Tag: Bank of America

Bank of America isn’t going to get out of trouble by making trouble for its customers

bofaYou would think that a bank that has received tens of billions in taxpayer funds to avoid death would learn from their mistakes. Not Bank of America. Like the rest, they are not only suffering from the housing debacle, but they’ve now got the issue of revolving credit defaults sucking life out of them. Their solution? Raise rates, and obscure credit terms as much as possible.

I received some of those ‘balance transfer’ check thingies the other day. I have a credit line at B of A, but I barely use it. It’s kept primarily to cover the medical deductible after I break a leg fly fishing. I don’t have balances on any other cards because those other cards are American Express – you pay that off monthly or you don’t get to use it anymore. I can’t use these checks, and in fact I’ve requested that they don’t send them to me at all. Those requests have not been honored.

Nonetheless, what bothers me about these balance transfer devices isn’t that someone could nab them from my mailbox and transfer their balance to me (the reason I don’t want to receive them to begin with), it’s the terms within. They suck. The form they come attached to is labeled with “Promotional Offer 0.99%” in big bold letters, but as everyone probably knows by now it’s the fine print you have to worry about. Unfortunately, B of A screws that up as well. The bank spits out the standard jargon regarding balance transfers…

* Promotional Offer ID FXNH-ZKJDR: The Annual Percentage Rate (APR) for this offer is a promotional corresponding ANNUAL PERCENTAGE RATE of 0.99% (.002712% Daily Periodic Rate (“DPR”)) and applies only to new Balance Transfers, Direct Deposit Cash Advances and Check Cash Advances bearing this Offer ID (each an “eligible transaction” for this offer)…

It goes on to say that if you are late paying, or if your balance exceeds your credit line, that the offer ends immediately and an APR of 9.9% kicks in immediately. Pretty typical. But then, after all the normal legalese is spewed, the terms stop, a line is printed across the page to separate the next set of paragraphs, which continue as follows…

Non-promotional Check Cash Advances and non-promotional Direct Deposit Cash Advances are subject to the variable APR for Cash Advances, which as of March 31, 2009, this APR is 19.99% (.054767% DPR). In addition, we may increase the APRs on your account up to the Default Rate without giving you notice. As of March 31, 2009, the variable Default Rate is 27.24%.

The average person without a law degree immediately assumes that ‘non-promotional’ label means the following terms don’t apply to the ‘check’ they are about to write to themselves. Then they sneak this in…

The standard transaction fee for Check Cash Advances, Balance Transfers and Direct Deposit Cash Advances is 3% of each transaction, Min. $10. Effective as of June 1, 2009, the standard transaction fee will be 4% of each transaction, Min. $10.

So it’s really not a 0.99% APR – it’s a little over 4% (or 5%, depending on when you write your ‘check’) after tacking on the upfront fee and compounding it.

Again, all this comes from a bank that has taken tens of billions of taxpayer funds to stay afloat, and is going to need billions more to stay that way. But I guess when you have the government perpetually covering your behind it doesn’t matter if your revolving credit portfolio falls further in the tank. We can’t subsidize the banks forever, but B of A clearly has other ideas.

And by the way…

We will allocate your payments to balances (including new transactions) with lower Annual Percentage Rates (APRs) before balances with higher APRs.

That’ll be trouble for B of A soon too.

MG signing off (to shred those ‘checks’)

Links for the Lazy – 1/15/09

Mixed bag

    Technology

  • Google starts axing services, but Google Reader is safe for now. There might be something to all that attention data value, but it isn’t going to benefit you anyway. I’d be looking for a substitute reader (preferably desktop) just in case.
  • New Yahoo! CEO Carol Bartz on the [first] dotcom bubble“I’d go to investor conferences—with standing room only at presentations by Used-Fucking-Golfballs.com—and I’d get four shareholders listening to me.” I love it.
  • XRDS-Simple at home – I’ve added Will Norris & Company’s WordPress plug-in to the previous OpenID install. Now I do my OpenID logins here instead of at a third party. As expected, works nicely.
  • Finance

  • Ready to play The Bailout Game? Personally, no. Like Hasbro with Scrabble, Parker Brothers will probably sue the makers for the likeness to Monopoly, and when that doesn’t work out they’ll join the RIAA in suing the players.
  • TED spread shrinks, so the TARP is working – Greg Mankiw concludes as such, although Citigroup and B of A equity investors might want to hold on doubling down right now.
  • Do you know what the multiplier for government spending means for you? You might want to brush up, as with the amount of public cash being dumped into failing institutions to compensate for idiocy, Zimbabwe-style currency destruction could be in your future.
  • Fly Fishing

  • Cuba Releases Hemingway Archives – Fishing Jones has more.
  • Strike indicators find love – Call it a bobber if you like, but I always laugh when high-profile guides talk about how they always see the fish eat the nymph. While using indicators.
  • Winter sucks – But the Frying Pan makes it more than tolerable.

Adieu.

US Financial Sector Bailing Without Big Pail (UPDATED)

No government assistance this weekend

As Lehman Brothers, one of oldest names on Wall Street, appeared to unravel on Sunday, anxiety over the bank’s fate — and over what might happen next — gripped the nation’s financial industry. By late afternoon, Merrill Lynch, under mounting pressure, entered into talks to sell itself to Bank of America.

While the New York Times waxed on about spoiled cocktail parties and canceled weekends in the Hamptons, Bloomberg noted that Lehman’s lawyers were prepping Chapter 7 paperwork and the Wall Street Journal said the Merrill Lynch board was nearing a vote on a $29/share sale to Bank of America.

After reviewing chatter around the web, I’ll say the consensus expectation is that Washington Mutual is a foregone conclusion, and that Wachovia and AIG are not far behind.

I guess the powers that be in the United Socialist State Republic of America figured they’ve already bitten off a century’s worth of meals with Fannie and Freddie.

UPDATE: The Fed has been clocking some overtime – according to their now regular Sunday press release, they are “broadening” the Primary Dealer Credit Facility and the Term Securities Lending Facility (i.e. the emergency conduits for the printing of money in return for collateral of declining value). In particular…

The collateral eligible to be pledged at the Primary Dealer Credit Facility (PDCF) has been broadened to closely match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks. Previously, PDCF collateral had been limited to investment-grade debt securities.

Unless I am completely off base, this means that the PDCF will now accept equity securities in return for short-term loans. The tri-party repo system is run primarily by Bank of New York and JP Morgan Chase – this is the kind of move that would reflect either 1) declining confidence in their ability to continue clearing the transactions or 2) something done with their prodding in order to reduce their own counterparty risk.

Big stuff.

UPDATE 2: Lehman files Chapter 11.

Countrywide deal has $160 million termination fee

When I first read the headline, I thought fair enough – if Bank of America backs out they should pay a breakup fee.

But alas, it’s Countrywide that will be doing the paying.

Potentially scary for the troubled mortage lender. While we don’t have full details, you might expect to see some type of minimum net asset clause and/or litigation contingencies in the deal sheet, meaning if Countrywide happened to have more skeletons in the closet they would wind up paying for it.

UPDATE: The Wall Street Journal agrees, and also notes that Countrywide stock price reflects a decent amount of skepticism.

BoA in Talks to Buy CountryWide Financial

Trading Rule #1: Never, Ever, Ever, Under Any Circumstance, Add to a Losing Position.

Yep. Number two would cut losses quickly, and number three would be double up on your winners. Even casual casino gamblers can win, if they do this while understanding and following game fundamentals.

UPDATE: The deal is now underway – it’s an all equity transaction at a hair under one share of B of A for each five shares of Countrywide priced out at around $7.20. CFC fell to $6.33 by the end of the day today, which could suggest some think the transaction will wind up more dilutive to B of A shareholders than management does. Meanwhile, Robert Shiller is questioning the whole deal – you can’t help but believe such skepticism has a solid foundation attached when it comes from him.

Quote of the day: “I’m not covering your ass with my wallet.”

Close enough.

It’s come join the SuperSIV party, but not everyone is up for the cocktail:

Loomis Sayles & Co. declined to invest after receiving one of 16 invitations for a personal meeting last week with current Fed Chairman Ben Bernanke, said Daniel Fuss, who oversees $22 billion as chief investment officer at the Boston-based firm.

“It’s so nice to get a personal invitation to go to Washington and have a one-hour visit with Ben Bernanke,” said Fuss, who decided participating wasn’t worth the risk to his firm. “Oh, boy, did I feel important for about 27 seconds, and then you smell a rat.”

PNC Bank takes proactive step on phishing

PNC Bank of Pittsburgh has noticed phishing emails bearing its name floating around, and is warning customers about it.

All I can say is “right on” – it is always good to see financial institutions taking proactive steps to protect their customers (particularly as the bank winds up paying for it in the long run, and passing the costs of fraud onto all customers in the form of higher rates and fees).

I’ve noticed other banks trying to head this problem off; CompassBank puts fraud warnings on their login pages, and Bank of America has gone with a funky multi-step login process, complete with image identification, that would be damn hard for a phisher to duplicate.

Now if my bank would only do the same.
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Bank of America sued over customer data fiasco

It took a while, but despite Bank of America’s public relations move in the security realm, they are not going to escape the legal system over their massive customer data “leak.”

After notifying each customer for which data was pilfered and offering free credit monitoring services, they are finally getting sued.

New spin security from Bank of America

Hot on the heals of handing a pile of data over to crooks, Bank of America is launching a new identity theft protection initiative targeting users of their internet banking services.

The new service, dubbed SiteKey, uses a combination of an image, user-created phrase and three challenge questions to authenticate both the customer’s identity and the authenticity of Bank of America’s Web site when customers log on.

Techdirt called the reaction to identity theft misguided, and I have to say that this latest from Bank of America seems right in line. Create some spin around the lack of internet security and how you are going to solve that, while customer data flies out the back door.