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Disappearing banks? The personal impact of shifting institutions

online banking

As banking institutions change, find a personal finance story.

Banks don’t just up and disappear on their customers.  Or do they?

Leslie-Jean Thornton, a journalism professor in Phoenix, was startled to find out that a regularly scheduled bill payment — her apartment rent, no less — had been rejected by Ameriprise Financial, where her account was located.  (Or so she thought.)  After several failed attempts to log in to her account, she contacted customer service and learned that her account had unilaterally been closed by Ameriprise, which has decided to get out of the retail banking business.

Thornton was flabbergasted.  So was Mark Fidelman, a Forbes contributor, who experienced the same thing, and was told that Ameriprise mailed out letters to its soon-to-be ex-customers in mid-August.  Like Thornton, he didn’t get the memo, nor did another patron who contacted him.  Ameriprise noted deep in its quarterly report for the period ended June 30 that it would be closing down its Ameriprise Bank unit, and that it would no longer be considered a savings and loan institution for regulatory purposes.  One wonders, if these plans were afoot earlier in the year, why depositors weren’t notified on a more timely and foolproof basis.

There are several interesting consumer nuggets you can pursue from this story.   In the first place, with banks actively pushing online bill pay and other automated services tied to checking and savings accounts, and many if not most employers issuing wages via direct deposit, six weeks is a paltry term of notice, even if all of Ameriprise’s letters had reached their targets.  Opening a new account elsewhere, waiting for deposits to clear, filing the necessary forms to get a variety of routine bills paid from a new institution and other related tasks is a big chore and one that could take one or more monthly banking cycles to put into effect.

As a personal finance piece, it might be worthwhile to look at some of the perils and caveats about online bill-pay and auto-debit services.  While banks don’t usually roll up the welcome mat on short notice, technical glitches do occur — earlier this year Bank of America and SunTrust both had hiccups, as The New York Times reported.  You can enlist some consumer and legal experts to decipher the fine print on area banks’ bill-pay options to see where consumers are vulnerable in case the service goes awry.

ameriprise

A screenshot from a Ameriprise Financial promotional video.

The larger story is, of course, the notion that one’s bank account can vanish on short notice.  It’s unclear how many Ameriprise patrons have been affected by that bank’s actions, though the company did note in its filing that it has more than 9,000 representatives nationwide.  It’s likely that these financial advisers/investment counselors had also persuaded a decent portion of their clientele to use the company’s retail banking services.  You might flush out some of these patrons via a post on  your news site or by visiting some Ameriprise affiliates’ offices.

And it may be that this is the tip of the iceberg; according to an August report in BankCreditNews.com, the insurance giant AIG is pondering an exit from the banking business as well, along with MetLife, Allstate and Hartford Financial Services.   They fear running afoul of the Volcker Rule in the Dodd-Frank financial reform package, which restricts trading activities of financial institutions that offer deposit banking.  (According to DealBook, lawmakers and lobbyists are still trying to change this regulation.) You could speak with regulators, financial industry consultants, equity analysts who follow this sector, academic industry-watchers and your region’s big banks themselves about the likelihood that your market’s consumers might be affected.

About the Author

Veteran financial writer Melissa Preddy served as a business writer, editor and columnist for The Detroit News from 1995 to 2008, is a Michigan-based freelance journalist. She now works as a writer and editor for a medical research unit of the University of Michigan Medical School. Follow her daily posts. | E-mail: Melissa Preddy

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