After the 2008 financial crisis, everyone seemed to love to hate the financial sector. Working at a bank was no longer so glamorous and mountains of regulation was written for the protection of consumers.
In July 2010, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Included in Dodd-Frank was the creation of the Consumer Financial Protection Bureau (CFPB).
The CFPB was created to help and protect American consumers when dealing with consumer financial products and services. In July 2011, the CFPB began accepting complaints from consumers against financial institutions. The CFPB created the complaint channel to supervise financial companies and to enforce rules and regulations for the consumer. The CFPB’s Consumer Complaint Database collects and displays over 679,000 complaints sent to nearly 3,000 different companies.
At LendEDU, we love looking at interesting data. Last month, our team stumbled onto the CFPB’s data set and we thought it would be interesting to take a peek at the data. After all, LendEDU works to help and educate consumers on their finances.
The CFPB’s data tells a number of stories. We thought it would be interesting to see which companies receive the most complaints from consumers. Over the last week we analyzed the 2016 data to determine which banks receive the most (and least) complaints from consumers.
In this report, we analyzed 57 different financial institutions which are included in the S&P Banks Select Industry Index. We researched both regional and diversified banks in our study. To relatively compare the financial institutions, we normalized the data by comparing the number of complaints received to the value of the deposits held at the bank. See more information in our Methodology section.
At the end of the day, we believe we’ve identified the worst and best banks of 2016 in terms of consumer complaints.
Our Data & Rankings
The following companies received at least one CFPB complaint in 2016. You can use our table to filter the results by complaints, deposits, and type of bank.
Surprisingly, the following companies received zero complaints in 2016. We worked to check each subsidiary and holding company against the CFPB database, but we were unable to confirm a single complaint by a consumer.
We pulled the CFPB’s Consumer Complaint Database data on December 12th, 2016. The set data includes all complaints made to the CFPB in from January 1st, 2016 to December 10th 2016. In total, we analyzed 175,051 CFPB complaints.
Using S&P Global Market Intelligence we were able to pull the most recently reported deposit data for each of the companies mentioned in our report. S&P Global Market Intelligence provided 9/16 as the most recently reported date of data collection.
We included 57 financial institutions in our report. We selected these institutions as all of these companies are components of the S&P Banks Select Industry Index.
Some of the financial institutions are holding companies. Our team worked to identify the individual subsidiary banks owned by each holding company. In our research, we cross referenced the names of the holding companies, as well as each individual subsidiaries, against the CFPB database.
For reference, the CFPB does not verify all the facts alleged in the complaint data. Complaint categories included Bank account / service, Credit card, Credit reporting, Debt collection, Money transfer / virtual currency, Mortgage, Payday loan, Prepaid card, Student loan, Vehicle / consumer loan, and Other financial service.
* Subsidiary banks include: http://www.wintrust.com/about-wintrust/who-we-are
** Subsidiary banks include: The Columbia Bank, FNB Bank, Fulton Bank, Fulton Bank of New Jersey, Lafayette Ambassador Bank, and Swineford National Bank)
*** Subsidiary banks include: Glacier Bank of Kalispell, First Security Bank of Missoula, Valley Bank of Helena, Big Sky Western Bank of Bozeman, Western Security Bank of Billings, First Bank of Montana, Lewistown; Mountain West Bank in Idaho, Utah and Washington; 1st Bank in Wyoming and Utah; Citizens Community Bank of Idaho, Bank of the San Juans in Colorado, First Bank of Wyoming, First State Bank in Wyoming and North Cascades Bank in Washington
The Benefits & Drawbacks of Using an Online Bank
With the advent of banking apps which allow you to do almost all of your banking on your phone, most people find that they rarely step into a bank branch. That might make some wonder if an online-only bank account might be right for them.
Online-only banks are gaining more acceptance with Ally, Capital One 360, and American Express Bank winning customers by offering consumers great interest rates and fewer fees. While some people worry that online banking is less convenient, and won’t provide the same services that they get from traditional banks, others are swayed by the fact that the best online-only bank accounts offer great perks that even the best traditional banks don’t.
Here are some of the benefits and drawbacks of online-only banks:
Benefits of Online Bank Accounts
High Interest Rates and Fewer Fees
One of the best benefits of online bank accounts is that they often offer much higher interest rates on your savings and checking accounts. They are able to do this because they don’t have the infrastructure costs that traditional banks have. Instead, they pass the savings onto you.
Online-only banks also tend to have much lower fees. Because you’re doing all of your banking via an app or online, there is less cost to the bank since they don’t have to pay the salary of a branch staff person to assist you. Once again, these savings are passed onto you. Depending on your banking activity, their lower fees could save you a considerable amount of money monthly.
Easy to Use Mobile and Online Banking
While many traditional banks have great banking apps and websites which allow you to do things like deposit a check, transfer money, monitor your balance, pay bills, or complete other banking activities, the best online-only banks outperform on this front because they have to.
Their apps and sites are usually more user friendly and allow you to complete more banking transactions online than even the best traditional banks. That means that you will be able to do all of your banking from home or on the go, rather than having to drive to a branch.
The best online bank accounts often give you better customer service then you would get at a traditional bank. They want to ensure that your customer experience is good and they have more money to invest in making sure that you are happy. With online-only banks, you can often expect 24/7 phone support.
Drawbacks of Online Bank Accounts
Lack of Branches
Some people appreciate being able to walk into a branch and speak to a person face-to-face in order to do their banking. While online-only banks offer great customer service via phone or online, that’s often not enough for some peoples’ banking needs.
Many consumers worry about where they’re going to get cash. While some banks will mail you money, most online-only banking customers use ATMs.
Since online banks don’t have their own ATMs, their customers can pay higher fees for the use of other banks’ ATMs. The best online-only banks have agreements with ATM networks in order to give you free access to cash, not all do. The best ATM networks have locations in popular stores like CVS and Walgreens.
If you routinely use or need cash, online banking might make that difficult for you, expensive, and even inconvenient. It’s important that you think about your banking needs and look carefully at what an online-only bank account offers before you decide to make the switch.
Lower fees can be a big benefit of online-only banks, but some of these banks have other non-traditional fees that could eat into your savings. For example, they might have fees to transfer money between your accounts – whether within the online-only bank or an outside bank account. Or they might charge you to pay your bills. Before you switch, be sure to read all the fine print so that you know exactly what you will be paying for and you can calculate how much you might save.
What to Look for in an Online-Only Bank
Before choosing an online-only bank, it’s important that you compare what the different options offer. Not all online banks have the same options, so it’s important that you figure out what you need and ensure that the bank you choose will be able to fulfill your needs.
One key thing to look for in a great online bank account is that it’s a member of the Federal Deposit Insurance Corporation. If it’s a member, your money will be protected in case your bank fails as it provides you with up to $250,000 of insurance on each of your accounts.
Also, since you’ll be doing most of your banking online, make sure that they have good cyber security. The best banks have large cyber security teams dedicated to keeping up with the latest in SSL technology.
Whichever online-only bank you choose, you will likely enjoy much higher interest rates than you’re getting at your current bank, so if you don’t mind the inconveniences of online banking, consider making the switch.
What’s the Difference Between a Checking Account and a Savings Account?
Whenever you open a new bank account, you’ll be asked a critical question – do you want to open a free checking account or a high interest savings account? While you might think you know the difference between these two kinds of accounts, here are a few things that you might not know.
Checking accounts are used primarily to access money for everyday purchases and banking. They often have low fees for everyday transactions and most people use them for paying bills, paying for regular purchases, and depositing money.
Most checking accounts don’t pay you interest on the money you hold in them or they pay a very small amount of interest – so they’re not good for long term savings.
The best checking accounts often come with checkbooks and a debt card/ATM card in order to make accessing your funds easier. While some checking accounts limit the number of free transactions you can make every month, they are generally designed to make accessing your money easier.
The best savings accounts are primarily designed to hold money that you want to save over the long term. They pay more interest than checking accounts, but there are many other types of investments that would pay more like stocks, bonds, or certificates of deposits.
Savings accounts are great for putting savings that you want to be able to access more easily than you would other investments. For example, people often use savings accounts to hold their emergency funds, or to save for specific things like a down payment on a house or a special vacation.
Usually, you are only allowed a few withdrawals or transfers from your savings account each month and you might be charged a withdrawal fee if you go over. This is to discourage you from spending the money in your savings account. Before you get a savings account, be sure to ask about any withdrawal limits or fees involved. The best banks charge very low fees on savings accounts.
Most people have both checking and savings accounts and use them complementarily. They get their paychecks deposited into their checking accounts and then transfer part of the money to their various savings accounts. Some people even set up automatic transfers between their accounts every month to facilitate this process. This allows them to optimize their savings and earn more interest while still being able to easily pay their expenses and bills each month.
What’s the Difference Between a Small Business Bank Account and a Consumer Bank Account?
Many people use their personal bank accounts to pay for their business expenses when they would likely be better off getting a dedicated small business bank account. If you don’t understand the benefits of using a small business account instead of a consumer bank account for your business expenses, here’s what you should know:
Small Business Accounts
Having a separate bank account for your small business will save you time, give your business credibility and possibly protect you from legal challenges.
The most important thing that a business account does is it keeps your finances separate so that your accounting is easier. You won’t have to go through your expenses every month and figure out which were personal expenses and which were business expenses, as all your business related expenses will be on one bank statement. This will make it much easier come tax time.
Another reason that a small business account is useful is that it provides legal protection. If you have set up your company as a corporation or LLC, you likely did so in order to legally protect yourself. However, if you comingle your personal expenses and your business expenses, then the courts could decide you are liable if your business is sued since there is no clear separation between you as an individual and the corporation.
Another benefit of having a business bank account is the credibility it provides when working with your clients or paying your bills. People might not take your business seriously if you’re using a personal bank account.
Consumer Bank Accounts
The best bank accounts are designed with an individual consumer in mind. That means that they often don’t have features or options that a small business account would have and that could mean that they won’t be able to meet your needs.
You will also have to painstakingly go through your statements in order to separate the expenses for your business from your personal expenses. When you’re starting a new business, you will be pressed for time and this will become inconvenient.
If you’re just starting a small business or if you’ve been running one for a while, it’s a good idea to get a small business account in order to streamline your accounting, appear more professional, and ensure that you’re protected legally. Make sure to do you research to find the best bank account before finishing the paperwork. It can be a hassle to change in the future.