BofA mortgage holders who had account service fees waived will lose that… (Davis Turner, Bloomberg )
It's long been a basic tenet of the business world: You give us more business, we'll reward your loyalty with better deals.
That's how cable companies operate with their service packages. That's how phone companies work.
And until now, that's pretty much how banks played things as well. Want to avoid checking-account fees? Maintain a higher balance or, better yet, take out a home loan.
As of this month, however, about 2 million erstwhile Bank of America mortgage customers are scrambling to figure out their status after the bank sold servicing rights to their accounts to a company called Nationstar Mortgage.
That's because any BofA benefits the customers might have enjoyed because of their mortgages soon will disappear. After a 12-month grace period, the bank says, fees will kick in for various services that might have been covered by a customer's home loan.
"We had to make an unfortunate decision to lose these customers," said Jumana Bauwens, a BofA spokeswoman.
That makes it sound as if the bank didn't want to cast millions of mortgage holders adrift — as if it was beyond the bank's control.
In fact, BofA made a very deliberate decision to cut these people loose, and the main reason was that it never really wanted them in the first place.
Most of these mortgage customers were inherited by the bank after its disastrous 2008 acquisition of Countrywide Financial, the company that became the nation's biggest mortgage lender partly by awarding home loans to pretty much anyone who asked, regardless of ability to make payments.
It's not unusual for banks to sell home loans to other financial companies. It happens all the time. One reason the housing market went kerblooey a few years ago was because banks had sold off piles of bad loans to investors, thus avoiding accountability for their reckless lending practices.
But in the past, a bank that issued a loan typically would have continued servicing it, which meant customers would notice hardly any changes to their mortgages — or any change to the perks they got for having multiple accounts at the bank.
BofA changed things by washing its hands of many people's loans, regardless of whether these customers were faithful in making their payments or monogamous in their other banking needs.
"You lose power as a consumer if a company can just get rid of you whenever it likes," said Sally Greenberg, executive director of the National Consumers League.
"If you do business with a company, and you haven't done anything wrong, it should be up to you whether you want to keep doing business," she said.
In other words, the onus should be on the company to continue earning our loyalty, rather than on us to remain in the company's good graces. It should be enough that we bring a business our hard-earned money. We shouldn't have to woo it with flowers and candy as well.
I refinanced my mortgage to a Countrywide loan in early 2008, knowing that BofA was acquiring the lender. I wanted the lower rate, plus I knew I'd be able to eliminate fees on my BofA checking account. I felt pretty clever at the time.
Now I'm one of those 2 million customers who find themselves unexpectedly pushed out — and into the arms of Nationstar.
All I know about Nationstar is that it was sued in March by a group of New York investors, accused of selling off people's home loans at what the suit called "fire sale" prices.
Not exactly the most confidence-building fact upon which to build a new banking relationship.
BofA's Bauwens told me there was no one reason the bank decided to get rid of 2 million mortgage customers. "There were multiple factors that contributed to the decision," she said.
Still, it's hard to escape the conclusion that the bank just didn't want to be in business with these people. In relationship terms, it just wasn't that into us.
John Hoffmann, a Nationstar spokesman, assured me that the former BofA mortgages are in good hands. He said Nationstar has plenty of experience servicing people's loans.
"Over the years, we've gotten pretty good at it," Hoffmann said.
Meanwhile, former BofA mortgage holders have 12 months to figure out how to avoid the bank's fees.
Any other bank looking for 2 million new customers?
Millions of American Express cardholders may have been surprised by a recent notice.
It said that people's contracts are being changed so that AmEx reserves the right to access cardholders' credit reports any time it pleases "and that we will use them for any purpose, subject to applicable law."
Say what? I asked Desiree Fish, an AmEx spokeswoman, what purposes the company had in mind.
She said people's credit reports would be used in part to help manage risk — that is, to make sure a cardholder is creditworthy or is paying an appropriate interest rate.
But she also said credit files will be used to "market products and services" to AmEx cardholders.
Actually, Fish indicated that AmEx has been doing this all along, but it wasn't adequately disclosing its behavior.
She said the notice was sent out because cardholder contracts were changed from saying that AmEx "may" use people's credit files for any purpose. Now they say AmEx "will" use them.
Glad to have that cleared up.
David Lazarus' column runs Tuesdays and Fridays. He also can be seen daily on KTLA-TV Channel 5 and followed on Twitter @Davidlaz. Send your tips or feedback to firstname.lastname@example.org.