News

Bank mergers bother some consumers

June 13, 2004

NEW YORK - Some consumers are feeling shortchanged following a wave of recent bank mergers.

The Associated Press reports that a majority of Americans who have been through a bank merger say it's made little difference to them, while about 20 percent believe they are worse off, according to an online study of 1,001 consumers by Maritz Research. Only about 14 percent feel they are better off.

The Maritz poll, which has a margin of error of plus or minus 3 percentage points, pointed to new or higher fees and a decrease in service as the main reasons consumers feel adversely affected by bank mergers.

Consumers may have reason to be concerned. TheAP cited a A 2003 Federal Reserve study that showed that banks with operations in more than one state tend to charge higher fees on average -- for items including stop-payment orders, overdrafts and cash withdrawals -- than banks operating in a single state.

New fees may also crop up as a result of consolidation. For instance, when First Union Corp. merged with CoreStates Financial Corp. -- both predecessors of Wachovia Corp. -- in the late 1990s, the combined institution began charging some customers a fee for visiting branches, according to Eric Levy, a research director at Maritz in St. Louis, Mo.

The good news is that in the current wave of consolidation, banks may be more careful about imposing new fees for fear that customers will flee to competitors.

"By measure of inertia, fees are still going to rise, but it's not going to be just because of these mergers," said Greg McBride, a senior analyst at Bankrate.com. "I don't think we're going to see as many changes in fee structures as a few years ago."

Consumers will also see some benefits, according to the AP, including access to a greater number of ATMs and branches. For instance, the recent combination of FleetBoston Financial Corp. and Bank of America Corp. has expanded the ATM network to more than 16,000 machines and bank locations to about 5,700.

In the past five years, more than half of all U.S. households have endured a bank merger, according to Maritz's poll, conducted between April 7 and 12. One in four has been through this experience in the past year.

At the end of 2003, about 7,769 commercial banks were insured by the Federal Deposit Insurance Corp., a significant decrease from the nearly 11,000 commercial banks a decade ago. This is mainly due to mergers and corporate reorganizations, FDIC spokesman David Barr said.

While the majority of consumers currently affected by a merger plan to stay with their banks, about 13 percent of consumers are looking to change banks, according to Maritz. Another 35 percent plan to see what the combinations bring.