Las Vegas Sun

April 20, 2014

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Businesses hit hard by bank service charges

Businesses had more difficulty maintaining enough money in their accounts to avoid banks’ service charges, industry experts agree.

In the first six months of this year, the majority of Las Vegas banks collected a pretty penny from deposit accounts’ service charges, the banks’ financial filings reveal.

Nevada State Bank, the largest state-chartered bank, collected $9.8 million in service charges, up 6.1 percent year-over-year, when it collected $9.2 million.

The service charges range from maintenance and overdraft fees to automated teller machine withdrawals and checks with insufficient funds, according to the Federal Deposit Insurance Corp.

The second largest state-chartered bank, Bank of Nevada, increased its service charge income 19.9 percent to $2.3 million from $1.9 million.

Most of the fees collected are business-related, said Bank of Nevada spokeswoman Jan Rowe, relaying a statement from bank CEO Bruce Hendricks. Also, the bank made a “significant investment” in new services such as remote deposit and lockbox services, both of which the bank said are popular and carry fees.

Overall, Las Vegas-based banks increased their service charge income 8.8 percent, although some, such as First Security Bank of Nevada (70.6 percent) and Nevada National Bank (61.5 percent) had significant increases.

The service charges are generally monthly charges for accounts with not enough money, stop payment fees, cashier checks and others that banks may levy, Nevada Financial Institutions Commissioner George Burns said.

Burns speculated the increase could be because of the recession, as more people write bad checks, overdraw accounts or withdraw too much money and fall below the amount required for that deposit account — all of which rack up fees.

“Logic draws us to the state of the economy,” Burns said.

Nevada Commerce Bank CEO Kathy Phillips said the increase is “absolutely a reflection of the economy we’re in.” Her guess is that more of her customers are writing checks when they don’t have enough money.

Most of the banks’ customers are businesses.

About 75 percent of the service charges collected the first half of the year are from overdrawn accounts, said David Kellerman, chief financial officer of Nevada Commerce. Those paying the fees represent less than 1 percent of the bank’s customers, he added.

In the first half of the year, the bank had collected $51,000 in service charges, up 41.7 percent from the same time last year, when it collected $36,000.

In response to the recession, at the start of the year the bank stopped charging most deposit account fees, except those for overdrawn accounts, he said.

Legislation has been introduced in the House that would, in part, require banks to get customers’ permission before initiating overdraft protection services and fees for checks and other debit services, up to

three times a year. The consumer would then have an active role in deciding whether they want their account to be overdrawn, and if so, pay the fee.

Nevada Bankers Association CEO Bill Uffelman said that if such legislation is passed, products such as free checking will “go away.”

This would only serve to punish those who had never overdrawn their accounts, he said.

“Those who aren’t showing personal responsibility are paying the price of being irresponsible,” he said, although he adds that the increase is “probably a reflection of the times.”

The fees are “avoidable charges” and 80 percent to 90 percent of bank customers never incur any of those fees, Uffelman said.

“The folks who are having problems are paying the charges for those (overdrafts),” he said. “If you maintain a specific amount and don’t overdraft (your account), you will never pay any of those charges. It becomes a question of personal responsibility.

“When you open an account, those things are in the contract.”

People makes mistakes, he said, but some can take advantage of a bank’s services.

Advocacy group Americans for Financial Reform spokeswoman Lauren Weiner said businesses would benefit from further bank reform, as well as the proposed Consumer Financial Protection Agency.

“We really feel banks should be notifying customers” if they are going to overdraw, she said. “If it’s a small population, then it shouldn’t be a problem.”

Meadows Bank and Kirkwood Bank of Nevada increased their service fee collections by 100 percent because this is their first year of operation. First Security Bank of Nevada saw an increase of 70.6 percent year-over-year.

Brian Greenspun, editor of the Las Vegas Sun, a sister publication of In Business Las Vegas, is on Meadow Bank’s board of directors.

First Security Bank executives David Moody, the CEO, and Jeff Duncan, the chief financial officer, explained that the increase was primarily because the bank is still young and growing — and is not a symptom of the recession. The bank has grown from 800 accounts to 1,150 in the past year, they said.

“As a startup, our ratio is skewed,” Moody said. But he added that there have been account overdrafts as well, for which a fee is charged. In addition, there is a monthly fee if an account doesn’t maintain a specific amount, according to the bank’s Web site.

On the flip side, Black Mountain Community Bank’s service charges dropped 42.9 percent, which CEO Pete Atkinson attributed to some changes the bank made.

First, the bank began offering free checking to its small-business accounts, and it had a three month moratorium on service fees while it transitioned to the new service.

Businesses “are seeing sales down and are trying desperately to keep costs down,” Atkinson said. “It’s a lot easier to overdraw an account.”

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