Antics of big banks give credit unions, community banks early holiday gift

November 20, 2011

Banking & Finance

Mississippi credit unions saw ‘some activity’ from ‘Bank Transfer Day’ while community bank Renasant grew accounts in state markets by 32 percent

Breaking up isn’t so hard to do, after all.

At least that’s what the Credit Union National Association reported a few days after the Nov. 5 national “Bank Transfer Day,” a protest staged to show dissatisfaction with the nation’s giant banks by urging depositors to move their accounts to credit unions and hometown community banks.

Just days ahead of the protest date, big banks such as Chase, Bank of America, Wells Fargo, SunTrust and Regions pulled the plug on plans to start charging customers monthly fees of $3 to $5 monthly for using debit cards for retail transactions. The concessions failed to slow the momentum of the “Move-Your-Money” protest, said the Credit Union National Association, or CUNA.

CUNA, which describes itself as the nation’s largest credit union advocacy group, said extrapolations from a survey of 1,100 credit unions led to an estimate that 40,000 consumers joined credit unions on the Nov. 5 “Bank Transfer Day.”

Credit unions around the country took in about $80 million in new deposits and also had a “brisk day” of lending, with total new loan volume at about $90 million, the association said.

The increased business comes on top of the 650,000 new customers and $4.5 billion in deposits credit unions have added since Sept. 29, when Bank of America announced its since-rescinded plans to charge a $5 monthly card fee, CUNA said in a Time magazine article.

It’s hard to tell if the protests nudged up account numbers for credit unions in Mississippi, according to Charles Elliot Jr., president and CEO of the Jackson-based association that represents 91 credit unions in the state.

The association has not surveyed members, Elliot said, though he added: “Without question we have seen some activity. We have seen a lot of negative sentiment toward the larger banks.”

He said he doubts the movement has been anything near what it’s been in other states.

Regions, the market leader in Mississippi, was the lone bank in the state to initiate the monthly fees other than SunTrust and Wells Fargo, both of which have only a slight presence in the state. Well Fargo limited its fees to customers in Georgia and five Western states before dropping them.

“For the most part,” said Elliot, “Regions was the only bank that would have affected any appreciable” account movement to credit unions.

The $130-billion Regions joined a parade of large banks Oct. 31 that announced an end to the unpopular fees. The Birmingham, Ala.-based bank and the others uniformly cited “customer feedback” in their decisions to quash the new charges.

Tupelo’s Renasant Bank, a $4.1 billion regional institution, says it saw significant account growth in October in metro markets it shares with the larger banks, including Birmingham, Huntsville and Decatur in Alabama, the region north of Atlanta and Memphis.

“The entire footprint” had growth of 54 percent in October compared to the previous October, said John Oxford, Renasant spokesman.

“In Mississippi, year-over-year we had 32 percent growth in accounts” in October.

“What was the difference? It was the debit card” fees,” he said.

The up-tick Brandon-based Community Bank saw came in September, said Tony Sims, spokesman for Community Bank, a subsidiary of Community Bancshares, a $2.3 institution that operates six banks in 37 locations in the Southeast.

“I believe it was from folks getting ready to avoid what was going to happen on Oct. 1” with new monthly debit card fees, Sims said.

He added, however, that the influx of new accounts and money transferred into existing accounts could not be described as huge.

The nation’s big banks said they set out to charge the fees to offset a government-mandated drop of approximately 50 percent in the amount of money merchants pay them each time a bank’s debit card is used for a transaction. Those fees went from around 44 cents a transaction down to 22 cents to 24 cents. The Federal Reserve Board of Governors will consider lowering the fees to around 12 cents in a couple of years.

Banks with total assets below $10 billion can still charge the higher fees, though even Federal Reserve Chairman Ben Bernanke has conceded that market forces will eventually force them to accept fees in the 22 cents to 24 cents range.

So far, Community Bank is still getting the higher fees from transactions made with a debit card it issues through MasterCard, Sims said.

Though Sims said he understands why the big banks felt they had to assess the fees, he said Community Bank concluded any sort of fee for use of the card would serve to diminish a level of service account holders had come to expect. “To spring something like that on them would have been completely unfair,” he said.

Likewise, Trustmark Bank concluded free use of debit cards benefited customers as well as the bank itself, said Barry Planch, senior vice president of product development for the $9.6 billion Jackson-based regional bank.

“We feel like use of the debit card is good for our customer and good for the bank,” Plance said in an early fall interview just as the larger banks were preparing to launch the new fees.

Nationally, it’s not yet clear what sort of account movement occurred on the Nov. 5 “Bank Transfer Day,” but the Independent Community Bankers of America said its website’s bank locator feature had a 50 percent jump in the Friday through Sunday preceding the “Transfer Day.”

Within the past 30 days, traffic on the locator spiked 832 percent, the trade organization that represents about 5,000 community banks told Time.

The Independent Community Bankers of America’s press office has been working to let readers know that changing banks is not as difficult as it may seem.

As Halloween approached, the association issued a press statement that a community bank is “a safe haven from scary bank practices that can leave many bank customers spooked…. No tricks about it.”

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