Chase has taken an interesting approach with it’s WAMU customers. They are just getting rid of many of them. Last fall, they made uncompetitive the previously successful WAMU Online Savings account. This makes sense if you are Chase and have a low cost of funds, but customers did go elsewhere. Last summer, many lenders like WAMU and Chase started cutting back Home Equity Lines to reduce their exposure to declining real estate values. This too was understandable and customers really had no where else to go.
Fast forward to April 2009, the Chase marketing department is spending a lot of resources on bringing WAMU customers into the fold and making it’s long awaited big debut in California. But the loan department is now unilaterally suspending some of the home equity accounts of WAMU customers. Chase has begun notifying customers of the suspensions, claiming further declines in property value as the reason for the action. Interestingly, they have taken this action even where there is plenty of equity in homes and no outstanding balance on the equity lines. This is really a hatchet approach when a scalpel is much more appropriate. Interesting message to it’s new California and WAMU customers, welcome to Chase, we are one of the strongest and oldest banks, we don’t have competitive savings rates, we don’t have money to lend regardless of the equity in your house, but we’ll give you $100 to open a checking account.
Why do I mention this? First, it’s important to reiterate that if you have any line of credit at any bank that you are relying upon (home equity (HELOC), personal line, business line) you should be careful. Banks can decrease, suspend and cancel your account. They will let you know after the fact. This has been happening a lot in the past year and has put many people and businesses in a bind. You really need to make sure the money is accessible on your line of credit before writing any checks or trying to use a charge card tied to the credit line.
Second, this raises many questions about Chase and the other large banks. Are they really in such bad shape at this point in time that they need to take these drastic actions? Is this in response to government demands? Is the government micromanaging these banks? Are these mega banks capable of being responsive to individual customers? Do the banking decision makers in New York and Charlotte (and Washington, D.C.) understand the impact they have on people with their actions?
The taxpayer is on the hook for some of the WAMU loans. Maybe this move may be bad for WAMU customers, but ultimately a good thing for taxpayers. Maybe Chase is a good bank, but just in a difficult situation. I don’t know. If you have any experience with this situation or thoughts on the questions I raise, please share in the comments below.