By Lachin Hatemi M.D.
(To be published by www.yourblackworld.com)
The U.S.
Census Bureau lists Buffalo, New York, as the third poorest city in the United
States; however, news about poverty is nothing new in the Western New York
region. The cycle of poverty has continued in some
parts of Buffalo for generations, and the city’s poverty rate remained stuck at
about 31 percent based on 2011 data.
In 2008, the
United Nations released a report named “State of the World’s Cities” in which
the Buffalo-Niagara Falls area was cited as having one of the worst rates of
racially-based economic inequality in the world. In addition, the Census Bureau also released
information placing the Buffalo-Niagara metro area, as the 8th most segregated
region in the United States.
Coincidentally,
Buffalo is also home to the one of the largest and most profitable regional
bank in the Unites States – the Manufacturers and Traders Bank (M&T Bank).
M&T was established more than a century ago when Buffalo was a bustling
city.
Despite
Buffalo’s declining fortunes, M&T Bank somehow prospered during the same
period. Since 1980, M&T had experienced an annual compound growth rate of
19.8%. Only a handful of other companies in the entire nation had done so well
for so long. It is a well-known fact that the one of the richest man in the
world, Warren Buffet, long admired M&T’s current chief executive officer,
Robert Wilmers. Buffet occasionally talks to Wilmers, and Buffet’s investment
company Berkshire owns 4.1% of the M&T Bank’s outstanding stocks. Warren
Buffet loves M&T Bank for a good reason – it had dominated the No. 1 position
among local deposit-takes in the Western New York area. Based on data from June 30 2013, M&T Bank has
47.2% of all the bank deposits in the Buffalo/Niagara region.
But
a big question remains unanswered: How can a regional bank serving the poorest and most
segregated cities of Western New York and the East Coast yield such record
profits?
The magic answer is the “overdraft fees” and victims
of this crime are the low-income customers. A $37-$38 overdraft fee can make a
difference between buying groceries and facing hunger for a low-income single
mother with kids who lives in the dilapidated neighborhoods of Buffalo. Burden
of overdraft fees are disproportionately on the poor urbanites. Those living
paycheck to paycheck are more likely to
overdraw their deposit accounts.
Moebs reported that U.S. banks made a whopping $31.5
billion in 2012 despite stricter federal regulations enacted since 2010. One of
the most recent federal regulations governing the overdrafts fee was Dodd-Frank
Act of 2010, which tried to prevent predatory overdraft affecting the poorest
segments of the population.
Dodd-Frank Act simply mandated banks to do something
that sounds like a no-brainer – obtaining a customers’ consent before signing
them up for “overdraft services” that many customers never asked for in the
first place. The federal law also describes how such consent can be obtained to
ensure transparency.
Official Commentary published by the Federal Reserve
further describes the consent methods which are defined as reasonable:
providing the customer with a written form which can be signed in person at a
bank branch is one of them. Consenting via internet or phone was also suggested
as acceptable alternatives, but such methods were less likely to be used by the
poorest customers. Given that most low-income customers are not comfortable
with Internet banking, consenting in writing remains the most viable method.
To my surprise, M&T Bank obtains consent
verbally without any reproducible proof of the transaction. There is no record
of the verbal consent and how the customer was asked to consent by the bank
employee. There is no paperwork, no accountability, and no proof of the consenting
process for overdraft fees in person. Surprisingly, M&T does not provide a
standard written form, which you can fill out to give consent for overdraft
protection. You simply cannot consent in writing at M&T Bank even if you
request it.
This shocking revelation prompted me to contact some
high level executives at M&T Bank since I coincidentally live in Buffalo
where M&T has its headquarters.
On October 7, 2013, I personally met with Joseph
Lombardo, Vice President of Consumer deposits, and Rich McCarthy, Senior Vice
President of M&T bank’s retail branch network. My primary goal was to
discuss the facts and observations that I shared with you in the preceding
paragraphs. My conversations with the two high-level bank executives confirmed
my worst fears. M&T does not provide its customers a standard form to
consent for overdraft services in writing which might be a gross violation of
the Dodd-Frank Act. I think this matter deserves close attention from the
respective federal banking regulators.
Nobody is above the federal law. M&T bank’s
lawyers should read the Dodd-Frank Act one more time with utmost attention and
comply with it.
Lachin Hatemi is a physician in Buffalo, New York. His interests
include human rights, patient’s rights and interfaith dialogue. You can reach
Lachin at Lachinhatemi@gmail.com.
