The following is a tale of corporate malfeasance, from my buddies at HSBC Bank.
HSBC needs to be held accountable for this and I have no problem taking bad actors to the woodshed.
On Thursday Feb. 4, 2016, I got a letter in the mail (Dated Jan 29, 2016) from HSBC Bank, saying my checking and savings accounts would be terminated, effective Monday Feb. 8, 2016.
I call in to customer service, to figure out what’s happened. They tell me that all that’s noted on my account is the following:
“HSBC Bank USA will be discontinuing its banking relationship with you based upon our Rules for Consumer Deposit Accounts.”
Ok. What rule did I violate?
“We don’t have access to that information. You’ll have to go in to an HSBC branch to learn more.”
I go to my local branch of HSBC, same day. Branch manager tells me what I was told over the phone, that all that’s noted on my account is that HSBC would be discontinuing my accounts.
I push the bank manager for more information. She makes a few more phone calls, to no avail.
After another Kafka-esque romp through HSBC’s phone tree–and a couple visits to a local branch—I was none the wiser. Not a single person—not the customer service reps, branch managers, or compliance officials—could tell me anything about why my accounts were terminated.
Arbitrary account revocation—with only two business days’ advance notice—is poor form. Unfortunately, it’s not uncommon in the banking industry.
I feel sorry for anyone who has had this happen to them during the first ten days of the month, as it’s a busy automatic bill-pay period. A bank closing your checking account without advance warning can wreak havoc on your credit and finances.
Before I explain the real reason why I believe my accounts were closed, let me back up a bit.
I received a letter in November 2015 from HSBC, telling me they were doing an annual update of all consumer accounts and wanted me to call in. I did so, providing contact/banking updates etc. and was assured that my accounts were in good standing and that I had nothing to worry about.
Been with HSBC for over a decade. It’s been relatively smooth, with a few service outages here and there, but nothing insurmountable.
Here’s the sum total of my activity with HSBC, little of which has changed since 2005, when I opened my first account with HSBC:
– Regular deposits and withdrawals of funds every month, no conspicuous influxes of cash (e.g. $9999 deposits every other month)
– Monthly direct deposits to well-known investment brokerage firms
That’s the bulk of my banking activity. Nothing that should raise eyebrows. It’s been that way for the 10+ years I’ve been with HSBC.
I’m not laundering money or secretly funding Al-Qaeda. I’m just a guy conducting regular banking activity.
I can’t think of anything I did to trigger an account closure. Not one thing.
Here’s why I think HSBC really decided to close my accounts….
Banks, facing increasing costs and declining revenues, are looking for any way to stay afloat.
HSBC, in particular, has taken a beating in the marketplace in recent years.
They’ve already drawn the ire of several national governments. Embattled leadership might be inclined to throw integrity to the wayside to salvage financials.
HSBC is doing whatever it can to bail water.
HSBC be like….
When you’re fighting an economic war, the two best ways to stay afloat are to generate more revenue and cut costs.
You’ve seen all the bank commercials touting the convenience of mobile and online banking.
Cost-cutting measures will forever be low-hanging fruit, so it’s ground zero for most policy changes. Pushing customers towards mobile and online banking is a thinly-veiled attempt to introduce more automation in to the banking process and cut payroll costs (see: firing tellers)
The looming threat of automation is one of the reasons why fast food employees should think twice before demanding massive wage increases.
A lot of big banks are focusing on overseas markets, where costs of customer acquisition and retention are lower.
Banks cull tens of thousands accounts from their ledgers every year, many of those in the American market. Quarterly account purging is a known practice in the banking industry, a great way to shift numbers around to please stockholders.
It’s not unlike controlled fires in California. Farmers set some of their land ablaze to get rid of dead wood and other hindrances to future growth.
In this instance, HSBC is eliminating a segment of accounts that aren’t generating a ton of revenue for them, lowering costs and increasing profitability.
My guess is that I was a cost-cutting casualty; my accounts, the victims of a purge.
(And if you think these sorts of “sudden closure” stories are uncommon, you’re fooling yourself.)
Like most banks, HSBC wants customers who:
1) Maintain high monthly balances
or
2) Generate a ton of fees for the bank.
Preferably, customers that do both.
I don’t bounce checks or incur overdraft fees, nor do I generate a ton of consumer debt for the bank. Those are all consumer mistakes that banks love.
I don’t keep an exorbitant balance, and I’m exempt from monthly maintenance fees on my account because I have direct deposit.
I’m squarely on the “Expendable Customers” list, a member of the silent majority, the folks who make consistent transfers and deposits and pay their bills on time.
No waves or noticeable spikes in activity; just Curtis Martin-like consistency over a decade.
The biggest reason why my accounts would be on the chopping block is that I don’t maintain a balance over $25,000 in any single account. I exceeded the minimum monthly requirement for my accounts, but kept the bulk of my money elsewhere.
How much money can a bank generate on responsible customers who refuse to leave large sums of money in their accounts? Not much.
If you’re dealing with institutional accounts, like a local police department or Fortune 100 company, you’re holding on to millions of dollars, easy, so you don’t mind inactivity, given the size of the balance.
But what of other customers, who, quite rationally, decide there are better places to park money than in accounts that pay zero interest?
That’s a big problem for banks, especially when the brass has to answer to Wall Street every quarter.
All of which provides a convenient excuse to close an account under a vague “rules violation”, without providing a specific transgression.
They fixed “the glitch”, so the problem is all solved on their end!
If HSBC–and other banks–decided to pay better interest, you’d have more customers willing to leave the bulk of their money in their accounts. It’s a tacit agreement between big banks–paying low interest rates–and one usually has to venture off the beaten path to find a better interest deal.
After hearing my ordeal, a friend sent the following screen shot, of the interest generated by his Chase Bank savings account (Dec. 2015):
Sweet.
You’re better off making regular cash deposits in to a no-load index fund, especially if short-term liquidity is not a major problem.
Much to HSBC’s chagrin, my sizable deposits were routed to accounts that HSBC never touched for longer than a day or two
Why would anyone want to leave their money somewhere where it’s generating nearly-zero interest?
I keep the bulk of the money I don’t need in the short-term in non-HSBC accounts, institutions that see fit to pay more than .01% interest per month.
That’s one penny for every hundred dollars, for those of you keeping score.
And even that was subject to some convoluted monthly machinations that shaved points off the APY.
Well done, HSBC.
Pay customers more interest and maybe that money would find its way back in to your coffers.
Which brings me back to the point of this article: calling attention to HSBC’s lack of transparency.
There’s no reason my accounts should have been terminated, especially if HSBC is unwilling to provide details about why my account is closing.
HSBC is free to terminate client accounts at will, but they ought to give you a reason for doing so, especially if you’re claiming a “rules” violation occurred.
Mr. Gulliver could provide answers, but I don’t think he’d take my call.
Just tell me the truth. Tell me some corporate bean counter considered my account expendable.
If the company told me that, I’d be annoyed, but I could respect it. I’d accept it and move on quietly.
I’m aware that telling clients their accounts were closed for profitability reasons wouldn’t play well in the media, yes, but business owners and people who understand how the world works would be less inclined to make a fuss about it.
Lie to me, in order to avoid an uncomfortable truth, and that’s another story.
Righteous indignation, in the hands of someone who knows how to get things done, is dangerous. You can’t just throw a vague explanation my way and wash your hands of the matter.
That might work with people who are afraid of confrontation. Not me, though.
HSBC’s account closure process is the sort of short-sighted public relations move that kills companies.
Your whole goal with this account purge and “rules violation” gambit is to save face. Anger enough customers, with enough ability and willingness to complain, and soon you’ve got a sea of negative internet press attached to your business name.
And internet articles never go away.
All publicity isn’t good publicity. Too much of the wrong publicity and you may have to pull an MCI.
HSBC states that they no longer want me a customer; that’s fair. They can conduct business with whomever they please.
I just don’t appreciate the lack of explanation for terminating my accounts.
Hold the people who hold your money to higher standards; I want someone to pay me when I land on “Free Parking”.
So, where did I move my money to?
I joined a credit union based in NY, Bethpage Federal Credit Union.
(The branch manager at the location where I opened my account couldn’t have been more helpful.)
Credit unions make a ton of sense for most of the populace: Better rates, lower fees, and solid customer service.
Who wouldn’t want that?
A fitting representation.
I had long soured on HSBC, watching interest rates and benefits being cut annually. The only thing that kept me at HSBC were the switching costs: having to find a new bank, set up new direct deposits, get new checks etc.
Could I have done this years ago, without being pushed out by HSBC? Yes.
Inertia is a powerful thing.
HSBC’s move forced me to act quickly and it wasn’t nearly as painful as I thought.
“But Kene, if I join a credit union, what happens when I bank outside my local area? I don’t want to be confined to banking within 10 miles of my house.”
This was my biggest fear. I didn’t want to join a credit union and then have to scramble to find a bank any time I leave my area.
After doing some research, I discovered that a lot of local credit unions have formed coalitions that allow members to do their banking at any affiliated institution. Many of them have deals that provide access to thousands of branches and ATMs across the country, including units at convenience stores like 7-Eleven.
The switch to a credit union should prove beneficial.
Of course, this missive would not exist if HSBC just told me why they were terminating my accounts.
Give me a real reason; don’t be a coward. All they had to do is explain why my accounts were closed.
If you’re telling me I violated a rule, tell me what that violation was. You’d have documented evidence of it and I’d just accept it and move on.
Again, I don’t fault HSBC for terminating my accounts if I violated some part of the user agreement, or even if they just didn’t want my business anymore; this is a free country and companies are free to discriminate as they please.
My problem is HSBC’s lack of transparency.
Companies that handle commerce—like banks—have a fiduciary responsibility to handle customers with care. That wasn’t done here, and it’s why I took the time to write this piece.
The hubris displayed by HSBC warranted a response.