Oh Uh! Woodforest National Bank Forced to Repay $32 Million To Customers
By: Oscar L. Orias
The Woodland’s based financial company Woodforest National Bank get hit with a $32 million fine from federal regulators. The regulators charge that Woodforest Bank changed excessive overdraft free against certain consumer segments. These fees make it difficult for consumers made it difficult for consumers to have their accounts current and to pay off the fees. New, continuous fees aside from the overdraft penalties kicked in when the account remained overdrawn for more than 7 days. Consumers were forced to pay these new continuous fees aside from the overdraft just to try to keep the account from being shut down and reported to ChexSystem (banks and credit unions send info to this company when someone doesn’t pay back overdraft or other fees). Once reported to ChexSystem a consumer may be prevented from opening another bank account for 5 years.
Woodforest Bank marketed these accounts as low-cost and a good fit for consumers that had trouble managing accounts in the past. According to regulators, the bank however, failed to inform consumers how expensive the overdraft protections could become and what other fees were tact on after 7 days of not paying off the overdraft fee. Woodforest is now forced to repay $32 million to defrauded consumers while paying a civil penalty of $1 million.
Consumer and national trust in the banking industry has taken a huge hit during the recession. From creative new fees to the stimulus package banks have been seen as a corrupt entity trying to gain money and power at the expense of the people. The problem has been made worse by banks not loaning out as much money as they did before the recession. There have even been calls to nationalize for-profit banks or to outlaw them all together.
Woodforest National Bank has been thrown into the lime light with these new allegations of defrauding consumers, especially vulnerable consumers with poor financial records. Many consumers will see the actions taken by the bank to fix this issue as purely a reaction to the government investigation and fines. The actions Woodforest takes now to address the issues and help customers will be scrutinize and questioned.
Bad customer service has very danger and long-term effects for all industry. A study by Technical Assistance Research Programs Institute from 1979-1986 shows that 95% of customers will complain about a company to other people but not to the company themselves. Those dissatisfied consumers will tell on average 9-10 different people. That same study also concluded that 70% of consumers would do business with a company if the resolution was solved. If Woodforest is to repair its damage image from these fines it has to do it quickly and carefully.
Actions Woodforest Can Take
The bank has the opportunity to gain these customers back and repair its image by following some important actions. Woodforest has to first assure customers individually that their problems are being heard and addressed by the company. One of the ways it can do this is by informing all staff about all the recent fines by regulators. An informed staff gives the impression that the company is on top of the situation and ready to address the issue. Give additional training to staff to handle any distraught customer that may ask about the fines. Invite these distraught clients individually to speak face-to-face with staff to address their complaints and concerns. A well trained staff will be able to negotiate the customers’ expectation and concerns. Come up with solutions and options so that these customers can retain their accounts with the bank. These steps may seem easy and logical but when faced with a customer service crisis like this, many companies try to sweep it under the rug and hope not too many clients or prospective clients notice. Sweeping it under the rug may seem like an easy, short-term solution but in today’s multi-media age with easy access to social networking sites and blogs bad, news can spread like quickly like wildfire and damage a company’s brand.
What other Solution can Woodforest come up with to address customer concerns and to repair it image?
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