Wednesday, April 23, 2014

Too Big To Fail…And Big Enough To Screw You Over In Unexpected Ways

I want to tell you a personal story that is a genuine cautionary tale to everyone, regardless of your political stars and stripes. It’s about banks – you know, those massive financial institutions that nearly pushed our country (and potentially others, especially in Europe) into bankruptcy and have ruined the lives of millions without an ounce of corporate cooperation or compassion.

I used to have a Sears credit card – just for their stores, not a Sears Mastercard or anything like that. I got it in the late 1970s when I moved into the apartment I still live in and throughout the 70s, 80s and mid 90s, I used it extensively for things I needed in this apartment. But by the 90s, I decided I wanted to have that card exclusively as a safety net for major appliances – like a new refrigerator, stove, air conditioner, because mine were getting old. So I slowly paid off my balance and was left with a card in good standing that had a zero balance due and a $7,000 credit line. It gave me great peace of mind.

Then, during the 00s, I indeed needed a new air conditioner. I found one that was right for me on the Sears website and phoned to place the order. That’s when I found out my account had been closed by the bank that “manages” Sears’ accounts. It was closed for “lack of use” and because the bank felt I had too many other accounts and they didn’t like my credit score. I had never received anything in writing from Sears or their bank advising me that my account was in jeopardy. I spoke to several people, at the store and The Bank. I told them I wanted to make a major purpose. I was told there was absolutely nothing that could possibly be done to restore my account – but I could apply for a new account. I told them that I knew and they knew that if I applied, I would be turned down. But I applied. And I was turned down. So much for my peace of mind.

This week I got a written “Advisory Notice” in the mail from Dell Computer. I had had a Dell Preferred account since 2007, when I bought a new desktop computer with all the fixings and a new all-in-one copier/scanner/fax. The latter only uses Dell ink/toner, so a couple of times a year, I order their ridiculously expensive ink, since you can’t buy it anywhere else. At the time I got the “Advisory Notice,” it had been a while since I’d ordered ink, because I had some in reserve. Now, I had a $1,700 credit line and zero balance due on this account. They said they were (1) reducing my credit line to $500 and (2) would be closing the account completely in mid-May. They were doing this because of “lack of use” and because the bank felt I had too many other accounts and they didn’t like my credit score. For the record, credit scores range from 200 (bad) to 900 (excellent). My score is in the high 600s.

With both Sears and Dell, when I finally got to speak to someone who was an allegedly senior person in the store’s corporate customer service department (and believe me, it took many calls and lots of time to get to these Wizards of Oz), I got very sketchy answers to my questions. I asked “Was this a company decision or a bank decision?” I explained in both instances that I had been a customer of longstanding. I said to Sears I was about to buy an air conditioner. I said to Dell that since my 2007 computer was elderly by computer standards, I was planning to buy one later this year. Nothing they could do. I asked them why, if they had never had a problem with me and my payment history, why were my accounts being closed. No real answer.

I told Dell that I would never buy another Dell product again (except for the ink…); that I would do everything I could to spread the word about this unwarranted customer punishment; and reminded them that they were by no means the only game in town. Nothing. I finally said, “If this action was taken by your bank on their own authority rather than it being a corporate decision, you are not running your company, your bank is running your company and this should be a matter of some concern to you.” No reply – but I heard a little gasp.

If you’re blessed with various kinds of assets, financial resources, and a great credit score, then lucky you, you probably have nothing to worry about. But if you’re low on assets and cash and your credit score is considered Fair (like mine) or just Good, beware. Because if at any time in the near future you need a new job, a new home, a school or other loan, or if you’ve been (responsibly) keeping a credit card unused, should you need something to fall back on, think twice.

And think about the fact that since the Crash of 2008, banks and other financial institutions have gotten larger, not smaller. Some have re-paid their bail-out funds and some have paid fines for poor practices. But not one single responsible person has been indicted, let alone imprisoned. And in many instances, poor (dangerous!) banking practices have only gotten worse – because nobody’s watching and any fines they might eventually have to pay cost far less than the profits they’re making.

Think about the number of houses that have been foreclosed, rather than banks working with homeowners to save their homes. Think of how many loans have been denied. Think about how much increasing power banks have in the companies with whom you do business. Think about the usury-level interest rates banks impose on consumers (26% to 30%) and the miniscule rates they pay when they borrow money from the Fed. Think about how easy it is for anyone – a prospective landlord or employer, for example – to get your credit score, and the fact that credit scores now play an unprecedented and powerful role in employment and housing.

Think about the insane power banks increasingly have in our lives and the damage they can cause if what’s “too big to fail” actually does fail.

Or, if you prefer, worry about Benghazi.

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