Judge finds notice of fee changes was never given
It’s become increasingly common for small local banks to get gobbled up by huge national corporations who turn around and charge their customers higher fees.
But an elderly Santa Monica couple didn’t sit still when US Bank bought Santa Monica Bank and raised its fees.
So the couple sued the bank. And on Monday, they won.
Michael and Kristin Runge sued when the bank charged them $75 to close three of their IRA accounts and then, over their complaints, refused to refund the money. Two years ago US Bank purchased Santa Monica Bank, where the couple’s accounts were originally opened.
The Runges said US Bank promised not to raise any of the fees on their no-charge IRA accounts inherited from Santa Monica Bank. But the promise soon appeared to go the way of independent banks, buried in the blitz of consolidations which have seized the financial services industry.
The Runges said they were soon faced with lower interest rates, poor service and increased fees on new accounts and transactions.
“We asked if there would be any new fees, and they told us Santa Monica Bank customers would not be charged anything new,” said Kristin Runge. “But when they took over they began charging all these hidden fees.”
“So we had to close the accounts,” she added, “and they charged us for that too.”
Kristin Runge said the couple had moved their account to another bank that didn’t charge as many fees and offered better interest rates. She declined to name her new bank.
“We had our retirement accounts at Santa Monica Bank for years and they never tried to charge us any fees,” Runge said.
Rhonda Nasser, a US Bank sales and service manager, said the fees were charged to recover the cost of filing reports with the Internal Revenue Service whenever an IRA account is closed.
Nasser said the bank charged the couple a lower amount than what they charge their customers now because the Runges’ accounts were inherited from Santa Monica Bank and the $25 fee is what US Bank charged in 2000. Now the bank charges $30 for the same transaction, she said.
“We followed the rules in place when the account was opened,” Nasser said.
“Every customer gets a contract explaining the rules.”
But Santa Monica Small Claims Judge Pro Tem James Lewis said US Bank had unfairly charged the couple. He said Santa Monica Bank had always advertised as a no-fee bank, and it was very likely the couple would not have been charged the same fee if the original bank was still around.
“Santa Monica Bank used to be an aggressive advertiser,” he said. “And their big gimmick was that they had no fees or hidden costs.”
Lewis said any bank that purchases another must abide by the original bank’s policies, rules and fee schedules until they give their customers enough notice that they can close their accounts and switch if they find the new policies to be disagreeable.
“I have the impression there were no fees charged by Santa Monica Bank,” Lewis said. “And (US Bank) is bound by the same rules as Santa Monica Bank unless they gave their customers sufficient notice of any changes.
“And from what I’ve seen today, that notice was never given,” he added.
Originally published in the Santa Monica Daily Press print edition on July 16, 2002. Read the original PDF.