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WASHINGTON, DC & SAN FRANCISCO, CA – Consumers Union today urged the Federal Reserve Board to require banks seeking mega-merger approval to make specific guarantees in five key areas of consumer concern. The nonprofit organization, which publishes Consumer Reports magazine, also urged the federal regulatory agency to require banks to answer select questions publicly as part of their application for approval.
Consumers Union is seeking that banks in mega-mergers agree to a fee moratorium, cost savings dedicated to increase service to low-income consumers, Community Reinvestment Act dollar commitments, consumer safeguards in the sale of uninsured products, and compliance with consumer protection laws of each state where the banks do business. Consumers Union outlined these commitments for pending and future bank mergers in a letter sent today to the Fed. The agency is required to evaluate the impact of proposed mergers on the "convenience and needs" of local communities, and may deny or impose conditions on a proposed merger that does not meet this test.
"Merger approval should not be a rubber stamp process," said Frank Torres, Legislative Counsel with Consumers Union’s Washington, DC office. "When considering these massive deals, the Federal Reserve Board must require banks to make clear and specific commitments, rather than vague promises, to consumers and communities."
"Many consumers already know that bigger is not always better when it comes to their bank," said Gail Hillebrand, Senior Attorney with Consumers Union’s West Coast Regional Office. "During past mergers, banks have touted cost-savings, yet bank fees are still high. Studies show that bigger banks mean higher fees."
The consumer group’s letter urges the Fed to require specific guarantees in all proposed mega-bank mergers. This would include the recently announced mergers between NationsBank and BankAmerica and Banc One and First Chicago.
Consumers Union urges the Fed to require that banks proposing to merge guarantee to:
"In the short term, consumers pay for big bank mergers through confusion, changes in accounts, and loss of convenience while the systems are integrated," said Hillebrand. "The fee moratorium and dedication of savings would put some teeth into bank promises that consumers will benefit from these mergers."
In addition to seeking these guarantees, Consumers Union raised a number of questions regarding branch closures, and loss of local control.
"Affected consumers and communities shouldn’t need to settle for vague promises of future efficiencies after a merger is approved," said Torres. "Instead, the public deserves to receive clear, specific details about the benefits and harms of proposed mergers. These written guarantees and answers to important consumer questions should be made part of the merger application so that they may be considered by the public and enforced by federal banking regulators. This is a golden opportunity for these huge institutions to affirm their commitment to their existing customers and the communities they serve."
[Editor’s Note: For a copy of the letter to the Federal Reserve Board, please call Robin Kane at 415/431-6747 or Kathy McShea at 202/462-6262.]
