Stephanie Retchless, Are All Banks Bastards?:

This week’s inspirational story person is Stephanie Retchless. Stephanie’s background is a little bit different to most. Stephanie was employed by banks for some 36 years. This included 10 years as a bank manager.

To give you an idea of what opinion she has concluded from these 36 years, Stephanie has written a book called, “Are all banks bastards?” This book covers tricks and games played by the banks to get more of their customers’ money/business.

Stephanie has become somewhat of an expert on banking matters appearing on ABC radio, Today Tonight, A Current Affair, Mornings with Kerri-Anne and an ABC documentary called – Addicted to Money.

I talked to Stephanie and really tried to get her to open up about some of the banks more interesting ideas to get your money. Plus I asked her some hard questions about the banks.

In your book Stephanie you said that you started at the bank in 1967 and left in 2003. You said that over that time you noticed some big changes. What did you notice?
One of the most damning changes occurred in 1995 when the whole banking system got turned on its rear end. That’s when the sales culture hit. Bank branches went from a customer service oriented culture to a sales oriented culture.  

OK so now the branches are operating more like car dealerships. What do you sell in a bank? How do you sell in a branch?
There are two main ways we would sell and our accounts are referred to as ‘products’ just like any other retail outlet.

1. Let’s pretend we sat down with a client to open a garden variety streamline account. The bank would make us do a mini financial needs analysis profile (MINIFINAP). In other words you had to find out what their financial strategies were both currently and into the future. Scripted questions were devised to establish:

If they had a home loan.
If they had a credit card.
If they had a Personal Loan
If they were due to inherit any money
If they didn’t have a home loan, why didn’t they have a home loan?
How much money they had in the bank?
If they had children?
If they had trust accounts for their children? And if not, why not?
If it was a woman in my age group (+50) they would ask if you had grandchildren and if you had trust accounts for them?

All this information was recorded and scrutinised (by management) to ensure every possible financial activity (real or imagined) was given to improve the chances to cross sell other products.Now the notion for getting this information was you had a range of products that you had to sell that went along with that information.

2. Somebody comes up to a teller or the like to make a straightforward deposit or withdrawal and you get a totally and utterly unrelated question “have you got a home loan”. This is called a non related tag-on just like Macca’s – will you have fries with that - which is technically a related tag-on because they have already purchased food – I call that McBanking! It is unrelated because it has nothing to do with the current transaction or enquiry being made.

So do the banks have sales targets?
Yes. At the end of every week my staff had to come to me and tell me how many streamline accounts, credit cards, car loans, how many referrals they made in relation to home loans, personal loan etc. etc. that they had sold or were likely to sell. I in turn had to advise upper level management at the end of every week how I either achieved those targets or why they had not been achieved. And there was a dollar component to the targets which was specifically in the area of home loans.

Each staff member had a set sales target each week. If they hit their sales targets over a week, month, quarter, half year or yearly basis it directly affected my bonus as the manager. The main contributor to that bonus was the annual amount of home loans written and the outstanding balances of all my combined home loan balances.

So you directly would be compensated on credit cards if you increased their limit?
No, not really, but we were given targets of selling three credit cards per staff member per week (this depended on the size of the branch). The credit limit on the cards sold didn’t really matter. As long as you sold them one. But it was certainly suggested from head office that the higher credit limits were preferable. YOU COULD NEVER EVER FIND THAT IN WRITING.

What about selling a home loan, would you try and sell them more money than they came in for?
A home loan basically answers itself in terms of the amount required, because if somebody is buying a home for $500,000 and they have a $100,000 deposit ‘blind Freddie’ can tell you they need a $400,000 home loan. But you would still have to try and say maybe you would like an extra $50,000 as a line of credit in case you need to buy a car. Or you wanted to do some investment or refurbishments to the home.

The managers of the branches, and I was one of them, used to hate clients that would pay off their home loans! Because my annual bonus was partly based on the outstanding debt in my ‘book’ of home loans. Managers would often lament on this fact and try to think of ways to keep their balances growing by e.g. introducing car/holiday loans through the equity in a client’s existing home.

So if you could sell customers more than they needed for the house e.g. sell them the line of credit, was that seen a as a positive thing by your head office?
Oh yes.

Did banks in your opinion when you were there, ever lend money to people who could not afford it. Or put them on the brink?
Yes. In the late 60s, 70s and leading into the 80s the criteria for borrowing on a home loan was much, much stricter. For arguments sake I can remember in the 70s that clients wanting a home loan would need to establish a savings pattern for a full year i.e. to show that the average balance per year was $5000. And over a full 12 months you would have to not only save that $5000 but keep it there for one full year before you could even apply for a loan! This savings pattern showed a willingness on behalf of the client to save towards their own home and not rely on the banks to provide the bulk of the purchase price

Of course in the 80s & 90s the criteria changed. They introduced something called commitment levels i.e. if you earned $60,000 per year your total loan repayments could not exceed 30% of your gross annual income. In other words if the repayments for your credit card, personal loan and home loan exceeded $18,000, your loan application was rejected.

However commitment levels blew out the door when non-conforming lenders entered the market and changed the landscape in terms of what could be lent and how. These non conformers had no such constraints, in their attempts to gain market share and therefore mainstream lenders had to change their policy in order to complete OR lose market share. And therefore the attitudes changed from the banks and – enter stage left – low doc lending, no doc lending, 100% lending and the list goes on. Banks now believed (because they had to put away their moral compass i.e. if they ever had one) it was up to the client to tell us if they could afford the repayments or not with the attitude being, they want the money – give it to them.

Is it your opinion when banks offer you a certain amount of money it doesn’t necessarily mean you can afford it?
They will tell you can because their new serviceability calculators are predicated on their in-house criteria not yours. Generally of course most clients rely on their banker to tell them if they can get the loan, not necessarily what the repayments might do to their lifestyle – very rarely would a client ask the question and even rarer for a loans officer to tell them.

House prices have been going up; up and up do you think this might be a direct result of easier credit?
I think there is direct correlation to it yes. It has to be. The more money available, the higher the prices go, you only have to look at the first home owners’ grant to gauge what that did to home prices.

What’s something else that has changed in 30 odd years in banking?
They don’t have time to sit down and explain the products people take out. For example nobody from the bank tells you that if you have a $1000 dollar credit card then walk out the door with the lovely little card in your hand then you max it up by the end of the day and only pay the minimum repayments; it will take you 11 years to repay it.

And that is never discussed?
No and that is one of the most criminal things that goes on in banks nowadays. They don’t explain to people what the ramifications might be if you do X-Y-Z.

Thanks Stephanie Retchless. For more information on Stephanie please go to http://www.thefinancefairy.com.au/.