Column: Why banks turn to high-pressure sales
A recent Wall Street Journal article reported that mega-bank Wells Fargo is being investigated by both its primary regulator, the Office of the Comptroller of the Currency and the San Francisco Federal Reserve for sales practices that allegedly are adversely impacting employees as well as customers.
According to some reports, in some bank locations employees responsible for selling services and products to customers are given not monthly, weekly or daily sales quotas, but, in some cases, hourly goals. Supervisors, it was said, met regularly, sometimes four times a day, to monitor quota success.
A reader emailed me a copy of the article, saying that she had a client who was subjected to what she felt was a very high pressure sales pitch by a local bank (not Wells Fargo) to sign up for an overdraft protection line on the client’s checking account, which is really just an unsecured loan. The reader wondered what’s going on in banking.
It’s pretty simple.
Ancillary income, that which comes from sources other than interest and one-time loan fees, is a big profit center for banks. These service charges are relatively small, but add up quickly, and are significant, even for smaller institutions. For the Too-Big-To-Fail guys, they can be mind boggling.
Subsequent to the Great Recession and the enactment of the Dodd-Frank statute, regulators like the FDIC and the Consumer Financial Protection Bureau are clamping down on these charges, and it’s creating a hole in banking’s income stream. The fees haven’t disappeared, but they’re being curtailed.
Eliminating, or limiting, a profit center for a banker is like taking an ice cream cone from your 4-year-old. You’re going to get a reaction.
And the reaction is what you’d expect from any business. If you have to sell less of one thing, you sell another. If you want to make a lot of money, you sell it hard.
The reader noted that, when she called the bank, the terminology describing the product and its workings was, well, confusing. Not surprising: We bankers are adept at dressing up virtually any activity with glittering jargon. We can put to shame the suede shoe boys at Crazy Carl’s Pre-owned Pontiac Emporium.
The young people in the front line of this sales effort are well-trained, and, if they should have the boss looking over their shoulders every hour, highly motivated.
It should be noted that Wells is simply being investigated for certain practices. The issue may go no further than that. And even if the reports do turn out to be true, it’s quite possible that no regulation or law was violated.
But there is a sea change in bank marketing taking place. It will be interesting to see what develops. We’ll keep an eye on it.
Pat Dalrymple is a western Colorado native and has spent almost 50 years in mortgage lending and banking in the Roaring Fork Valley. He’ll be happy to answer your questions or hear your comments. His e-mail is email@example.com.
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