Banks

As another year of jobs lost, homes foreclosed and budgets cut draws to a close in America, some of Wall Street heftiest fat cats are tipping the scales with their bonuses -- and pocketing your tax dollars at the same time.

Sound unbelievable? Sadly, it's true, according to BusinessWeek. A recent article from this financial magazine details how one powerhouse bank has taken steps to trim lavish compensation for top execs in response to a public outcry.

Signer beware! Turns out the forms homeowners fill out to apply for lower monthly mortgage payments for three months while waiting for more permanent relief contain a potentially lethal booby trap courtesy of the U.S. Treasury Department.

According to a report in the Miami Herald, the forms require borrowers to "waive important notification rights."

The result, says the paper, is that more and more homeowners who thought their enrollment in the trial modification period would lead to a more long lasting roof over their heads, find, instead, the rug pulled out from under them by lenders who at the last minute sell the property without even bothering to notify the homeowner.

Well, 300 years is a good run for just about anything, but it seems that the era of the paper check might just be drawing to a close across the pond.

In the U.K., a board made up of major banks called the U.K. Payments Council voted to phase out paper checks by 2018. According to this Reuters article, the number of checks written annually in Britain has been falling sharply over the past decade as a growing number of people use online banking and credit or debit cards to pay for goods and services. The article also says it costs banks one pound (about two bucks) to process a hard copy of a check. A related article from the British newspaper The Daily Telegraph projects that check usage in the U.K. will continue to fall, dropping to 1.6 million per day nationwide by 2018, as compared with 3.8 million a day last year.

The banks may be paying back their bailout funds, but there's still trouble ahead for some banks. That became clear this week when the Federal Deposit Insurance Corporation agreed to almost double the amount of money in its 2010 budget that is there to deal with bank failures. What's more, the FDIC plans to add more than 1,600 staffers.

Of course, with any luck, we won't need those 1,600 additional workers, only 84 of them who will be permanent staff members, incidentally. But this year, we've had 133 banks fail, and there's no evidence to suggest that we won't have a 134th soon. And now, with the added funds and additional staff, it's clear that the FDIC expects the possibility of quite a few more bank failures next year among the nation's 8,300 banks.

It's not law yet, but it's come a long way. On Friday, Dec. 11, the House of Representatives passed the Wall Street Reform and Consumer Protection Act of 2009, which includes a provision for creating a new agency aimed at protecting ordinary Americans from predatory lending practices. The new Consumer Financial Protection Agency would regulate credit cards, payday lenders, and home, auto and student loans and their underwriters. The Senate will create its own version of this bill, and a final draft would probably be signed into law by next year.

The bill is not without its detractors. Not one Republican lawmaker voting on the bill elected to approve the Act, and the banking industry has been vocal in its disapproval of what it depicts as a power grab by the government that interferes with its business model.

Pssst! ... Want to know a secret? Banks actually have two customer-service departments. The one all of you are probably familiar with is regular customer service. But financial institutions also have what's called "executive customer service" - and these guys (and gals) can perform magic.

The blog Consumerist dedicated this post to a reader's experience with Chase's executive customer service. The short version: After being turned down by ordinary customer service when he asked for a lower rate, Chase's executive customer service department dropped the cardholder's APR from 26% to 9% for a year. He also got three months' worth of finance charges refunded.

Guess those mortgage bankers showed Congress who's the boss ... They are!

Only a day after the Mortgage Bankers Association fired off a stern letter of warning to Congressional leaders about attempts to change foreclosure bankruptcy laws to ease the plight of those facing foreclosure and help end the still threatening housing crisis, the House of 'Who The Heck Are We Representatives?" shot the proposal dead.

But make no mistake about it, the House may have been holding the gun, but the mortgage bankers provided the ammunition.

Is this what we have finally been waiting for? Really good news about foreclosures. My guess is, don't get too excited by any short term "trends"--- but, that said, the latest news from RealtyTrac just out today is encouraging.

Foreclosure filings decreased again in November, down almost 8% from the previous month. That marks the fourth month in a row that was the case.

Of course, there is still plenty of bad news because the foreclosure rate is up an enormous 18% from a year ago this time.

Right now, the RealtyTrac report reveals that one in every 417 households got a foreclosure notice last month alone.

Remember when Uncle Billy in It's a Wonderful Life loses the bank deposit, and George's troubles ensue (and a holiday classic is born)? Or when Loretta Castorini in Moonstruck forgets a bank deposit as part of a series of comedic misunderstandings? Bank deposit bloopers happen in real-life as well, but the dollar amounts are considerably higher and the bank deposit bloopers are often caused by the bank, not the customer. And, the end-results of these bank deposit bloopers are, unfortunately, not always as heartwarming as in the movies.

Take Randy and Melissa Marie Pratt, whose perceived windfall turned into jail time, when they took an erroneous bank deposit and ran. Melissa made a bank deposit to FNB Bank in the summer of 2008 of $1,772.50, but the bank read the check as $177,250. When the central Pennsylvania couple saw the difference in their bank balance, they wrote checks to another account, quit their jobs, bought a new vehicle and moved to Orlando, Fla. They were in the process of buying a house before the bank deposit mistake was traced.

They've been summoned.

The big banks and mortgage lenders that hold the key to loan modifications have been summoned to Washington for what is supposed to be some heavy duty arm twisting to get them to put pedal to the metal and bring down mortgage payments at a much faster rate.

Among the institutions ordered to D.C., are Bank of America and Citigroup.

But there have been many attempts to get the banks to stop their foot dragging and nothing has really seemed to work.

More than a million Americans lost access to banks last year, bringing the total up to 30 million people in this country who can't even open a savings account or write a check. The issue of the "unbanked," as they're being called, is a serious one, and the recession is only making the problem worse.

According to the FDIC, which compiled the stats, poor, immigrant and minority members of society are most likely to have trouble finding a bank. In total, a whopping 25.6 percent of all citizens are unbanked or "underbanked," a situation which makes their day-to-day financing more expensive and makes it extremely difficult for them to attain upward mobility.

For anyone who is serving in the military, or served and was honorably discharged, you're now eligible to be a customer of one of the top-ranked banking and insurance companies in the country. USAA, started in 1922 by 25 military officers to insure each other's cars, is opening its doors wider. It recently announced an expansion of its customer base from enlisted military to all living service men and women who were honorably discharged.

Ever since the news got out that the U.K. plans to force some of its large, bailout-receiving banks to sell off some operations and become smaller, there's been plenty of speculation on this side of the pond that we might do the same thing.

Richard Fisher, president of the Dallas Federal Reserve Bank, threw down the gauntlet when he said recently that banks considered "too big to fail" should be broken up to make the economy more stable. (Fisher's full speech on the topic is here if you're interested.) A committee in the House of Representatives is pushing for new legislation that would go even further and let the government break up other kinds of companies -- not just banks -- it deemed a threat.

It's a very satisfying idea: Banks that get too big to handle should be forced to downsize. Only trouble is, a lot of economists think it won't address the problem. "The problem is, the really emotionally satisfying things that we could do all create more harm than good," said Douglas Elliott, a fellow at the Brookings Institution, a think tank. On the subject of breaking up banks dubbed too big to fail, Elliot told WalletPop, "It would hurt the economy, which ends up hitting the average person."

A lot of Americans have plenty to say about their banks these days, and it's not always pretty -- we've heard you in the comments section. We wanted to call out some of banks' slimier tricks for separating you from your money as well as recognize some of the helpful tools or innovations (yes, there are a few mixed in with all those fees!) some banks offer.

WalletPop got on the phone with a few top consumer finance experts at watchdog groups -- people who track what the banks are doing day in and day out -- to ask them what today's customers should appreciate and what they should avoid at all costs. Here's our roundup of the good, the bad and the ugly.

The Good
Direct deposit: If your employer or benefits distributor offers this, sign up for it. There's no question this is a good thing. Nearly all the experts we talked to said this is one of the most consumer-friendly practices banks offer today. Not only does your money get into your account up to five days faster than if you deposited a paper check, direct deposit eliminates the errand of physically going to the bank to deposit it. Often, direct deposit makes you eligible for free checking at most banks (although not Citibank, come February). "Generally it's safe to say direct deposit benefits consumers," Consumers Union staff attorney Lauren Bowne told us. In other words, it's a no-brainer.