminatory and predatory agricultural practices, manufactured housing, and a scarcity of banking.

It’s a rather large task that the CFPB is taking on given that rural life in and of itself is extremely diverse. Arkansas isn’t the same as it is in neighboring Texas, and farming differences between Montana and South Carolina are night and day.

“Rural people are deeply committed to the places they live, but face real challenges in accessing reliable services and good jobs, keeping up with household expenses, maintaining farming, and finding affordable housing,” said the CFPB’s Shawn Sebastian.

“We are concerned about these threats to rural household financial resiliency and committed to using our tools and authorities to ensure that rural communities, and the people who live in them, have opportunities to build wealth and thrive.”

Sebastian said rural America never fully recovered from the shock of the 2008 financial crash and that job growth in rural areas has been less than a third of the rate of job growth in urban areas. In addition, rural wages are lower and poverty rates are higher in rural communities than they are in cities. 

“And the gap is growing," he said. “Increasing corporate consolidation across the economy has hit rural areas particularly hard, suppressing wages and leaving rural people with fewer employment options. In addition, the effects of the COVID-19 pandemic on rural populations have been severe, with significant negative impacts on unemployment and the economic outlook .

The issues facing rural America

Earlier this year, CFPB Director Rohit Chopra invited more than 50 people from organizations representing rural people across the U.S. to share their concerns with the agency. The #1 issue that those people said they could use help with is making sure their communities’ experience with consumer finance mirrored that of metropolitan areas. Tackling that issue would go a long way towards addressing what the agency calls “rural banking deserts.” 

The rural patrons the agency heard from said a decline in banks has led to non-bank alternatives that charge higher fees and interest rates, which results in more money leaving rural communities.

“Trends of bank consolidation have also resulted in the loss of local, on-the-ground knowledge of how rural communities operate. As a result, banking relationships and credit disappear, followed by small businesses and jobs,” Sebastian said, adding that the rural counties most deeply affected by bank closures are those with a greater proportion of African-American residents relative to other rural counties. 

CFPB looks to tackle more issues

In addition to rural banking deserts, the CFPB is looking to address several other economic and financial disparities in rural communities to bring those areas closer to equality. Two additional issues it's looking to tackle include:

Discriminatory and Predatory Practices: People submitting comments to the CFPB noted that credit providers discriminate against Black farmers, which in turn, has contributed to the decline of Black farmers from a million in 1920 to fewer than 50,000 today, with a loss of 12 million acres of farmland.

“We heard from people working on the ground with Black farmers that discrimination in lending to Black farmers continues to persist  and that many Black farmers still struggle to access the credit they need,” he said.

The agency was also told by farmers that their obligations to banks can trap them in exploitative arrangements with agriculture firms that seem intent on controlling a farmer’s life. 

Manufactured Housing: Another concern that the rural citizens cited was difficulty in finding quality, affordable housing in rural areas due to a limited supply of rental properties. Manufactured housing residents told the agency that manufactured home parks are increasingly being bought up by private equity firms that have, in some cases, taken advantage of renters by dramatically increasing rents and tacking on fees. 

“According to the residents we heard from, some feel trapped in the arrangement because they’re still paying off their home-only loan and don’t want to lose the equity they’ve invested,” Sebastian said.

Sofi is one of the largest fintech companies and is a cross between a technology company and a bank. This week, it took another step toward becoming a bank.

The company announced that the Office of the Comptroller of the Currency (OCC) and the Federal Reserve have approved its applications to become a bank holding company through its proposed acquisition of Golden Pacific Bancorp, Inc. 

Sofi plans to operate its bank subsidiary as SoFi Bank, National Association. The company said it expects the acquisition to close in February.

“This incredible milestone elevates our ability to help even more people get their money right and realize their ambitions,” said Anthony Noto, CEO of SoFi. “With a national bank charter, not only will we be able to lend at even more competitive interest rates and provide our members with high-yielding interest in checking and savings, it will also enhance our financial products and services to ensure they efficiently meet the needs of our members, business partners, and communities across the country.

Active in refinancing student loans

Like many other fintech companies, consumers access Sofi's various financial services using an app. Many of its customers, like Gen, of Los Angeles, use Sofi to manage student loans.

“I transferred my student loan to Sofi because I was able to get a better interest rate and pay it down quicker,” Gen wrote in a ConsumerAffairs review. “The process was easy, the online management is great, and approval was very quick.”

The company also makes different types of loans, including personal loans. Luis, of Eatontown, N.J., told us he was approved for a $50,000 personal loan in fewer than three business days.

“My FICO score was good but not excellent,” Luis wrote in a ConsumerAffairs review. “I was even able to speak to a live human when I had a question. I did get a good rate compared to Lending Club or Prosper. The site itself is a pleasure to use.”

Among ConsumerAffairs reviewers, Sofi achieves a score of 3.7 stars in a 5-star rating system.

The move was expected

Sofi’s formal move into banking was well-telegraphed in advance. In 2021, the company announced a definitive agreement by its subsidiary Social Finance, Inc. to acquire Golden Pacific Bancorp, Inc. and its wholly-owned subsidiary Golden Pacific Bank, N.A. (GPB).

SoFi said it plans to contribute $750 million in capital and pursue its national, digital business plan while maintaining GPB’s community bank business and footprint, including GPB’s current three physical branches. 

With the approval of its move into banking, Noto says Sofi will be able to increase its portfolio of financial products and services for its customers.

What makes a good bank? When J.D. Power surveyed bank customers this year, they cited convenience, tailored account offerings, and helpful customer service.

“Customers have come to expect the nation’s largest retail banks to be able to meet them on their terms across all channels, delivering a flexible, highly engaging experience along the way,” said Paul McAdam, senior director of banking services at J.D. Power.

The annual bank customer satisfaction survey found that customers value highly personalized levels of service. They want relevant account alerts and guidance on ways to save money and optimize spending. 

In the 2021 survey, Capital One emerged as number one in customer satisfaction, according to J.D. Power. Capital One got the highest score by providing digital channels, helping customers save time or money, delivering account offerings that meet customer needs, and “allowing customers to bank how and when they want.”

“It is also noteworthy, in light of Capital One’s recent announcement that it is eliminating overdraft fees, that proactive efforts by banks to help customers avoid fees is one of the most powerful ways to personalize the banking experience,” McAdam said.

PNC ranked second in the survey, earning points for resolving customers’ problems. TD Bank was third, performing highest in the “people factor.”

ConsumerAffairs reviewers weigh in

ConsumerAffairs reviewers tend to agree with the choices, although they rate several other banks higher. Joe, of Dearborn, Mich., gave Capital One a 5-star review after applying for a Capital One credit card.

“Not only do they have a clean interface with perks easily displayed and purchases shown with logos of the establishments, but they have a fast response time for payments (instantaneous),” Joe wrote in a ConsumerAffairs post.

Eric, of Ellendale, Del., is a big fan of PNC Bank. He tells us he is happy with PNC’s prepaid card.

“Great customer service, excellent card, I love the tap pay feature available, I've never had one issue when it comes to banking with PNC,” he wrote in a ConsumerAffairs review.

Nick, of Brooklyn, N.Y., liked the service he received when he applied for a loan at TD Bank.

“Filled out the info requested, which was at the tip of my fingers, and got the loan on time,” Nick wrote. “Moreover, questions were very easy to understand and the representative followed up as was expected.”

Consumers posting reviews on ConsumerAffairs also flip the order of the three banks, with TD Bank rated highest with 3.4 out of 5 stars. PNC was second with 2.8 stars, and Capital One was third with 2.5 stars.