Friday, April 25, 2008

Banks: Love to hate'em.

For the past decade, banks have managed to alter their relationship with their "customers". I place the word in quotes because that's what bank users are called, but that's not how they're treated anymore.

The banking lobbies have managed to have state laws changed in their favor. The law now reduces the duty of care that a bank owes its depositors down to ordinary care.

What does this mean? Ordinary care is the same duty you owe to someone on the street that you've never met. Banks can now treat you and the money they handle for you as if you were a stranger to them.

In the past, anyone who handles money on your behalf is legally a fiduciary to you. As a fiduciary, they must exercise a heightened duty of care and must not engage in self-dealing.

Anyone with experience knows that banks do not behave according fiduciary rules.

Banks have managed to morph the relationship with their customers from a fiduciary relationship, carrying duties of loyalty and duties of care, to one of creditor and debtor.

Banks prefer being creditors because that provides them a host of rights that can be enforced against their "customers".

These rights now take the form of overdraft fees, checking arrangements that opportunities to create charges that their set up customers must now pay.

It's high time that banks be held to account for their attempts to create debtors out of their customers.

Banks still remain fiduciaries when handling your money, despite what the law may say.


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