Joe Pitcher - Irrelevant - Wirral 05 October, 2009, 11:30 0 likes

Am I missing the point here? I watched her video ( a couple of them) and she states that she had some missed/late payments.

Thats surely a breach in terms and conditions and gives BOA or any other bank the right to reprice her. I would say missed/late payments are a possible indication of increased risk and a reprice is acceptable in this case.

A Finextra member 06 October, 2009, 00:36 0 likes

Joe,

Did you miss the part where she stated 'I wasn't over the limit or behind in payments'?

While I didn't post it to debate this particular bank's actions, we have all seen that youtube videos can have some far reaching effects and undoubtably influence others.

In this case on the face of it one could accept that the cardholder might be more of a risk if they have been laid off, (especially if they work in the financial industry) this would be more likely to effect the maximum credit that might be made available to the consumer, not their rate? Did the bank even know the person had been laid off? If the person is re-employed tomorrow does the limit go back up, and the rate down?

Clutching at straws Joe. Do you work for an institution undertaking similar activities?

Those of you who do not see the risk in this sort of thing may well be soon be in a similar position. I did read that financial services workers were now in the high risk category for credit, and we know just how high risk they are - don't we?

A single person can plant a seed that grows into a billion dollar problem for your business. It remains to be seen whether this is an example.

A Finextra member 06 October, 2009, 01:26 0 likes

There was a nice little reference to local community banking that I picked up on in the video.  Once upon a time, branch managers were the bank front line relationship managers and any issues regarding financial difficulties and positions were discussed directly...face to face...with the customer, which allowed the bank to better understand, assess and manage the level of risk.  Naturally, this has now morphed into 'relationship managers' for the wealthy and the number crunching systems from Fair Isaacs (Triad being the major behavioural scoring application for credit risk) and the like to look after the masses.  This may be ok as a cost limiting measure but if banks really consider the customer as their asset, then this impersonal approach doesn't say much in the way of protecting, nurturing and revitalising that asset now does it?  Perhaps all banks need to rethink their asset management strategy or the local community bank alternative may become an attractive option...assuming the government gives the small banks the same level of protection as the big banks, but that's another story.

Joe Pitcher - Irrelevant - Wirral 06 October, 2009, 08:44 0 likes

Dean,

I did see that bit thanks. Did you fail to see the subsequent video where she admitted to having missed payments?

And no I don't work for a bank, I am very happy to join in on bank bashing and would happily promote as an Olympic sport in 2012, we may have a medal hope in one event at least!

Elizabeth Lumley - Girl, Disrupted - Crayford 06 October, 2009, 12:35 0 likes

However, her video did get her the desired result. BofA put her interest rate back to the origional rate. See here.

A Finextra member 06 October, 2009, 14:40 0 likes

Steve - very good point about the risk. I may have commented on another blog (WSJ) about the old days where it was worth your time to get to know the local bank manager. He is of course irrelevant now with centralised processes. The bank also got to know you and your risk profile. We can only suppose that some banks have studied the aftermath of the 1930's - there was no risk information available because all the little local banks had been closed down and with it went the local knowledge. It took decades to rebuild it.

As far as I can see the only credit ratings any of the agencies have is that Mr/Ms X is a good bet when times are booming beyond sanity. I would suggest that they are mostly irrelevant to the current climate. Perhaps dust them off at the height of the next boom. Until then better to get some local knowledge because making decisions at a distance on risks you cannot really measure or relying on statistics is really going to sort out the remaining banks.

Without the local knowledge there is little chance to develop loyalty with those customers who are going to succeed and the long term prospects for your institution are grim.

New competitors should concentrate on mechanisms to build accurate and current risk profiles and build relationships. Its like venture capital, you need to invest in building a lot of relationships but ultimately it will be the few that make the difference for your business in the future. Participation in the customer's payment processes might also provide significant insight so don't become disintermediated (ha ha).

New entrants are probably as close as they'll ever be to an equal risk footing with the existing players. The same might be said of trust. It is wide open - except for those institutions guaranteed by government bailouts - they clearly have a 'no lose' advantage and somewhat lower cost of funds...