I've Been Mugged Blog

New Phone-Based Phishing Scams Can Trick Even Experts. How You Can Avoid Getting Duped

Beware, phone scams are more sophisticated. The pitches are so slick that even some technology experts who know better were tricked into disclosing sensitive personal and payment information. Some phone scams include human callers (called "phishing"), while others include a mix of humans and computer automation (called "vishing").

The Krebs On Security blog listed several examples. Here's one:

"Matt Haughey is the creator of the community Weblog MetaFilter... Haughey banks at a small Portland credit union, and last week he got a call on his mobile phone from an 800-number that matched the number his credit union uses. Actually, he got three calls from the same number in rapid succession. He ignored the first two, letting them both go to voicemail. But he picked up on the third call, thinking it must be something urgent and important. After all, his credit union had rarely ever called him.

Haughey said he was greeted by a female voice who explained that the credit union had blocked two phony-looking charges in Ohio made to his debit/ATM card. She proceeded to then read him the last four digits of the card that was currently in his wallet. It checked out. Haughey told the lady that he would need a replacement card immediately... Without missing a beat, the caller said he could keep his card and that the credit union would simply block any future charges that weren’t made in either Oregon or California. This struck Haughey as a bit off. Why would the bank say they were freezing his card but then say they could keep it open for his upcoming trip?"

Maybe that struck you as odd, too. Against his better judgment, Haughey continued the phone call and didn't hang up. The caller knew his home address and asked him to verify his mother's maiden name, the 3-digit security code on the back of his card, and his PIN number. Those requests were more clues, too. The bank should know this information.

Like most people, Haughey thought that it was his bank trying to be helpful. Finally, he hung up and called his bank directly. That's when he learned it was a scam. His bank hadn't called.

This example provides several lessons for consumers:

1. Scam artists are persistent. They will keep calling hoping you'll give in and answer the phone calls.
2. Scam artists are well armed. Thanks to the recent multitude of massive corporate data breaches (like this one, this one, this one, this one, and/or this one), the bad guys have probably acquired plenty of stolen personal and payment information about consumers. Criminals also buy, sell, and trade stolen data on the dark web. Using the same technologies (e.g., artificial intelligence, open-source online tools) which the good guys use, the bad guys will "spoof" or fake valid phone numbers to pretend to be your bank or financial institution.
3. A bit of skepticism is healthy. We've all been taught to be polite and to answer the phone when it rings. Scam artists try to exploit this habit. Experts advise consumers to hang up on robocalls. Even if the Caller ID feature on your phone displays a familiar number, hang up and call your bank or financial institution directly. Their phone number is conveniently listed on the back of your credit/debit card. Ask your bank if they called. They probably didn't.
4. Learn how to spot robocalls acting like humans. If you're curious and have the time, ask a simple question like, "How's the weather where you live?" If the caller ignores your question or provides a canned response, like "I don't have that information" or "I'm sorry. Can you repeat that," then it's probably a robocall. Hang up.
5. Know scam artists' pitch. It's all about money. They will pretend to be your bank, financial institution, phone company, and/or computer company. (Yes, online scammers have a profile.) Similar to phishing emails, phone scams often include a sense of urgency. They want you to act now... in the moment. Wise consumers do product research and comparison shop before making purchase decisions. The "haste makes waste" advice your parents told you as a youth still applies.

You now know more, so you won't get duped by phone scams.

Video: The History of Credit Unions in The USA

46 years ago yesterday, the U.S. Congress created the National Credit Union Administration (NCUA), an independent federal agency, on March 10, 1970. Cooperative credit unions, or credit unions, started in Germany in the 1860's, and in the United States in 1909. Why? Traditional banks were unwilling to provide loans to farmers, small businesses, and most individuals. Regular people, like you and I, formed credit unions to pool their savings and provide loans to neighbors at reasonable terms and at reasonable interest rates; plus encourage thrift and savings.

So, credit unions were built by and for consumers. This has been an important check and balance against the excesses by traditional banks. And, we've seen a lot of excesses by banks recently. Last year, banks paid more in bonuses to their executives than all minimum wage workers earned. Yes, you read that correctly. The amount of bonuses to banking executives exceeded the total earnings of all minimum-wage workers in the USA. Yes, there are minimum-wage workers in banking.

With fewer fees, lower fees, high interest rates for savings, and lower interest rates on loans, credit unions are worth considering. Credit unions have outperformed banks on customer loyalty. It's no surprise banks are lobbying to eliminate credit unions.

So, know your country's history:

October 15 Is Credit Union Day

Thursday October 15th is Credit Union Day. It has been celebrated since 1948 on the third Thursday of October. The World Council of Credit Unions explains:

"The day is recognized to reflect upon the credit union movement's history and to promote its achievements. It is a day to honor those who have dedicated their lives to the movement, recognize the hard work of those working in the credit union industry and show members our appreciation.

The ultimate goal is to raise awareness about the great work that credit unions are doing around the world and give members the opportunity to get more involved. Credit unions and associations throughout the world celebrate the day with fundraisers, open houses, contests, picnics and parades."

If you are a member of a credit union, then you are probably familiar with the many benefits beyond both fewer and lower banking fees, compared to the big banks. After a big bank raised its banking prices, I moved my money to a credit union.

To learn more, read this primer. To find and visit a nearby credit union, use this online search tool.

Survey: 6 Reasons Why Consumers Switch Banks. What You Need To Know When Switching

A reader shared the link to a good article at Kiplinger about switching banks. The article lists six reasons why consumers switch banks, based upon a survey by Harris Polls for Kasasa, a service that offers free checking accounts.

As you probably guessed, the number one reason why consumers switch banks is the monthly service fee. And, the cost of banks seems to be going up. Recently, Bank of America announced a new $25 monthly service for its checking accounts. The new fee was announced in New England with plans to go nationwide later this year.

The fifth reason why consumers switch banks are low rates in interest bearing accounts. I thought that this would have rated higher on the list. Read the Kiplinger article to browse the full list of ranked six reasons why consumers switch banks.

If you are thinking about switching banks, Kiplinger offered this advice:

"If you don't like the service you're getting [at your current bank], vote with your feet and take your business elsewhere... It's not as hard as you might think. Of those polled on behalf of Kasasa who switched financial institutions, 81 percent said it wasn't difficult..."

You can move your money from a big bank to a smaller, regional bank or to a credit union. If you are thinking about switching to a credit union:

"... you're twice as likely to find free checking at a credit union than at a commercial bank, according to a study by Bankrate... 72 percent of credit union checking accounts don't have balance requirements. Unlike commercial banks, which are usually for-profit institutions, credit unions are membership-based nonprofit organizations. Member are eligible to join because of a common bond, such as a place of employment, place of worship, school, geographic location... You can find and research credit unions at CUlookup.com and ASmarterChoice.org."

There are more resources. You might try Find A Better Bank (FBB), MyCreditUnion.gov, the Credit Union Locator tool at the National Credit Union Administration (NCUA) site, and the Move Your Money Project website. I switched banks recently. if you switched banks or plan to, share below your reasons for switching. Did you find the switching process easy? I did.

Big Banks Threaten To Withhold Campaign Donations To Politicians

If you think that money has not corrupted the political process in the United States, then read this Raw Story news article. If they don't get their way, several big banks have threatened to withhold campaign contributions:

"Representatives from Citigroup, JPMorgan, Goldman Sachs and Bank of America have met to discuss ways to urge Democrats, including Warren and Ohio Senator Sherrod Brown, to soften their party's tone toward Wall Street... Bank officials said the idea of withholding donations was not discuss at a meeting of the four banks in Washington but it has been raised in one-on-one conversations..."

The threat is not to only to candidates, but to organizations, like the Democratic Senatorial Campaign Committee, that raise funds for candidates. The gesture would be symbolic, since the most a bank can give directly is $15,000 per year. They all probably give more indirectly through super-PACs.

Let's briefly review some of the banks' history:

Bank	Events
Bank of America	August, 2011: Bank Of America To Settle Class-Action Lawsuit With Overdraft Fees December, 2011: Bank Of America Agrees to Pay $335 Million To Settle Discrimatory Lending Lawsuit March, 2012: Bank Of America To Test New Fees September, 2014: The U.S. Justice Department And Bank Of America Agree On Record Settlement Amount March, 2015: Bank of America Raises Prices For Its Checking Customers. What You Need To Know And How To Avoid The New Fees
Citigroup	March, 2010: Citibank Breach Exposes Sensitive Personal Information of 600,000 Consumers June, 2011: Citigroup Increases Number of Breach Victims To 360 Thousand July, 2011: Customer Losses From Citigroup Data Breach At $2.7 Million October, 2011: Citigroup To Pay $285 Million To Settle An SEC Lawsuit About Mortgage Backed Securities July, 2014: Citigroup To Pay $7 Billion Settlement For Misleading Investors About Toxic Mortgage Backed Securities
JP Morgan	September, 2013: JPMorgan Chase To Pay About $1 Billion in Fines To Settle Charges By Regulators October, 2013: JPMorgan Chase and U.S. Justice Department Reach Tentative $13 Billion Settlement About Mortgage-Backed Securities. What Next? December, 2013: Settlement Agreements Require JP Morgan Bank To Pay Record Amount of Fines December, 2013: JPMorgan Chase Bank: Data Breach Affects 500,000 Prepaid Cardholders, And The Bank's Sordid History December, 2013: You Gave JPMorgan Bank A Whale Of A Christmas Gift

Given this history, these banks should be focused instead upon strengthening their data security, eliminating banking deserts, and improving their customers' satisfaction and loyalty. Yes, banks are free to donate money to the candidates of their choice. Similarly, consumers are free to deposit their hard-earned money in the bank (or credit union) of their choice. I'm glad that I moved all of my money out of Bank of America.

What are your opinions of the banks' threats?

Bank of America Raises Prices For Its Checking Customers. What You Need To Know And How To Avoid The New Fees

Bank of America (BofA) has decided to move forward with charging large monthly maintenance fees to its checking account customers. Yesterday, I received a notice via postal mail from BofA dated March 6, 2015:

"We're updating our checking products and, as a result, the existing checking account listed above will become an Advantage Regular Checking account...

What's not changing
Your account information, including your account number, checks, and debit card all remain the same. Your account features, such as direct deposit, Online and Mobile banking. Bill Pay, as well as accounts linked for overdraft protection, will also remain the same.

What's Changing
Monthly maintenance fee: You can avoid the monthly fee on this account when you meet any ONE of the requirements shown below during each monthly statement cycle. Otherwise, the $25 monthly fee will be deducted from your account. This change takes effect on your first statement cycle that starts on May 15."

I checked the BofA website for any press releases about its price increase. I saw nothing. Not good.

A $25 monthly maintenance fee equals $300 yearly. That's a big price increase. You may remember Bank Transfer Day in 2012, when many consumers moved their money from the big banks to smaller, regional banks and credit unions. Several banks and BofA had tried to raise prices in 2011 by applying monthly maintenance fees, but then reversed their decisions after considerable push-back by consumers.

BofA tried to justify its 2011 price increase by saying their transaction costs had gone up and the, "economics of debit cards have changed," After some research in 2011 (see image on right), I found that BofA partnered with another company, First Data, to create a separate company that actually processes the bank's debit-card transactions, and both share in those debit-card transaction revenues.

That partnership continues today. The 2015 Hoovers profile states:

"The next time you swipe your card and it clears, you might thank Banc of America Merchant Services. A 2009 joint venture between Bank of America and First Data, it is one of the largest processors of electronic payments in the US. The firm handles more than 7 billion check and credit, debit, stored value, payroll, and electronic benefits transfer card transactions (worth a total of some $250 billion) annually. Its clients are small businesses and large corporations including retailers, restaurants, hotels, supermarkets, utilities, gas stations, convenience stores, and government entities. First Data owns 51% of Banc of America Merchant Services, while Bank of America owns 49%."

I'll bet you didn't know this. Most people don't. Most of the big banks have similar arrangements with First Data. So, the big banks make money off your money by investing it (what you'd expect), but also by both charging customers monthly maintenance fees and from collecting revenues from their debit-transaction processing partnership (not what you'd expect). Some people might call making money at both ends of the transaction double-dipping. I do. That didn't pass the smell test in 2011, nor today.

Fast-forward four years, and the transaction cost reason has been replaced with the "updated our checking products" excuse. It's still lame. A price increase is a price increase. Plus, the notice I received from BofA failed to mention any cost cutting done before passing along a huge price increase to its checking customers. That's just bad.

Moreover, the bank's latest price increase couldn't be more confusing. The bank's notice explained how checking customers can avoid the large monthly maintenance fees:

"Keep an average daily balance of $5,000 or more in your checking account or linked Regular Savings account, or

Keep an average daily combined balance of $10,000 or more in checking with linked savings, money market savings, CDs or IRAs, or

Keep an outstanding balance of $15,000 or more in an eligible linked installment loan or line of credit, or

Have $15,000 in total combined assets in your eligible Merrill Edge and Merrill Lynch investment accounts that are linked to your checking account, or

Have a linked Bank of America first mortgage loan that we service."

This reads like legalese written by lawyers. Why not keep it simple and say: keep $5,000 in an account to avoid the monthly maintenance fees. Simplicity matters.

Let's review some more of BofA's history. In August 2014, the bank agreed to a massive settlement with the U.S. Justice Department and several states' attorney generals. The $16.65 billion settlement agreement resolved both federal and state civil investigations into activities by the bank's former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch, related to the packaging, marketing, sale, and issuance of residential mortgage-backed securities (RMBS). The bank acquired Merrill Lynch in 2009, and Countrywide in 2008.

To be fair, other big banks have paid massive settlement amounts during the past few years: Bank of America, $61.1 billion; JPMorgan, $31.4 billion; Citigroup, $10 billion; and Wells Fargo, $5.8 billion. A 2012 survey found that junior bank executives view wrongdoing as necessary to advance their careers. Based upon all of this, there clearly seems to be an ethics problem in banking.

I find BofA's reason (e.g., updated their checking products) for its price increase disingenuous. More likely, the price increase was driven profitability concerns given the massive settlement payments. Why not reduce senior executive compensation and bonuses instead (e.g., especially those executives that committed the wrongdoing that led to the massive settlement payments)? Why put the burden on customers?

That BofA decided to place the burden on its customers speaks volumes. Banks can clearly raise prices if they want. They are free to do that. Customers are free to move their money to a bank (or credit union) with lower or no monthly maintenance fees.

I'll make it easy for BofA checking customers to avoid the price increase: move your money to a small, regional bank or credit union. It's easier than you think, and there are a lot of benefits. Last month, Bankrate compared checking account fees between banks and credit unions:

"You're twice as likely to find free checking at a credit union than a bank, according to a new study by Bankrate.com. Nearly three quarters of credit union checking accounts -- 72 percent -- come with no balance requirements or monthly maintenance fees. That's in sharp contrast to banks, where only 38 percent of checking accounts are free... Most of the time, when you encounter dramatically lower prices for the same product, you assume that the cheaper product is somehow inferior. But that's not the case with credit unions, which typically offer services comparable to similarly sized banks. Instead, it comes down to the way credit unions are organized, says Jon Jeffreys, managing partner at Callahan & Associates, a management consultancy that works with credit unions..."

Thankfully, I had already begun to move my money. BofA's latest price-increase notice just accelerated my schedule. While I have sufficient account balances to avoid BofA's new monthly maintenance fees, I simply dislike the way the bank operates. For me, it goes to values.

If you are looking for a small bank or credit union to move your money to, a good resource is the Move Your Money Project. Some consumers have tried to move their money to prepaid cards instead. I believe that is a poor decision, because there usually are many fees with prepaid cards. Plus, experts have advised consumers to be wary of prepaid card protections.

What are your opinions of Bank of America? Of its latest price increase? Has your bank increased prices?

Youth Savings Pilot Program Underway By FDIC

Earlier this month, the Federal Deposit Insurance Corporation (FDIC) announced a pilot program to encourage school-aged youth to save money. The goals of the program are to collect and share best practices by participating banks.

The pilot program includes two phases:

"... the first covers programs that will be in place during the 2014-2015 school year. Through August 22, 2014, the FDIC is soliciting interest from institutions that will have a youth savings program underway during the 2014-2015 school year. For the second phase, the FDIC will begin soliciting interest in April of 2015 for institutions that will begin new savings programs with schools in the 2015-2016 school year..."

After the "great depression," the U.S. Congress established the FDIC in 1933 to restore public confidence in the nation's banking system. The FDIC insures deposits at the nation's 6,730 banks and savings associations. The agency promotes the safety and soundness of banks by identifying, monitoring and addressing risks.

According to a December 2012 report by the FDIC (Adobe PDF):

"A majority of banks (87 percent) offered at least one of the following specialty savings products: Individual Development Accounts (IDAs), specialized savings clubs, workplace-based savings, or youth (minor) savings accounts. Youth accounts dominated, with 82 percent of financial institutions offering this savings product. Forty-one percent of banks offered specialized savings clubs..."

That same report also concluded about all consumers, not only youth, without bank accounts:

"Community outreach through collaborations with community groups was identified as the most effective strategy for developing relationships with these populations. Despite this recognition, only about half of all banks reported using partnerships with organizations to promote opening checking or savings accounts."

In a 2011 study by researchers at the University of Kansas concluded:

"... that when savings accounts are started for children of low-income families and financial education is included, not only are the families more likely to save, but students can be more likely to attend college and graduate... when money is set aside for college, families save more, find creative ways to save even when money is tight and view attending college as a more realistic possibility."

During its pilot program in 2014-15, the FDIC will document innovative practices and assess the success of participating banks. Participating banks must send in December 2014 a summary of the youth savings programs they implemented during the Fall. The FDIC will collect a variety of data about the pilot program, including:

".... the number of accounts opened, the average saved in the accounts, indications on whether the youth accounts helped the institution establish account relationships with the parents, the on-boarding process for the accounts, the financial education strategy used and its reception, the longevity of account relationships, whether banks felt satisfied with their work with the school, and whether the bank’s expectations were met."

Learn more about the FDIC Youth Savings Pilot Program. The Credit Union National Association (CUNA) operated during April 2014 a similar national program to encourage savings by youth.

What are your opinions of this pilot program? Do youth need to save more?

Consequences From The Target Data Breach

After executives at Target announced in December a data breach that affected the retailer and its customers, there have been plenty of consequences. ABC News reported:

"The nation's second largest discounter said Wednesday that its profit in the fourth quarter fell 46 percent on a revenue decline of 5.3 percent as the breach scared off customers worried about the security of their private data... Target's business has been affected by the breach in a number of ways. During the quarter, the number of transactions fell 5.5 percent... The company also has faced costs related to the breach. Target said it can't yet estimate how much the data breach will cost it in total. But in the fourth quarter, it said the breach resulted in $17 million of net expenses, with $61 million of total expenses partially offset by the recognition of a $44 million insurance receivable."

Typically, after a data breach affected consumers require replacement bank cards (e.g., credit and debit). Banks incur costs to issue replacement cards, to close affected accounts, and open replacement accounts. Consumers incur costs from stolen money, the lost time and aggravation to submitting complaints for reimbursement, and to re-establish online payment account settings.

ABC News also reported:

"Target said expenses may include payments to card networks to cover losses and expenses for reissuing cards, lawsuits, government investigations and enforcement proceedings..."

May? I would say definitely. Why? The Huffington Post reported:

"Costs related to the holiday data theft has now exceeded $200 million for financial institutions, according to data collected by the Consumer Bankers Association and the Credit Union National Association. The two trade associations said Tuesday that 21.8 million of the 40 million compromised credit and debit cards have been replaced."

And, these costs will surely rise since the damage is still ongoing. Target will also incur legal costs to defend itself. The Minneapolis Star Tribune reported:

"A group of First Farmers & Merchants banks in southern Minnesota has sued Target Corp. over alleged damages from the retailer’s data breach late last year. While a number of financial institutions from around the country have sued the company since news of the data heist broke, the First Farmer & Merchants lawsuit is believed to be the first by a financial institution on Target’s home turf in Minnesota... The banks are First Farmers & Merchants National Bank in Luverne, First Farmers & Merchants National Bank in Fairmont, First Farmers & Merchants State Bank in Brownsdale, First Farmers & Merchants State Bank of Grand Meadow and First Farmers & Merchants Bank in Cannon Falls."

According to the Chicago Tribune:

"A House of Representatives committee with broad investigative jurisdiction has turned up the heat on Target Corp, demanding that the No. 3 U.S. retailer turn over internal documents and messages describing how and when it learned of a recent massive consumer data breach... The committee set a deadline of March 10 for Target to turn over the materials... the House committee also requested any documents generated between November 1 and December 19 referring to discussions about notifying others about the data breach, and any documents generated since December 12 in which any federal agency advised the company to avoid providing information to Congress."

Why Congress started this investigation:

"... was prompted, at least in part, after committee officials felt dissatisfied with responses given by Isaac Reyes, an official with Target's government relations department, during a January 30 conference call about the data breach."

About breach costs, the Chicago Tribune reported:

"... several analysts expect Target to slash its share buybacks as it copes with costs tied to the breach, which some estimate will cost the company $500 million to $1.1 billion."

When companies fail to protect consumers' sensitive personal and payment information, there are lots of consequences. There should be lots of consequences. I'll bet that Target executives did not expect the consequences they now face.

My advice to executives at corporations, banks, and mobile app developers:

If you can't protect it, don't collect it.

Helping The Poor Trapped In Banking Deserts In The USA

Despite the claims of many politicians (and some economists), markets don't solve all problems, and many consumers are not just abused, but overlooked and ignored. There is a wonderful and inspiring article in Forbes magazine about how the dedicated and hardworking folks at Hope Enterprise Corporation, a community development financial institution, help the poor.

"HOPE serves black farmers in the south, though its customer base is much broader than that. Like Root Capital, HOPE was founded to address a fundamental market failure, and it has developed creative strategies to serve a rural population left behind by traditional banks."

Bill Bynum, the CEO of Hope, described the challenges and his organization:

"We work with a population that has not had the opportunity to participate in the formal banking system. Our region still suffers from a legacy of plantation agriculture, which relied on keeping people uninformed and dependent. The vestiges of this system persist today, leaving significant gaps, opportunity gaps... HOPE was started in the mid-90s by civic and business leaders who had seen years of effort to improve conditions in the delta, the most impoverished region in the U.S., produce little change... HOPE’s territory is akin to a developing country, a situation made worse by the dramatic expansion of bank deserts throughout the region. Eighteen hundred bank branches have closed since the recession and 93 percent of those are in low-income tracts. It’s happening across the country but it’s been particularly devastating to neighborhoods here in the Mid South... that leaves a lot of communities on the outside looking in, and vulnerable to predatory lenders and other abusive financial practices. Our region has always been under-banked and under-served by traditional institutions..."

Hope Enterprise Corporation works closes with the Hope Credit Union. I strongly encourage you to read the entire Forbes article. Another title for this article could have easily been, "What Hope Can Teach Others Seeking To Serve Bank Deserts In The USA."

Credit Unions Outperform Banks On Customer Loyalty, And Banks Lobby To End Credit Unions' Tax-Exempt Status

The Bankrate Banking blog reported the results from a recent survey about customer loyalty:

"According to the 2013-2014 National Member and Nonmember Survey from the Credit Union National Association, 57 percent of credit union members indicate they are extremely likely to recommend their credit union to friends. In contrast, just 40 percent of members who also use banks say they're equally as likely to recommend that institution to friends."

A 2012 survey found that 11% of customers were ready to leave their bank. To improve their performance, you'd think that banks would focus on better customer service, and cut costs to improve profitability. The big banks have focused on lobbying legislators in Washington to end the tax-exempt status of credit unions, which are non-profits:

"... Frank Keating, president of the American Bankers Association (ABA) wrote, "Many tax-exempt credit unions have morphed from serving 'people of small means' to become full-service, financially sophisticated institutions. The time has come to abolish this exemption." "

Another claim the banking industry likes to make is that repealing the credit unions' tax-exemption would create a level playing field. Earlier this year, the American Banking Association trade group released a flyer (Adobe PDF) which claimed:

"Today credit unions are a $1 trillion industry that pays no income tax. That’s nearly $2 BILLION every year that could help shrink the federal deficit. Now, credit unions want even more perks. It’s time to end credit unions’ indefensible and outdated special treatment. Enough is enough."

I agree. Enough is enough. And, enough with the spin and misleading statements. Let's start with some facts from the U.S. Statistical Abstract:

• The average bank is about 14 times larger than the average credit union. In 2010, the average bank had $1,739.7 billion (or $1.7 trillion) in assets while the average credit union had $124.6 billion in assets.
• Banks still control a whopping 94% of the market, based on assets. In 2010, FDIC-insured banks (commercial and savings) had over $13.3 trillion in assets, compared to $914 billion in assets at credit unions (federal- and state-insured).
• Banks are far bigger with more branch offices and ATM retail booths. Also in 2010, the 7,657 FDIC-insured banks (commercial banks and savings institutions) had 95,527 offices (main office and branches). That is about 12 offices per institution. In the same year, there were 7,339 credit unions; most with a couple offices (that rely on others' ATM networks to service their members).
• In 1990, the average bank was about 20 times larger than the average credit union. In 1990, the average bank had $306.6 billion in assets while the average credit union had $15 billion in assets.
• From 1990 to 2010, the number of banks decreased (e.g., consolidations, failures) by about 50%, the number of offices increased by 45%, and assets increased 186%. So, the big banks got a lot bigger.
• During the same period, the number of credit unions decreased (e.g., consolidations, failures) by about 43%, and assets increased by 361%. So, small organizations did get bigger.
• In 1990, banks controlled about 96% of the market; based on assets. So, credit unions have captured 2% of the market in 20 years. That is miniscule annual growth in market share.

Some additional facts worth noting:

• Banks provide retail banking operations (e.g., checking accounts, savings accounts, money market accounts, debit/credit cards), commercial banking (e.g., lending to businesses), and investment services. 70% of credit unions do not provide commercial banking operations. So, the claim about full service isn't accurate.
• A 2012 study found that while the total number of branch offices at banks increased during the past six years, the number of branches increased in higher-income areas and decreased in low-income areas. It seems hypocritical at best (and dishonest at worst) for banks to accuse credit unions of focusing away from the poor while banks do it.
• The claim by banks that credit unions receive special treatment is particularly laughable. Banks should never, ever complain about special treatment. During the 2007-2008 recession, banks received about $700 billion in TARP bailout money.
• If banks want to enjoy the benefits of tax-exempt status, they have the freedom and choice to re-organize as a credit union.
• When talking about banks, let's remember who we are dealing with. A 2012 survey found that more than a quarter of executives polled said that they considered unethical behavior necessary to succeed in business. The industry has an ethics problem it has failed to fix, yet it wants to tell another industry how they should operate.

The trade group representing credit unions has completed its own analysis which totally debunks the level playing field claim by banks. Read this 2011 report: Commercial Banks and Credit Unions: Facts, Fallacies, and Recent Trends:

• The claims by bankers imply that credit unions have captured a larger share of the market. This is false. In 1992, credit unions had 6% of the market -- the same share as in 2010.
• In 2011, half of credit unions had less than $19 million in assets while less than 2% of commercial banks were this small. During the same period, two-thirds of banks had $100 million or more in assets, while only 20% of credit unions were this big.
• The claims by bankers that credit unions don't paying their fair share of taxes is misleading and dishonest. Many banks use the SubS tax status to pay less taxes. According to CUNA, the number of banks using the SubS tax status has grown from 6% in 1997 to 31% in 2011. Both small and big banks use this tax dodge. Again in 2011, 61 banks with $1 billion or more in assets used the SubS lower-tax status, which was originally created for small businesses. It would seem that the banks are gaming the system tax wise.

What's really going on here? I began to wonder why an industry that controls 94% of the market would complain about its competition.

As I see it, this lobbying by banks is another slick attempt to focus attention away from themeselves and to limit consumer freedoms and banking choices. By limiting or eliminating choices (e.g., credit unions), banks reduce competition that keeps banking prices down. Without credit unions, it would be easier for banks to raise prices (e.g., fees, loan interest rates, decrease savings interest rates). Consumers would not have an option to move their money to from banks. I can think of no other reason why an industry would complain about competition that has only 6% of the market.

Remember, raising prices was what the banks wanted to do in 2011, but couldn't when consumers rejected higher monthly checking and debit fees proposed by the Bank of America and other big banks. Raising banking prices has several benefits for banks:

1. Increases banks' revenues and profits
2. Encourages some current account-holders to move to underbanked status: a checking or a savings account, but not both
3. Encourages some current account-holders to move to unbanked status: neither a checking nor a savings account
4. Allows banks to service both underbanked and unbanked customers with highly-profitable prepaid cards, instead of with traditional checking and savings accounts. Prepaid cards aren't as tightly regulated as debit cards, credit cards, checking accounts, and savings accounts. Prepaid cards have fewer or no disclosure requirements and few to no limits on the number or amount of fees the banks can charge. Prepaid card users have greater liability should the bank that issued their prepaid card fail.

In 2011, about 8% of U.S. households were unbanked and 20% were underbanked. The average prepaid card charges about $300 per year in basic fees. That's a huge revenue source for banks. Do you want to pay $300 per year, or more, in banking fees? I doubt it. I don't.

This blog discussed the long list of fees charged on many prepaid payroll cards. The goal should be to decrease unbanked and underbanked households. The St. Louis Federal Reserve said it well in 2010:

"Encouraging the unbanked to handle payments through the financial mainstream is important for a number of reasons. Having a checking and savings account is an important first step in establishing that the consumer has the financial acumen to apply for credit for a car or home... the key advantage to consumers having bank accounts is avoiding costly alternative financial services and enabling families to build and protect their wealth. Unbanked consumers spend approximately 2.5 to 3 percent of a government benefits check and between 4 percent and 5 percent of payroll check just to cash them. Additional dollars are spent to purchase money orders to pay routine monthly expenses. When you consider the cost for cashing a bi-weekly payroll check and buying about six money orders each month, a household with a net income of $20,000 may pay as much as $1,200 annually for alternative service fees—substantially more than the expense of a monthly checking account fee."

So, traditional checking and savings accounts are ways for consumers (e.g., the poor and lower middle-income people) to move up the economic ladder in society to achieve the American dream. If one wants the poor and middle-income classes to succeed, one should encourage them to open traditional checking and savings accounts with the lowest-cost financial products possible, usually available at credit unions.

Without credit unions (or with severly hampered credit unions), a rise in banking prices by banks would likely result and cost consumers dearly. The Los Angeles Times reported:

"The tax exemption is crucial to credit unions, which by law can't raise capital through public stock offerings the way that banks can, said Fred R. Becker Jr., president of the National Assn. of Federal Credit Unions, a trade group with about 3,800 federally chartered members... A 2012 economic study commissioned by the trade group found that removing the tax exemption would cost consumers about $10 billion a year through higher fees and interest rates on loans, as well as lower interest rates on savings."

The Los Angeles Times article also provided some good background information:

"Under a 1934 law, Congress exempted credit unions from federal income taxes as long as they were nonprofit businesses, organized without capital stock and operated for the benefit of their members. For decades, most credit unions were small operations, usually serving employees of individual businesses and government agencies. The industry has grown significantly since the 2008 financial crisis, boosted by outrage over Bank of America's 2011 plan to impose a $5 monthly fee for debit card use."

So, the big banks have only themselves to blame for the rise in credit unions. I think that it is important to remember the history of banks and credit unions described in this Federal Credit Union handbook (Adobe PDF):

"In the early twentieth century, credit needs of the urban working classes in the United States were largely neglected by established financial institutions. For the most part, the average worker had nowhere to turn except to the usurious money lenders of the day. This growing dependency complicated the economic life of the average consumer and gave rise to the development and formation of a cooperative credit system in the United States, an idea originating in Europe and imported to North America in 1900. In 1908, the first legally chartered cooperative credit society was established in Manchester, New Hampshire by a special act of the state’s legislature. The following year, the first complete credit union act, the Massachusetts Credit Union Act, became law in Massachusetts. By 1933, enactment of state laws permitting formation of credit unions had been largely accomplished. In 1934, the Federal Credit Union Act was signed into law..."

A reminder: usurious = very high or unlimited interest rates. So, a world without credit unions would eliminate the need for the Credit Union Act. It would also eliminate several freedoms citizens have, including the right to gather as a group and form a credit union. It would also set conditions for a return to the high interest-rate times of the 1800's. Do you want to return to banking practices of the 1800s? I doubt it. I don't.

What to do next. First, contact your elected officials and tell them what you think of the banks' lobbying against the tax-exempt status of credit unions. Second, move your money to a local, community bank or to a credit union. Third, join the Don't Tax My Credit Union movement.

7 Tips To Avoid A Rejected Credit Card During Vacation Travel

Today, banks are more vigilant than ever about spotting potential fraud. One way banks spot potential fraud includes charges outside of the cardholder's normal usage pattern -- the area where you live, work, and use your credit card. Often, when consumers go on vacation you intentionally travel outside of your area. Nobody wants a credit card purchase denied while traveling, especially when you don't have the cash with you.

So, what can consumers do to avoid having your credit card denied while shopping during vacation? Banks and credit card issuers advise consumers to:

1. Understand where your credit card is accepted outside of the United States. You can visit the customer service section of your bank's or credit card issuer's website. For example: the Help Center in the Discover site lists the regions where that credit card is accepted, including an international Country Acceptance Map. This is also helpful to understand any exchange rates used, and/or any fees or surcharges that might apply for purchases in different currencies. The Visa Travel Preparation Page provides similar information for cardholders traveling internationally.

2. Decide which credit cards you will bring. You may decided to leave at home the credit cards with high foreign transaction fees, don't offer purchase protection insurance, doesn't offer frequent-flyer mileage, and/or aren't accepted in the countries which you will visit. Experts advise consumers to bring at least two credit cards, and use one as a back-up in case your primary card doesn't work.

3. Notify your bank or credit card issuer of your upcoming travel, and the specific locatons where you will use your credit card. For example, Capital One directs its Visa cardholders to call its Customer Service department (1-800-955-7070) before their trip to provide the following information:

• Credit card number
• Travel destination(s): states and/or countries
• Travel start and stop dates
• Which cardholders will be traveling (if multiple people have accounts)

In Capital One's automated voice system, cardholders speak to enter and select voice prompt options. Say "More Options" and then "Report Upcoming Travel" to access the relevant option. Then, you can enter all of the necessary information, or you can speak with a human representative.

Obviously, if your vacation travel itinerary includes several cities and/or countries, you will want to have all of that information ready. When you contact your bank or credit card issuer, they will provide an international customer service phone number you can call while traveling outside the United States, should you have any problems. Last month before my vacation, I used Capital One's automated voice system. My travel itinerary included about six countries, and I found the system pretty easy to use to enter the necessary information.

4. Watch out for PINs. In some regions, automated kiosks require credit cards with smart chips. If your credit card doesn't have this new technology, it may not work.

5. If you want to use your debit card instead, first contact your bank, credit union, or card issuer to report your travel itinerary. Visit their website to find their office and ATM locations in the states or countries you will visit, any other banks they have partnerships with, any fees (e.g., conversion, foreign transaction) that apply, and any PIN number limitations (e.g., fewer digits). Generally, in-network ATM machines have lower fees than out-of-network ATM machines.

Experts advise consumers to keep sufficient cash with you for smaller purchases. The fewer times you use your debit card, the less you expose it to identity theft and fraud risks. If you read this blog regularly, then you already know that I use my debit card only at my bank's ATM machines. To me, it is too risky to use a debit card in a local retail store or gas station, especially in another country. There is no way to know if the card entry pads (or gas station pumps) has been compromised with skimming devices.

6. If you want to use a prepaid card instead, CardHub advises consumers:

"As long as your prepaid card bears the MasterCard or Visa logo and you notify your issuer of your travel plans, you should be able to use it abroad...”

Wise consumers will still check with their card issuer to get a copy of their prepaid card agreement, to find ATM locations in the states or countries you will visit, any other banks they have partnerships with, and any fees (e.g., conversion, foreign transaction) that apply. Again, in-network ATM machines generally have lower/fewer fees than out-of-network ATM machines. Compare the fees for your prepaid card against fees for your credit/debit cards. Understand your rights, protections, and the differences between credi, debit, and prepaid cards. If decided to use a prepaid card, make sure you load enough money onto it before you leave for your trip.

If you are unsure about whether prepaid cards are for you or not, there are plenty of online resources to help you decide. You can learn more by browsing the Prepaid Cards section of this blog. The posts in this blog section contain plenty of links to external sites and resources.

7. Check for foreign travel advisories. These may suggest additional precautions you should take in the countries you will visit.

Having done all of this, you can then travel with peace of mind.

HSBC Agrees To Pay $5.25 Million Settlement To NCUA

Last week, the National Credit Union Administration (NCUA) announced a settlement agreement with HSBC. HSBC hs agreed to pay $5.25 million to the NCUA for a complaint about its sale of residential mortgage-backed securities to five failed credit unions. The settlement agreement does not require HSBC to admit fault.

Similar to FDIC and the banks it oversees, the NCUA charges the credit unions it oversees with fees to cover failed credit unions and to protect depositors' assets. The NCUA uses the Temporary Corporate Credit Union Stabilization Fund (TCCUSF) to cover failed corporate credit unions. In this instance, the true risk of the mortgage-backed securities sold to corporate credit unions allegedly wasn't disclosed and led to the failed credit unions. Any payments the NCUA collects is used to offset future fees the NCUA charges for the TCCUSF.

The NCUA had filed five lawsuits against various securities firms, and had negotiated settlements with Deutsche Bank Securities ($145 million) and Citigroup ($20.5 million).

Corporate credit unions provide various services (e.g., short-term loans, check clearing, electronic funds transfers, ATM networks) to the consumer credit unions they serve. Consumer credit unions are the credit unions which we consumers join. Corporate credit unions are chartered by the NCUA or states.

In its 2010 annual report, the NCUA listed the following corporate credit unions:

Corporate Credit Union Name	State	Assets (Mill)	Members
Corporate America CU	Alabama	$3,701.7	369
First Corporate	Arizona	$979.4	51
Western Bridge Corporate Federal	California	$16,756.3	1,010
System United Corporate Federal CU	Colorado	$2,091.3	363
Southeast Corporate	Florida	$2,561.5	390
Georgia Corporate Federal CU	Georgia	$1,737.1	171
Iowa Corporate Central CU	Iowa	$108.2	159
Members United Bridge Corporate Federal	Illinois	$10,012.9	2,166
Kansas Corporate	Kansas	$302.3	148
Kentucky Corporate	Kentucky	$363.3	105
Louisian Corporate	Louisiana	$146.7	172
Eastern Corporate	Massachusetts	$507.5	278
Tricorp	Maine	$617.1	184
Central Corporate	Michigan	$2,394.3	359
Missouri Corporate CU	Missouri	$501.0	223
Treasure State Corporate CU	Montana	$386.3	63
First Carolina Corporate	North Carolina	$1,917.7	172
Midwest Corporate	North Dakota	$181.7	60
Corporate One Federal CU	Ohio	$2,881.1	768
MidAtlantic Corporate	Pennsylvania	$3,025.7	888
Volunteer Corporate	Tennessee	$1,351.7	256
Southwest Bridge Corporate Federal	Texas	$7,745.3	1,377
VA Corp	Virginia	$1,056.5	229
Corporate Central CU	Wisconsin	$1,623.7	281
West Virginia Corporate Federal CU	West Virginia	$228.1	110
U.S. Central Bridge Federal	Kansas	$18,412.9	56
Total		$81,591.1	10,428

Bill Maher: End Abusive Relationships With Your Bank

An important message about the Move Your Money Project from Bill Maher, with his usual wit and humor:

Big Banks vs. Credit Unions

If you are unsure about whether or not to move your money from a big banks to a small, community bank and credit union, consider the statistics below from Consumer Reports:

Item / Fee	Big Banks	Credit Unions
Non-interest Checking (per month)	$10.27	$6.00
Minimum Balance to Waive Fees	$1,115.97	$500.00
Online Bill Payment (per month)	$6.95	$0.00
Use Another Bank's ATM (per transaction)	$2.21	$1.07
ATM Surcharge (per transaction)	$2.96	$2.79
Overdraft (per transaction)	$34.48	$27.82
Insufficient Funds (per transaction)	$34.48	$27.82
Stop Payment (per transaction)	$31.09	$19.43

To learn more:

• Javelin Research Reports Results About Bank Transfer Day
• Learn About Credit Unions. Free Workshops At A Nearby City
• Keeping Its Commitment To Its Customers: A Bank Does The Right Thing
• Bank of America Merchant Services And Money Network Announce New Payroll Solution
• How To File A Complaint About A Bank
• Move Your Money To... Walmart? A Good Deal?
• Some Banks Reverse Decisions To Add New Debit Card Fees

Javelin Research Reports Results About Bank Transfer Day

Finally, some firm statistics are being released about the results of Bank Transfer Day, when consumers moved their money from big banks to credit unions and local community banks. Based on extensive research, Javelin Strategy & Research estimated that 5.6 million U.S. adults moved their money during a 90 day period. Some details:

• 11% (610,000 of the 5.6 million) mentioned Bank Transfer Day as the reason they moved their money
• 26% said that high banking fees were the reason they moved their money

Javelin concluded that both Bank Transfer Day and the Occupy Movement had a measurable impact when compared to research results from prior years. So, a true grassroots movement can have an impact.

Previously, CUNA revised downward its estimates of Bank Transfer Day results due to a flawed methodology. CUNA did not change its estimate of more than 40,000 new credit union accounts opened by consumers on November 5, Bank Transfer Day.

Javelin designed the online research questionnaire and surveyed 5,878 consumers during December 2011. The survey process included:

"... targeted respondents based on representative proportions of gender, age, income, and ethnicity, and data was weighted to U.S. census proportions. The survey is based on a set of questions that were first fielded in 2003, and are now deployed on a twice-annual basis."

Javelin has research identity theft and fraud, with reports covering 2008 and 2010, plus trends in corporate data breaches. I have found Javelin's work reliable, but still await more results about Bank Transfer Day. It would be great to know the average bank account balance transferred, since the big banks seem to have focused on getting consumers to consolidate their accounts (e.g., checking, savings, and investments). The big banks are probably willing to lose consumers with smaller balances.

In a recent conversation with banking industry analysts, the Bank of America CEO reported a 20 percent increase in account closures during the fourth quarter of 2011.

Learn About Credit Unions. Free Workshops At A Nearby City

While there hasn't been much mentioned lately in the mainstream news media, consumers are still moving their money out of the big banks to local community banks and credit unions. If you want to learn more about what a credit union is and its benefits, the National Credit Union Administration (NCUA) is hosting free workshops in several citys.

The NCUA is the independent federal agency that regulates and supervises federally chartered credit unions. The NCUA operates the National Credit Union Share Insurance Fund (NCUSIF), which insures deposits at federal credit unions and most state-chartered credit unions. Deposits are insured up to $250,000 per account.

Upcoming workshop dates and locations through June 2012:

• March 3: Phoenix, AZ
• March 10: Los Angeles
• March 22: Richmond, VA
• April 11: Chicago
• April 12: Portland, ME
• April 19: Philadelphia, PA
• May 3: Detroit, MI
• May 11: Minneapolis, MN
• May 19: New York, NY
• May 23: Albuguerque, NM
• May 30: Baltimore, MD
• June 2: Denver, CO
• June 7: Omaha, NE
• June 9: Dallas, TX

To learn more and register for a workshop, visit the NCUA website. The NCUA operates the MyCreditUnion.gov website for consumers, with plenty of resources, tips, and advice. This prior blog post includes basic information about how to find a credit union near where you live.

CUNA Revises Downward Its Estimate Of New Accounts

An I've Been Mugged reader at the American Bankers Association provided a link to this December 6 American Banker article: Credit Unions Eat Crow On Customer Numbers. The article reported that the Credit Union National Association (CUNA) revised downward its initial estimate of the number of new accounts opened at credit unions by consumers who moved their money from large banks during the weeks leading up to Bank Transfer Day.

The CUNA is a trade association of 90 percent of 7,400 state and federally chartered credit unions serving about 93 million Americans. The CUNA originally estimated on November 3 that consumers opened 650,00 new accounts at credit unions from September 29 to November 2. The revised estimate is a third of the initial estimate: 214,000 new accounts at credit unions during this period. The American Banker article concluded:

"The [CUNA] association's scaling back of its numbers on Monday gave credence to banking industry officials and others who criticized the association's methodology last month."

The CUNA has admitted that its initial estimate was "rushed and flawed." The CUNA has not changed its estimate of more than 40,000 new credit union accounts opened by consumers on November 5, Bank Transfer Day.

I found the title of the American Banker article unnecessarily excessive: "Credit Unions Eat Crow On Customer Numbers." First, final new account numbers are not yet available, only estimates. Second, I hope that ABA members stay focused on the needs of consumers rather than this one-upmanship about a single flawed CUNA survey. If big banks truly were meeting consumers' needs, then this move-your-money situation would not exist. Banks have a lot of consumer trust to regain after huge credit card interest rate increases and alleged foreclosure abuses during the past two years. A recent consumer satisfaction survey found:

"Consumer satisfaction with credit unions has soared this year, posting scores well above their large-bank competitors, according to the 2011 American Customer Satisfaction Index... The satisfaction score for credit unions rose 8.7 percentage points to 87 points on a scale of 0 to 100. The index said it is the highest satisfaction score ever for any of the 47 industries."

Third, if you read about the genesis of Bank Transfer Day, it was a voluntary call by a person for consumers to move their money by November 5. Consumers can continue to move their money after November 5, and it may simply take consumers longer to move their money. Fourth, consumers value stability. This analysis suggested that credit unions survived recent economic crises better than commercial banks.

On December 1, the National Credit Union Administration (NCUA) agency reported performance results about credit unions during the third quarter of 2011:

"Membership and Total Assets Growth Continues: Despite a slight decline in number, federally insured credit unions added more than 450,000 members during the third quarter, growing to 91.4 million individuals. In all, membership has increased by almost 1 million during the first 9 months of 2011. Credit union total assets also continued to expand, standing at $951.1 billion on Sept. 30, an increase of almost $8.7 billion for the quarter... For the second quarter in a row, credit union lending increased to end the period at $567.1 billion, an increase of $3.1 billion over the prior quarter. New auto loans and other real estate loans continued to decline, while used vehicle loans, unsecured loans—including credit cards—and first mortgage real estate loans again all rose during the quarter. Notably, demand for non-federally guaranteed student loans jumped 20.5 percent during the third quarter to end at $1.3 billion on Sept. 30."

The NCUA report included only the 7,179 federally insured credit unions, and excluded results for October 2011 and Bank Transfer Day. I look forward to reading in January comprehensive actual results, not estimates, from all sources for all of 2011.

Credit Unions: A New I've Been Mugged Topic

Since many consumers are moving their money from the big banks to community banks and credit unions, I have added a new topic in the tag cloud in the near right column. "Credit Unions" includes content of interest to credit union customers. I hope that you like the new category.

CUNA Says 650,000 Consumers Have Already Moved Their Money To Credit Unions

The Credit Union National Association (CUNA) has estimated that since September 23, when Bank of America announced its plans to introduce a $5.00 monthly fee for its customers to use their debit cards, about 650,000 consumers have opened accounts at credit unions. That total is more than the number of people who joined credit unions during all of 2010.

That bears repeating. About 650,000 consumers have moved their money to credit unions. They didn't pledge to move their money, or make a vague promise. They actually moved their money.

Those 650,000 new credit union accounts are estimated to be worth about $4.5 billion or just under $7,000 per account. And, Bank Transfer Day -- the November 5 date promoted by the Occupy movement -- hasn't arrived, yet. Many credit unions are open and ready to help consumers move their money on Bank Transfer Day. CUNA President/CEO Bill Cheney said:

"The results indicate that consumers are clearly making a smarter choice by moving to credit unions where, on average, they will save about $70 a year in fewer or no fees, lower rates on loans and higher return on savings."

As I see it, that $70 annual savings is a minimum savings, assuming the big banks will probably find other ways to introduce new fees, rather than do the sensible thing and cut costs.

CUNA is the national trade association that represents credit unions in the United States.

According to CUNA, many consumers have visited the aSmarterChoice.org website to find credit unions near where they live and work. Read this article for more search tips to find a credit union. While some of the big banks have cancelled their plans for a monthly debit card fee, there are more reasons to move your money.

Yes, the backlash against the big banks is well underway.

ABC News: The Backlash Is Underway As Consumers Move Their Money To Credit Unions

ABC News broadcast the segment below during the Monday evening national news. In response to new debit fees imposed by the big banks, the backlash is underway as consumers move their money to credit unions and community banks: