Isle bank fees up 14.2%, to $117.6M
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Video: Rising bank fees a concern |
By Rick Daysog
Advertiser Staff Writer
Local consumers paid $14.6 million more last year in bounced-check fees, non-network ATM withdrawals, deposit fees and other bank service charges.
An Advertiser review of filings with the Federal Deposit Insurance Corp. and the Securities and Exchange Commission shows that Hawai'i's eight largest banks collected a total of $117.6 million in fees in 2007, which was up 14.2 percent from the previous year's $103 million.
The increase comes as banks' profits from their core business of making loans to businesses and homeowners has cooled.
"Higher fees are a reality and they are here to stay," said Greg McBride, senior financial analyst with Florida-based personal finance Web site bankrate.com.
"The upward creep in fees has been very steady and very consistent and that's not something that's going to change when the credit crunch or mortgage problems go away."
Banks said the increase is largely due to new accounts and the popularity of new products.
First Hawaiian Bank, the state's largest financial institution, said its checking accounts grew last year by 10,000, or about 4 percent, boosting its fee income. Bank of Hawaii, the state's second largest financial institution, said the introduction of a new check card last year helped boost the number of checking accounts it now handles.
They say that their fees tend to be lower than those of Mainland banks. The typical charge for using a non-network ATM in Hawai'i ranges between $1.50 and $2.50 per transaction, while some Mainland banks such as Bank of America charge about $3.
For bounced checks, local banks charge around $25, but that fee can rise depending on the frequency of checks bounced. Nationally, the average charge is about $28.23, according to bankrate.com.
David Hudson, senior vice president of retail banking at the state's No. 3 financial institution, American Savings Bank, believes that Hawai'i's high cost of living contributes to the increase in collected fees.
As the prices of gasoline, transportation and other goods and services rise, consumers "aren't able to keep as much money in their checking accounts," resulting in an increase in fees for bounced checks and other service charges, Hudson said.
Banks add that the fees are needed to cover the cost of providing the services for their customers and say that consumers can avoid many of the fees by keeping track of their account balance online and by avoiding non-network ATMs.
To be sure, banks have come to count on service fees as a large portion of their business. Last year's $117.6 million in fee income represents more than 21 percent of the banks' overall income.
WHERE THE MONEY GOES
Here's a snapshot of the fees collected by each of Hawai'i's largest banks:
Peter Biggs, the bank's senior executive vice president for consumer products, said the company's checking account business has seen significant growth due in large part to the popularity of its HawaiianMiles check card, which allows customers to earn mileage with Hawaiian Airlines each time they use the card.
In addition to the 10,000 new checking accounts, First Hawaiian added 57 new ATMs when it became the exclusive vendor for all 7-Eleven convenience stores last last year.
Don Horner, First Hawaiian's president, said the bank tends to have lower fees, but its customers have larger checking account and savings account balances. The typical customer not only has a checking account with the bank but may have a credit card, a mortgage or a car loan with the company.
Blenn Fujimoto, Central Pacific vice chairman, said the decrease reflects the bank's focus on long-term relationships and cross-selling opportunities instead of seeking "transactional types of accounts" that carry higher fees that result in high customer turnover.
Last year, the bank introduced a new type of checking account that pays an unusually high 4 percent interest rate and carries no monthly service fee so long as the customer makes a set amount of check-card purchases and automatic deposit and bill payment transactions each month.
Hudson, the bank's senior vice president of retail banking, said Hawai'i's rising cost of living has resulted in additional "stress" on consumers. But Hudson said American Savings' fee income also received a boost from account growth and the recent introduction of a new debit card that provides customers with rewards each time they use it.
He said that American Savings receives a portion of the debit card processing fee each time a customer makes a purchase.
WATCHDOGS CRITICAL
Nationally, consumer watchdogs believe the aggressive pursuit of fees can lead to abuses.
A July 2007 report by Durham, N.C.-based Center for Responsible Lending concluded that banks nationwide often abuse overdraft practices to generate billions of dollars in fee income.
The nonprofit center did not name specific banks but said that some banks delay crediting deposits to an account so customers believe they have more money in the bank than they actually do.
The center also faulted banks for manipulating the order of check clearing or debit card charges by processing the higher amounts first. The practice could empty an account faster, resulting in a flood of overdrafts, the center said.
Banks have defended the practice, saying the large charges usually are for key items such as mortgage payments, rent or car payments. If the consumer bounces a check for these items, they could incur default or late payment fees that are much larger than those for bounced checks. The customer's credit rating also could be affected by a late payment.
Kevin Nesnow said he believes that he has been charged unfair fees by his bank.
The 29-year-old Makiki resident said his bank, American Savings, charged him a $7 "maintenance fee" several times during the past year for allowing his checking balance to dip below $500. Nesnow said he wasn't aware of such a fee, which was not listed anywhere on the bank's Web site, when he signed up for his checking account.
Nesnow, an MBA student at the University of Hawai'i-Manoa, recalled that other banks in the past have charged him a $30 fee for having insufficient funds when he thought he had enough money. If he didn't have enough money in his account, the banks should have rejected his purchases, sparing him the bounced-check charge, he said.
"I understand that banks are in the business of making money but it's ridiculous to charge people who don't have the money," he said.
Hudson, the American Savings Bank vice president, said all fees are listed in agreements customers must sign. Hudson said the bank explains to customers the fees and services when they sign up for new accounts.
Hudson added many of the fees are avoidable. American Savings allows its customers to view their account balance online for free, he said. The online service includes a feature that provides an e-mail alert anytime the customer's balance dips below a certain level, he said.
For a fee, customers can also sign up for overdraft protection that either uses a person's savings account or a line of credit to cover any shortfalls.
"We know accidents happen. When that happens, we try to work with the customer," Hudson said, adding that if the overdraft was due to a bank error, they will waive the fee and apologize.
A PROMINENT DISPUTE
Sam Slom, president of Small Business Hawaii, said he recently closed his organization's bank account at the Bank of Hawaii after 32 years because of a dispute over bank fees.
Slom, who also is a member of the state Senate, said SBH was charged as much as $500 in unfair bounced-check fees over the past several years, caused largely by delays in processing the organization's check and credit card deposits.
At one point last year, the bank bounced more than five checks at the same time when the account should have had enough money, he said.
The problem: The bank took too long — sometimes as much as five days — to clear credit card and check payments to SBH, Slom said.
Bank of Hawaii officials would not respond to Slom's specific complaints, citing the company's policy of not commenting on customer matters. But company spokesman Stafford Kiguchi said the bank regrets that it wasn't able to resolve Slom's concerns.
"We apologize to Mr. Slom if his concerns were not fully addressed. We worked with him to address the issues and at the time had thought they had been satisfactorily resolved," Kiguchi said.
"We regret any inconvenience this may have caused and we would certainly be willing to discuss it further."
Reach Rick Daysog at rdaysog@honoluluadvertiser.com.
