Although consumer-level “move your money” campaigns are popular, the sad thing is that many individuals are only marginally profitable as checking/savings account customers. So transferring your account out does not have enough of an impact to make a difference (unless you do so in a way that makes branch staff uncomfortable, by doing it in person and describing their banks’ bad behavior. Enough of that might make a psychological difference). The key to retail customer profitability is cross selling, usually at the time of account opening. So the checking account is the gateway product for them to get customers to sign up for retirement accounts/brokerage, credit cards, and (hopefully sooner rather than later) mortgages.
By contrast, bigger customers who use multiple products are a sweet spot for banks. Getting churches, endowments, small businesses, and cities to move money out of the “too big to jail” banks hits them in their wallet and can also generate the sort of press coverage that will make it easier for their peers to make similar moves.
The Boston Globe reports on how the City of Brockton, which has one of the highest foreclosure rates in the state of Massachusetts, decided to save money and send a message by moving its payroll account from Bank of America:
Brockton will move its $170 million payroll account out of Bank of America, a move the city says makes good business sense but which advocates for residents facing foreclosure see as a just response to the national lender’s role in the subprime mortgage crisis…. in this case the switch means a savings of $20,000 to $30,000 a year in fees….
Both [City Treasurer Martin] Brophy and Mayor Linda Balzotti adamantly denied making the change based solely on the foreclosure issue. But each also said it didn’t hurt to send a powerful message.
Yves here. Local groups pushed for the change:
In March, members of the Brockton Interfaith Community, Coalition for Social Justice, and City Life asked the City Council to divest, pegging Bank of America as the institution with the poorest rate nationally of loan modifications per the federal Home Affordable Modification Program, which was created to address the crisis.
Advocates at the time also said the lender was lax in working with groups such as Neighborhood Housing Services of the South Shore to modify local loans..
City Councilor at Large Jass Stewart has lobbied for Brockton’s divestiture from Bank of America, filing a resolve asking the city for official action.
“For me, what the city has done is about business, but it is also symbolic,’’ Stewart said. “Bank of America should not get another penny from the City of Brockton.”
He said that, in addition to divesting from Bank of America, he’d like to see the city require mandatory mediation between homeowners and their banks before foreclosure is declared. He’d also like the city to charge banks a mandatory fee to be held in escrow when a property is seized, to ensure it is maintained.