Authored by Dr. Lachin Hatemi
Published by www.kulturekritic.com
Published by www.kulturekritic.com
The U.S. Census Bureau
lists Buffalo, New York, as the third poorest city in the United States;
however, news about poverty is nothing new in the Western New York region. The cycle of poverty has continued in some
parts of Buffalo for generations, and the city’s poverty rate remained stuck at
about 31 percent based on 2011 data.
In 2008, the United Nations released a
report named “State of the World’s Cities” in which the Buffalo-Niagara Falls
area was cited as having one of the worst rates of racially-based economic
inequality in the world. In addition,
the Census Bureau also released information placing the Buffalo-Niagara metro
area, as the 8th most segregated region in the United States.
Coincidentally, Buffalo is also home to the one of the
largest and most profitable regional bank in the Unites States – the
Manufacturers and Traders Bank (M&T Bank). M&T was established more
than a century ago when Buffalo was a bustling city.
Despite Buffalo’s declining fortunes, M&T Bank
somehow prospered during the same period. Since 1980, M&T had experienced
an annual compound growth rate of 19.8%. Only a handful of other companies in
the entire nation had done so well for so long. It is a well-known fact that
the one of the richest men in the world, Warren Buffet, long admired M&T’s current
chief executive officer, Robert Wilmers. Buffet occasionally talks to Wilmers,
and Buffet’s investment company Berkshire owns 4.1% of the M&T Bank’s
outstanding stocks. Warren Buffet loves M&T Bank for a good
reason – it had dominated the No. 1 position among local deposit-takes in the
Western New York area. Based
on data from June 30 2013, M&T Bank has 47.2% of all the bank deposits in
the Buffalo/Niagara region.
But a big question remains unanswered about the
surprisingly high profits of M&T bank:
How can a regional bank serving the poorest and most
segregated cities of Western New York and the East Coast yield such record profits?
The magic answer is the
“overdraft fees” and victims of this crime are the low-income customers. A
$37-$38 overdraft fee can make a difference between buying groceries and facing
hunger for a low-income single mother with kids who lives in the dilapidated
neighborhoods of Buffalo. Burden of overdraft fees are disproportionately on
the poor urbanites. Those living paycheck to paycheck are more likely to overdraw
their deposit accounts.
Moebs Services reported
that U.S. banks made a whopping $31.5 billion in 2012 despite stricter federal
regulations enacted since 2010. One of the most recent federal regulations
governing the overdrafts fee was Dodd-Frank Act of 2010, which tried to prevent
predatory overdraft affecting the poorest segments of the population.
Dodd-Frank Act simply
mandated banks to do something that sounds like a no-brainer – obtaining a
customers’ consent before signing them up for “overdraft services” that many customers
never asked for in the first place. The federal law also describes how such
consent can be obtained to ensure transparency.
Official Commentary
published by the Federal Reserve further describes the consent methods which
are defined as reasonable: providing the customer with a written form which can
be signed in person at a bank branch is one of them. Consenting via internet or
phone was also suggested as acceptable alternatives, but such methods were less
likely to be used by the poorest customers. Given that most low-income
customers are not comfortable with Internet banking, consenting in writing
remains the most viable method.
To my surprise, M&T
Bank obtains consent verbally without any reproducible proof of the
transaction. There is no record of the verbal consent and how the customer was
asked to consent by the bank employee. There is no paperwork, no
accountability, and no proof of the consenting process for overdraft fees in
person. Surprisingly, M&T does not provide a standard written form, which
you can fill out to give consent for overdraft protection. You simply cannot
consent in writing at M&T Bank even if you request it.
This shocking
revelation prompted me to contact some high level executives at M&T Bank
since I coincidentally live in Buffalo where M&T has its headquarters.
On October 7, 2013, I
personally met with Joseph Lombardo, Vice President of Consumer deposits, and
Rich McCarthy, Senior Vice President of M&T Bank’s retail branch network.
My primary goal was to discuss the facts and observations that I shared with
you in the preceding paragraphs. My conversations with the two high-level bank
executives confirmed my worst fears. M&T does not provide its customers a standard
form to consent for overdraft services in writing which might be a gross
violation of the Dodd-Frank Act. I think this matter deserves close attention
from the respective federal banking regulators.
Nobody is above the
federal law. M&T Bank’s lawyers should read the Dodd-Frank Act one more
time with utmost attention and comply with it. They should also keep their
hands off the hard earned money of minimum wage earners.
I applaud Dr Hatemi for his efforts to publicize this issue. I think I'll choose another institution to do business with.
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