Empowering the consumer: Former bankers take on banks with web portal on fees, rates

Empowering the consumer: Former bankers take on banks with web portal on fees, rates

June 14th, 2014 by Dave Flessner in Business Around the Region

Nick Clements

Nick Clements

Photo by Contributed Photo /Times Free Press.

Document: Chattanooga Bank Fees

Nick Clements left a top banking job in London last year to start a new online business in the United States.

But the veteran banker, who ran Britain's biggest bank credit card operation for Barclays Bank, says his new Web-based financial service is designed to do what traditional bankers historically did -- help individuals save and manage their money.

"In too many instances, banks today are charging excessive overdraft charges and other fees to those who can least afford it," Clements said Friday. "We want to help people find ways to lower or eliminate those fees and keep more of their money."

Clements learned first hand about bank fees and credit card charges during his career at Citigroup and Barclays banks. He insists that the $32 billion in fees paid to banks in the U.S. last year could be cut significantly if consumers were better educated about their options.

Unlike many consumer activists, Clements isn't looking for stricter regulations from the new Consumer Finance Protection Bureau to cut such costs. Instead, he and one his Stanford University pals, Brian Karimzad, have launched MagnifyMoney.com to do in the United States what he learned from one of his critics in the United Kingdom -- empower consumers with the best information about fees and interest rates.

Clements says he was inspired by British personal finance reporter Martin Lewis, a frequent critic of bank fees. Lewis turned such concerns into a successful business known as MoneySavingExpert.com to offer information for those confused by complicated financial products and wanting to save money.

"He did two things brilliantly," Clement said. "He made it easy for people to make better financial choices and he was not afraid to speak up when he thought products or practices were unfair."

To help research their American version of such a service, Clements and Karimzad came to Chattanooga this week to talk with those who he says need the help the most. The bankers-turned-entrepreneurs talked with many single mothers and others at the Chambliss Children's Home to hear tales of how such customers had paid hundreds of dollars in overdraft charges in the past year after they or their children had bounced several checks.

By identifying better savings options, cash-back credit cards and checking accounts with lower fees, Clements said he helped one local woman find accounts that would have saved or earned her $600 more last year.

MagnifyMoney examined Chattanooga's 14 biggest banks and found six offer unlimited free checking. Most charge overdraft fees from $30 to $36 for each bounced check but how multiple bounced checks add up for consumers varies among different banks.

Although Clements contends banks often make hefty profits from such fees, bankers note that most people don't pay such fees. A survey released in April by the American Bankers Association (ABA) noted that 65 percent of all customers spend $3 or less in monthly fees for banking services such as checking account maintenance and ATM access.

Online banks often offer lower overdraft charges, Clements said. But bankers counter than such remote banks don't offer as much personal service to customers.

"It sure is convenient to have a branch where you can walk in and talk to someone in person and figure out what is going on with your account or to be able to make a deposit on the spot rather than bouncing a check while you mail in your deposit," said Keith Sanford, Chattanooga market manager for First Tennessee Bank, the biggest bank in the Chattanooga market.

Banks make little, if any, income on most of their accounts and must charge fees to cover the expenses of trying to recover money when funds are depleted, according to ABA officials.

"Today's savvy consumers are avoiding many bank fees by taking steps like maintaining a minimum balance and only using ATMs owned by their bank," said Nssa Freddis, ABA's senior vice president and deputy chief counsel for Consumer Protection and Payments.

But Clements contends that most people don't have the ability to compare bank fees, interest rates, ATM charges and overdraft charges before picking a bank for their money. The new MagnifyMoney allows consumers to go online, plug in their personal spending and savings needs and have the web site identify the best banking option for that individual.

Ultimately, the new business also plans to offer financial planning guidance to help individuals lower or eliminate banking fees and maximize the return on their savings, Clement said.

"We strive to promote transparency and financial empowerment, so everyone is a well-informed bank, credit card and credit union customer," he said.

Unlike some web sites that highlight their sponsors, MagnifyMoney is designed to be transparent and unbiased, Clements said. The web site will ultimately make its money from highest rated banks that capture more business through the site and pay acquisition fees, Clements said.

"This model has worked well in Great Britain where overdraft charges and bank fees are much less even though there is no limit on what banks can charge for such fees or interest rates," Clements said. "The key is making information readily available and easy to use and understand."

Contact Dave Flessner at dflessner@timesfreepress.com or at 757-6340.