LAKE FOREST, Ill.–A new study finds many credit unions and banks are providing incorrect information to members/customers regarding their fees and checking offerings.
Moreover, a principal with the company that conducted the analysis believes the findings reveal an “internal struggle” at credit unions between front-line staff and management.
“When asked two simple questions on fees and checking, only 60.4% of banks, thrifts and credit unions answered correctly,” said Michael Moebs, economist and CEO at Moebs $ervices, referring to the company’s recently completed study of websites and branches. “Banks can’t get fee questions straight and credit unions are confused on checking.”
The result is a great deal of confusion among consumers over financial institution offerings, as well as lost business for the institutions themselves when members/customers don’t receive the right information.
“Our study found the cost to a depository to get a new account is $40 to $100 per account per consumer,” explained Moebs. “If you lose one member or customer a day every day you are open for a year, this will cost a minimum of $10,000 to $25,000. And if you have 10 branches, that’s $100,000 to $250,000 a year.”
Financial Institutions Studied
The survey was conducted among depositories with assets greater than $500 million.
“We examined each of these financial institutions, over 1,900 depositories, in early December,” explained Moebs. “We checked their websites for accuracy at least three times and called their branches at least twice.”
The results, said Moebs, show a significant number of consumers are not getting the accurate information they need from financial institutions to make meaningful financial decisions.
“Explorers over the ages have found when the tribal chief learns bad information, he kills the messenger who brings bad facts,” said Moebs. “This is not the case with our study. Our survey staff have an average of seven years’ experience and are overseen by two managers with a combined 69 years working with banks, thrifts and credit unions. They are well trained and have a tremendous understanding of depository services, fees and checking.”
Some of the key findings from the study reveal many FIs need to bolster staff training or
update their websites with accurate information:
- 66.1% of all depositories providing wrong overdraft price in the study are banks:
- The overdraft price on the website is outdated and reported lower than the current fee
- Fee prices are not available on the website, a potential Truth-In-Savings violation
- Consumers are told to come into a branch for fee prices
“The remaining FIs who gave the wrong overdraft prices were 18.8% CUs and 15.1% thrifts,” said Moebs.
While bank staff and websites stumbled when it came to fees, 78.1% of all FIs providing the wrong answers when it comes to checking were credit unions.
Some key mistakes made by credit unions, according to Moebs:
- Branch personnel claim that checking is free, but when pressed they admit checking is only free if conditions are met, a Truth-In-Savings violation
- No information, or misleading information, on the credit union’s website
- CUs avoid the free checking topic, but offer up other checking accounts
“Our survey staff often mentioned the website and what they were told did not match,” noted Moebs. “Sometimes, often immediately, the CU branch person said, ‘You will get free checking—please come and see me and I will get this done for you.’”
Moebs said this is good member service, but questioned how the credit union can measure the loss of confidence when a financial institution doesn’t give correct information.
“You cannot,” he said. “Many credit unions have an internal struggle going on. Branch people who have sold free checking for years think management is wrong for getting out of it. They have not been trained to communicate that free checking is expensive and the CU can’t afford it anymore. The price is huge for loss of trust when this internal struggle happens.”
Moebs said 14.3% banks and 7.6% thrifts were the remaining FIs supplying incorrect information on their free checking offers.
Moebs said it is concerning the study reveals consumers often don’t get correct answers when they speak to their FI about fees and checking.
“Five out of eight times websites are wrong, and three out of eight times branch personnel provide wrong answers,” said Moebs.
Moebs said the study identifies websites are often the most likely source of erroneous information rather than staff, since websites are often not updated with new prices or account design changes.
“Sometimes the website lagged well over a year in reflecting the right information,” said Moebs. “This is troublesome, since branch personnel often use the website
to address fee and account inquiries.”
In 4.5% of all FIs surveyed, neither the website nor branch personnel were informed about price or service changes, Moebs said.
“All FIs are very sensitive to fees. In particular, banks are very gun shy of fee inquires as a result of well-publicized lawsuits and regulatory actions,” Moebs said. “This makes FIs avoid stating fees on websites and avoid answering fee questions on the phone.”
Moebs said he believes credit unions are going through a severe “de-branding crisis” as a result of the elimination of free checking.
“As CUs have drastically eliminated offering free checking in the last two years, they struggle with how to address this issue with the consumer,” said Moebs. “CUs just don’t want to talk about free checking and avoid this like the plague.”
Moebs said greater, and more accurate, pricing transparency is needed on many FI websites.
“The best thing banks and credit unions can do, and do quickly, is put all pricing information on the website, especially fee schedules—which should be visible prominently and monitored for accuracy,” he said. “If all banks, credit unions and thrifts do not do this soon, the government will do it for them—ask Senator Elizabeth Warren or Representative Alexandria Ocasio-Cortez.”