August 21, 2019

Dear Jamie Dimon [Chase CEO],

I applaud your leadership role on the Business Roundtable and your recent commitment to creating value for stakeholders other than just your shareholders. Earlier this week, you were quoted as saying that this shift away from a shareholder only focus “will help to set a new standard for corporate leadership.”

Given your renewed focus on customers and setting new standards for leadership, I thought I would offer a suggestion on one policy that your bank might want to change. I run a small business focused on finance education and have a credit card account with your bank.

Today, I called your customer service line to find out why an electronic payment that had been deducted from our checking account had not been credited to our Chase credit card account. These payments, deducted from our checking account a week ago, had yet to show up at Chase. How could that be? After all, electronic payments between banks are instantaneous, no?

Well...this is where the policies of your fine profit-maximizing corporation come into play. Your customer service rep notified me it's standard practice to hold payments until they had been "verified" by Chase. Say what? One bank electronically transfers funds to another bank and it requires a 7 day period to be "verified?" Are we back to using stage coaches again to transport money? If the money is not in my checking account anymore and it's not being credited to my credit card account, then where is it for those 7 days? Money limbo?  Stuck in the internet? The customer service rep had no answers other than some corporate speak about "feeling my pain." 

And then the light bulb went off. It's all about the FLOAT! Chase has my money but by some twisted bank regulation and/or company policy doesn't have to credit my account until they "verify" it.  Verify what? While Chase holds my money hostage, they earn interest on it and better yet, if I'm running a balance on my credit card (which I don't), they would get to charge me a 20%+ annualized interest rate too. Now that's a two-fer that only corporate executives and shareholders can love. Should we wonder why banks are considered the least trustworthy of any industry in the U.S.?

I can hear the litany of excuses already: fraud detection takes time, compliance has its rules, other banks like it this way, we are just following regulations or maybe it's just the the clearinghouse. Ok, if you don't want to change the system then just cut the customer in on the interest you're collecting from sitting on the float. Why should you benefit from an antiquated system that you not only created but have every incentive to perpetuate? As for the challenges inherent in changing the system, well that's what leadership is about, isn't it? 

Looking forward to the day when your actions match your words and the banking industry serves its customers as well as it has its shareholders. 

Tim

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Update: I had to dig a little deeper to learn more and came across a resource with information about posting practices of credit card companies. Per the Truth in Lending Act banks generally need to post payments on the day it's received. However, there is one exception in that a delay is acceptable when "it does not result in a finance charge or other charge.” Leads to my next question "Does holding up payment for 5 days for a customer carrying a credit card balance constitute "a finance charge," or is that just incremental finance charges and is allowable. Where there is opacity in processes and regulations like this, you know that someone is profiting...and it's usually not the consumer. 

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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