As I was preparing for hurricane Dorian, I started to receive marketing emails from banks. These weren’t your traditional marketing materials selling me unneeded services. These were fake “we wish you well” missives attempting to create the illusion of caring banks. The audacity of masking sales pitches as caring reminders made me angry.
My father once told me that a bank will never lose money.
I didn’t really comprehend it then but as I became a bank consumer and having lived through the financial debacles of 2008, I soon came to understand what my father was telling me. There is the mistaken belief that banks lose money every time someone files for bankruptcy or defaults on a credit card. But the reality is that banks bank on delinquencies as part of their revenue models.
Late payments and interest fees are a bank’s best friend. That is why credit scores are based on the frequent usage of credit instead of the conservative consumer who uses credit sparingly.
Most important is the consumer credit delinquency rate. It hovers around 3%. In other words, the majority of credit card consumers – 97% – pay off their credit card bills including interest, annual and late fees. At 3%, the bank loses nothing when the credit card is written off as bad debt.
As a matter of fact, bad debt is offset by tax credits, another money making scheme.
Mortgage delinquencies are about 2.2% for conventional, FHA and VA loans. Since March 2013, the delinquency mortgage rate has dropped from about 6.3%. Since 2007, the highest delinquency mortgage rate was about 7%. Again, the vast majority (90%+) of mortgage holders pay off their loans.
Clearly, banks are not losing money on their loans.
The “we are here for you” faux caring emails were mostly from credit card banks. They expressed to me their wish that all is well during the hurricane and provided me a list of preparations I should take to help me weather the storm.
All were heavily laden with bank logos in the transparent attempt to put caring and bank branding together.
In other words, the banks were using the threat of a devastating hurricane to brand themselves are caring institutions standing by their customers.
If the banks really cared, instead sending me a list of things the government has already provided me to prepare for the hurricane, they could have sent me a simple message of don’t worry about your payment due this week as we understand preparing for the hurricane is more important than making your loan payment today.
A simple we’ll waive late fees this month would have sufficed. But no, the banks aren’t about caring for their consumers. Instead, they are about lining their pockets.
And, they have the audacity to pretend they care.