Risk Exposure: Learnings From a Loyal Bank Customer
It was an uneventful Friday afternoon and I decided to go out for a stroll with my daughter. The weekend ahead was going to be amazing. Including our wedding anniversary celebration. When I headed out of our apartment, I checked my mailbox and found 2 letters that initially seemed harmless.
Well, they weren’t. The bank decided to close all our accounts due to “unexpected activity”. After reading this, I immediately headed back home and showed the letters to my wife. We both concluded they were real. No scam. We called our account manager at the bank, who upgraded our accounts 2 months ago due to great financial behavior. She was out for the 2 next weeks — how convenient. So, we ended up calling customer service, who treated us very poorly. They insisted that there wasn’t anything we could do. They weren’t allowed to further explain to us what was the “unexpected activity” the letter was referring to.
On a Friday night there wasn’t much else to do specially with the attitude coming from the same bank that treated us so nicely a couple of months before. In between all the nice activities we had planned for the weekend, we had to squeeze in reorganizing our financial life within the next 2 weeks. The letter provided us with that deadline. All our assets were in that bank. This unilateral decision was a wake up call that left us with some learnings along the way.
The first learning came quite quickly, and obvious: Don’t put all your eggs in the same basket. Most of us have heard this saying multiple times, still we don’t keep it in mind for all scenarios and our interactions with the real world. It may feel reassuring seeing all your balances and transactions in one place. There is less overhead in terms of checking where your money is and what you are doing with it, but you are exposing yourself to too much risk. For example, banks are FDIC insured up to 250k for certain account offerings. If you have savings above that threshold or investment accounts with them, it is not going to be insured and if they file for bankruptcy that money goes away with them.
Since that painful Friday night, we called the bank almost daily to ask if something could be done. We wanted to know. We were sure it was a mistake. Long story short, after some good willingness from branch associates to get additional information, the answer remained the same — “ we can’t give you further information and the decision is final”. We learned in the worst way possible that the bank can do this. It is written on the contract you sign when you open any account. They can close one or all of your accounts without any explanation.
This brought us to lesson number two: Read the fine print. It is time consuming and close to impossible to read the fine print when you are signing the contract at the branch or online. Still, I would suggest you to do it. If not, ask your account manager or reach out to customer service on anything you are not so sure about before performing a transaction with the bank and/or another entity. As a rule of thumb, the bank is usually alright with you funding your account but it has plenty of rules around outgoing transactions.
The third lesson is harsh, but ultimately I would summarize it as: The Bank doesn’t care what happens to you or your family. It is a blunt statement but true. The decision to close your accounts based on any reason has ramifications in your life and your family’s. The bank doesn’t append this to the bulk of facts they gather from the technology they use to flag your actions as “unexpected activity”. The tech that analyzes and detects out of the normal behavior based on your historical patterns doesn’t consider out of the blue events that may have affected your daily life. The tech can raise a flag for something that is “unexpected” and a human has to decide to investigate it further or close the account based on a narrow perspective of your life — your bank transactions. Investigations take time and resources, preventive actions save the bank from potential fines for undetected fraudulent activities and it is cheaper.
It is a no brainer, closing accounts without further investigation produces most of the benefits with almost none of the risks. Not providing further information to their customers when they receive the shutdown letter is a strategic decision. Account holders can’t appeal without the necessary insight on how the decision was made.
To conclude, risk is with us all the time. Risk is an excellent teacher. It doesn’t teach us the way we would want to. But it guarantees us that we’ll learn. To better harness its teachings, it is a great practice to monitor it as a much as we can. Each dimension of our life has a risk exposure. Like any project would have.
