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Tag: Consumer banking

  • How Bank of America achieved a massive comeback from the brink of collapse

    How Bank of America achieved a massive comeback from the brink of collapse

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    The 2008 financial crisis had a devastating impact on Bank of America. Shares of the bank were trading for as low as $2.53 in 2009 and net income dropped from a high of $21 billion in 2006, to just $4 billion in 2008.

    “Bank of America was one reason why much of the investing public and consumers and government lost faith and trust in banking,” recalled Mike Mayo, a bank analyst at Wells Fargo. “If the government did not intervene for Bank of America and the other banks, Bank of America would have failed.”

    Fast forward to today, BofA is thriving despite concerns over inflation and threats of a possible recession. The bank reported net income of $31.9 billion in 2021, compared with just $4 billion in 2008.

    “As the rates have gone up and if the recession is shallow, then we’re going to see widening spreads and the ability of Bank of America to have significant earnings from net interest income,” said Kenneth Leon, a research director from CFRA Research. “This is unique to the banking industry and Bank of America being one of the largest banks, stands to benefit the most.”

    The hard-learned lessons from the financial crisis have also led BofA to undergo significant changes, allowing it to earn its position as the bank with the second-largest total assets in the United States. JPMorgan is still comfortably ahead as the largest bank in the U.S. based on total assets.

    “The big change at Bank of America is that they have gone from irresponsible growth to responsible growth,” said Mayo.

    A more conservative lending standard is just one example of the bank’s aim for sustainable growth.

    “One key aspect of Bank of America’s responsible growth is to say no and no more often,” explained Mayo. “So that when they say yes, it results in a lot more growth that’s sustainable, responsible and better for reputation.”

    BofA was unable to participate in CNBC’s coverage of this story.

    Watch the video to learn more about how Bank of America was able to achieve one of the biggest comebacks in banking history.

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  • How Bank of America came back from the brink of collapse

    How Bank of America came back from the brink of collapse

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    With assets totaling more than $3 trillion, Bank of America is the second-largest bank in the U.S. today. Shares of the company have seen astonishing gains of over 290% in the last decade. But just more than a decade ago, the 2008 financial crisis pushed the bank to the brink of collapse. It was a loss so catastrophic that it required a $45 billion bailout from the U.S. Treasury. So how was Bank of America able to stage such an impressive comeback and where is it headed next?

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  • Some Wells Fargo customers have already received their share of the $2 billion misconduct settlement. Here’s what you need to know

    Some Wells Fargo customers have already received their share of the $2 billion misconduct settlement. Here’s what you need to know

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    wdstock | iStock Editorial | Getty Images

    People owed a piece of the $2 billion that Wells Fargo has agreed to pay to customers affected by some of its banking practices could soon receive those funds.

    The nation’s fourth-largest bank reached a settlement with the Consumer Financial Protection Bureau, announced Tuesday, to resolve customer abuses related to auto lending, deposit accounts and mortgage lending, affecting about 16 million accounts.

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    Wells Fargo also agreed to pay a $1.7 billion civil penalty — the largest ever doled out by the CFPB.

    “We have already communicated with many of the customers who may have been impacted by the matters covered in the settlement, and those efforts are ongoing,” a Wells Fargo spokesperson told CNBC.

    Wells Fargo agrees to $3.7 billion settlement with CFPB over consumer abuses

    In other words, if you are among the affected customers, you may already have received your share of the $2 billion, or you will automatically hear from Wells Fargo. You do not need to take any action, the bank said.

    The CFPB said that customers of the bank were illegally assessed fees and interest charges on auto and mortgage loans, had their cars wrongly repossessed and had payments to auto and mortgage loans misapplied. Additionally, Wells Fargo charged consumers unlawful surprise overdraft fees and applied other incorrect charges to checking and savings accounts, and improperly froze some accounts, the CFPB said.

    $1.3 billion has already reached 11 million accounts

    More than 11 million customer accounts already have received more than $1.3 billion related to auto loan issues. Another 5 million customers with deposit accounts are receiving $500 million in remediation, including $205 million related to surprise overdraft fees, and thousands of customers with mortgages will receive a piece of at least $195 million, a CFPB spokesperson said.

    The amount that each harmed consumer will get (or already got) depends on the specifics. For customers whose vehicles were wrongly repossessed, the remediation includes $4,000, but could be higher. For deposit accounts that were wrongly frozen, the settlement calls for $150 for each affected customer.

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    “As we have said before, we and our regulators have identified a series of unacceptable practices that we have been working systematically to change and provide customer remediation where warranted,” said Charlie Scharf, Wells Fargo CEO, in the company’s press release about the settlement.

    “This far-reaching agreement is an important milestone in our work to transform the operating practices at Wells Fargo and to put these issues behind us,” Scharf said.

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  • How 2022 hastened the decline of overdraft fees

    How 2022 hastened the decline of overdraft fees

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    What started as a trickle of overdraft-fee policy changes in 2021 became a flood in 2022 as a growing number of large and midsize banks made their policies more consumer-friendly.

    The list includes megabanks like Citigroup, which this year became the largest U.S. bank to eliminate overdraft fees entirely, and Wells Fargo, which recently launched a new small-dollar loan program to help customers avoid overdraft charges.

    It also includes regional banks such as Charlotte, North Carolina-based Truist Financial, which dropped all fees tied to transactions that get rejected because the customer lacks sufficient funds, as well as charges for overdraft protection transfers.

    The pressure on banks to reform overdraft policies has been mounting for years, with consumer advocates and lawmakers arguing that such policies are particularly harmful to lower-income customers. More recently, Biden-era regulatory changes and competition from lower-cost online competitors have put pressure on large banks to reconsider their strategies.

    Here’s a look back at American Banker coverage from 2022 that highlights the evolution of overdraft policy.

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    Allissa Kline

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  • Bank card fraud exploded during the pandemic. Then came the bot hiring boom

    Bank card fraud exploded during the pandemic. Then came the bot hiring boom

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    Banks getting bigger is nothing new. The 2019 merger between two big banks, BB&T and SunTrust, which created Truist, was the largest in roughly a decade for the sector, and as big deals do, it led to a review of inefficiencies and opportunities, including in the back office.

    As Jarel Hawkins, former senior vice president of enterprise intelligent automation recently told CNBC at its Technology Executive Council Summit, the infrastructure and architecture was about five years behind and in need of modernization. But it was the pandemic as much as the deal itself which led to one important change in how the company looked at the combination of human workforce and technology.

    The use of digital banking boomed during the pandemic lockdowns and that led to an exponential growth in fraud. This led Truist to bring in robotic automation processing company UiPath to scale up its use of bots in the fraud process, and scale it down to the level of low-dollar transactions it previously would not have scrutinized as closely. Fraud was costing the bank a significant amount of money, but previous to the pandemic, employing a human workforce for every charge was not an efficient or economic way to solve the problem. The costs of the fraud were being refunded to consumers, but the bank was not claiming the costs back from payment processors.

    But once the two banks combined, “it became really valuable,” Hawkins said, just as the pandemic was leading to more fraud at low transaction values. “We went from 37,000 [claims] annually to 26,000 a month,” he said. Now, Hawkins says, it’s “upwards of eight figures” in new money coming back to the bank balance sheet as a result of the automation. 

    Robotic process automation allows a firm to learn where human errors are taking place in existing processes and teach automation to follow processes exactly as intended, while also identifying where human intervention is still needed. “Many cases [AI] can do 99% of the things correct,” Robert Enslin, co-CEO of UiPath, told CNBC, “and then there’s one or two things that a human needs to look at. And by automating so much of the process, you move the process through fast and you allow the humans to actually interact with the system in the areas that [they] absolutely must.” 

    Low-dollar chargebacks ranging from $50 to $100 can now proceed through a back-end process employing “digital workers” and existing business logic to connect with the payment processor and get a claim reimbursed to a customer. Bots also can be scaled up and down. In this case, as the cases of fraud rose, rather than trying to train employees to be able to handle a high volume process, a digital workforce could be scaled up immediately. “You can scale it up and down based on the economics of what’s happening around,” Enslin said.

    “Our consumers didn’t see any change in their experience. But we were able to drive that. And one of the great pieces of it is we were able to scale and go after higher value claims, $100, $200, $300, to expand and leverage that process,” Hawkins said.

    Truist next may take similar automation to its commercial business and its high-net-worth business next. “Fraud doesn’t care where it is,” Hawkins said.

    The bots, meanwhile, don’t take much time to get up to speed on a new market, and can work overnight.

    Watch the video above to learn more about how UiPath and Truist partnered with each other and the bots to solve an evolving fraud problem.

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  • How much money should you have in a high-yield savings account?

    How much money should you have in a high-yield savings account?

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    A checking account and a savings account are two basic, but very important, accounts for managing money. And while there isn’t any one “correct” way for an individual to manage the money in their checking and savings accounts, there are some general rules of thumb that can help you figure out how much money you should have in each account.

    “Like many Americans, you may default to leaving extra funds in a traditional checking or savings account,” says Dan Stampf, a CFP® and Vice President of Advisory Solutions for Personal Capital. “Maybe you haven’t decided how to allocate it to investment accounts. Perhaps you’re stowing away money for a rainy day or emergency fund. Or you could be building up savings for a short-term goal like funding a wedding or a vacation.”

    It’s important to note that you’re essentially losing money if you allow that cash to just sit in a low-yield checking account, as the value of your money is being eaten away by inflation and you’re missing out on higher interest payments from a high-yield savings account. This is why high-yield savings accounts are generally recommended as a vehicle for keeping savings, including your emergency fund.

    Some checking accounts, like the Ally Interest Checking Account or the Capital One 360 Checking® accounts do offer slightly higher interest rates compared to traditional checking accounts, but the interest is still lower than what high-yield savings accounts offer.

    How much money should you keep in a high-yield savings account?

    Of course, you do want to make sure you’re investing — and not only saving — so you can reach long-term goals like retirement. So you do have to draw a line between how much you should invest versus keep in a savings account.

    “Everyone’s financial situation is different and the amount of cash you have on hand will depend on your life stage and savings goals,” Stampf says. “As a general rule, consider aiming to have six to 12 months worth of liquid cash or cash alternatives, so you can withdraw from those if needed without touching your [investment] portfolio.”

    Avoid over-saving

    Stampf also cautions against over-saving for emergencies since keeping too much cash on hand could mean not having enough of your money invested, which could potentially undermine your retirement goals or other investing goals.

    You can avoid over-saving by targeting a specific number for your emergency fund. Maybe a fully funded emergency account for you means having six months’ worth of necessary expenses saved; take your monthly expenses and multiply that by six to find your target amount. You might also consider using a budgeting app, like Mint or Personal Capital, to help you figure out what your total monthly expenses look like.

    And of course, a high-yield savings account is also the best way to save for large expenses that you foresee having to make in the near future (1–3 years). It’s prudent to make sure you save for these expenses on top of your fully-funded emergency account money. And the higher interest rates let you grow your balance just a little quicker. Select ranked the Marcus by Goldman Sachs High Yield Online Savings as the best account for no fees.

    Marcus by Goldman Sachs High Yield Online Savings

    Goldman Sachs Bank USA is a Member FDIC.

    • Annual Percentage Yield (APY)

    • Minimum balance

      None to open; $1 to earn interest

    • Monthly fee

    • Maximum transactions

      Up to 6 free withdrawals or transfers per statement cycle *The 6/statement cycle withdrawal limit is waived during the coronavirus outbreak under Regulation D

    • Excessive transactions fee

    • Overdraft fees

    • Offer checking account?

    • Offer ATM card?

    The SoFi Checkings and Savings also stands out since it offers a welcome bonus after you setup and receive direct deposit payments. You can earn anywhere from $50 to $300, depending on the amounts of your direct deposits in a 30-day period.

    SoFi Checking and Savings

    Information about Sofi Checking and Savings has been collected independently by Select and has not been reviewed or provided by the issuer prior to publication.

    • Monthly maintenance fee

    • Minimum deposit to open

    • Minimum balance

    • Annual Percentage Yield (APY)

      Members with direct deposit earn 3.00% APY on savings and Vaults balances, and 2.50% APY on their checking balances. Members without direct deposit will earn 1.20% APY.

    • Free ATM network

      55,000+ fee-free ATMs within the Allpoint® Network

    • ATM fee reimbursement

    • Overdraft fee

      No-Fee Overdraft Coverage is available; however, SoFi requires $1,000 of monthly direct deposit inflows to unlock it

    • Mobile check deposit

    Pros

    • No minimum deposit to open an account
    • 1.80% APY with direct deposit
    • 2-day-early-paycheck automatically when you set up direct deposit
    • Save your change automatically with Roundups and set savings goals with Vaults
    • Get up to 15% cash back at local establishments
    • No foreign transaction fees

    Cons

    • No reimbursement for out-of-network ATM fees
    • Not a standalone checking or savings account

    Bottom line

    A high-yield savings account can sometimes be a happy medium between investing for the long-term and keeping liquid cash on hand for shorter-term large expenses, but it’s still important to avoid over-saving. ]

    Stampf recommends keeping six to 12 months’ worth of expenses in a high-yield savings account for easy access to cash in case of an emergency and saving for larger expenses that are are coming in the short term, like buying a home. Of course, you’ll want to also consider your stage of life and your needs when determining how much money to keep in a high-yield savings account.

    Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

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  • US retail sales rose 1.3% last month, a sign of resilience

    US retail sales rose 1.3% last month, a sign of resilience

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    WASHINGTON — Americans stepped up their spending at retailers, restaurants, and auto dealers last month, a sign of consumer resilience as the holiday shopping season begins amid painfully high inflation and rising interest rates.

    The government said Wednesday that retail sales rose 1.3% in October from September, up from a flat reading in September from August. The increase was led by car sales and higher gas prices. Still, excluding autos and gas, retail spending rose 0.9% last month.

    Strong auto sales may have been supercharged by the arrival of Hurricane Ian in late September, which destroyed up to 70,000 vehicles, according to economists at TD Securities.

    Even adjusting for inflation, spending increased at a solid pace. Prices rose 0.4% in October from September. The government’s solid report contrasted with gloomy figures Wednesday from retail chain Target, which announced unexpectedly weak profits as its increasingly price-sensitive customers pulled back on spending.

    Steady job growth, rising wages, and higher savings after many people cut back on travel and entertainment during the pandemic have enabled surprisingly steady spending by consumers, particularly those with higher incomes.

    Economists pointed to two other factors that likely contributed to the gain: Amazon held another Prime Day promotion last month, and California distributed inflation relief checks of up to $1,050.

    Yet there are ongoing signs that cracks are forming in consumers’ ability to keep up with the highest inflation in four decades. More households are relying on credit cards to pay bills, with nationwide credit card balances jumping 15% in the July-September quarter from a year ago, the largest year-over-year increase in two decades, according to a report Tuesday from the Federal Reserve Bank of New York.

    “Consumers are likely turning to credit to support spending as wage growth lags inflation and high prices are eating away from the stock of savings,” said Jeffrey Roach, chief economist for LPL Financial.

    And research last week from Bank of America found that consumers are increasingly seeking out cheaper options when it comes to groceries and dining out. Transactions by Bank of America customers, using credit and debit cards, show that they are now visiting cheaper fast food restaurants more often than full-service restaurants, after eating at both equally for about a year after the spring of 2021.

    The Bank of America report also found that, adjusting for inflation, grocery spending per household has fallen sharply, to below pre-pandemic levels, even though visits to grocery stores haven’t fallen. That suggests many people are seeking out cheaper options when shopping for food.

    Still, analysts said Wednesday’s government report on retail sales points to a healthier economy than previously expected. Morgan Stanley revised its forecast for growth in the October-December quarter to 1.7% at an annual rate, up from an earlier projection of 0.7%.

    Strong consumer demand could perpetuate inflation, but other trends may work in the other direction. Auto sales jumped 1.3% last month, the retail sales report showed, but that gain, in addition to people replacing cars in Florida, partly reflects a clearing of supply chain problems that have made more auto parts and semiconductor chips available. Auto production has rebounded, leading to greater supply, which can push prices down.

    Gas station sales jumped 4.1% last month, though that largely reflected higher prices. Online sales rose 1.2%, and restaurant and bar sales moved up 1.6%.

    Walmart, the world’s largest retailer, reported strong sales growth Tuesday in its third quarter, as more shoppers, including higher-income ones, sought out its cheaper groceries.

    The company said that consumers are trading down to private brands in baby items and baking goods, among other categories. It is also seeing wealthier customers. About three-quarters of Walmart’s market share gains in food came from customers with annual household incomes of $100,000 or more, the company said.

    Inflation reached 7.7% in October from a year ago, down from a peak of 9.1% in June but still a level that hasn’t been seen in 40 years. There are some signs that prices are likely to keep declining as many supply chain snarls have unraveled, boosting stockpiles of goods at many stores. Some chains may soon have to resort to discounting to clear excess merchandise.

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  • Relatives plead for tips on kidnapped family, including baby

    Relatives plead for tips on kidnapped family, including baby

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    SAN FRANCISCO — Relatives of a family kidnapped at gunpoint from their trucking business in central California pleaded for help Wednesday in the search for an 8-month-old girl, her mother, father and uncle.

    Authorities at a news conference Wednesday showed surveillance video of a man kidnapping the baby, Aroohi Dheri; the child’s mother, Jasleen Kaur, 27; father Jasdeep Singh, 36; and uncle Amandeep Singh, 39 from their Merced business on Monday.

    Family members said nothing was stolen from the trucking company but that their relatives were all wearing jewelry. Merced County Sheriff Vern Warnke said that after the kidnapping, an ATM card belonging to one of the victims was used in Atwater, a city about 9 miles (14 kilometers) north of Merced.

    Relatives of the victims asked anyone who owns a convenience store or gas station in the area to check their surveillance cameras for images of the suspect or the family. They said they were worried the baby wasn’t being fed because the family didn’t have any baby food with them at the time of the kidnapping.

    “Please help us out, come forward, so my family comes home safe,” Sukhdeep Singh, a brother of the victims, said, his voice breaking.

    Relatives of Jesus Salgado, 48, contacted authorities reporting that he had admitted to them he was involved with the kidnapping of the family, Warnke told KFSN-TV on Tuesday. Salgado tried to take his own life before police arrived at a home in Atwater, and he has since been hospitalized, he said.

    Warnke said the kidnapper made no ransom demands.

    Family members told KXTV-TV that the trucking company office had only opened about a week earlier.

    “My husband is very peaceful and calm person. We don’t have any clue why they kidnapped them,” said Jaspreet Caur, wife of the kidnapped uncle.

    The sheriff said detectives believe the kidnapper destroyed unspecified evidence in an attempt to cover his tracks.

    The sheriff’s office said that firefighters on Monday found a pickup truck belonging to Amandeep Singh that was on fire. Merced Police Department officers went to Amandeep Singh’s home, where a family member tried to reach him and the couple. When they were not able to reach their family members, they called the Merced County Sheriff’s office to report them missing, the office said.

    The sheriff’s office said the FBI, the California Department of Justice, and other local law enforcement agencies are helping with the investigation.

    Merced is a city of 86,000 people about 125 miles (200 kilometers) southeast of San Francisco in the San Joaquin Valley.

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