CitiBank's Free Checking Charade Gets Revealed by New York Attorney General

Try as we might to understand some the esoteric banking principles that contributed to the recession or give the industry any benefit of the doubt, the folks on Wall Street just keep giving us reasons to believe they are, and will forever be, drastically out of touch with the way the rest of America lives.

Last year, CitiBank, one the nation's major banking services players, announced a plan to provide customers with a truly free checking account, provided some account usage stipulations were met, in an effort to attract new accounts and to do their part in helping us stave off the effects of the recession. However, come November 2009, an announcement was made that additional fees would be applied to individuals that carried less than $1,500 in all accounts.

The fees were going to be applied to "EZ Checking" and "Access" accounts. The products would allow customers who made at least two monthly online bill payments or used direct deposit to not be subject to maintenance fees and per-check charges.

Needless to say, this did not sit well with a lot of people. Nor did it pass the smell test for the New York State Attorney General's office. Citing that the bank did not make it known within a reasonable timeframe that the fees would kick-in, Attorney General Andrew Cuomo managed to convince the bank to suspend any impending costs for consumers who had signed up for the accounts.

Those who registered for one the "free accounts" can continue to bank free of charge until the end of January of next year. Despite the case being tackled in New York State, customers across the country are eligible to continue using their accounts without being subject to the announced fees.

Cuomo, in a press conference about the settlement, spelled it out clearly for CitiBank customers. "If you signed up for free checking, the bank can’t change the terms and must extend the offer for a reasonable period of time. We are defining reasonable, in this context, to be for one year.”

The practice of surprising consumers with short notice announcements of interest rate hikes or banking fees is exactly what led to the recently enacted credit card reform. Far too many Americans have been subject to incentives that promise free services and discounts only to have them yanked away at the moment it hurts the most.

There is nothing wrong with a company making money. However, doing so with deliberately vague or misleading tactics is an entirely different story. There is not one in the industry that believes CitiBank intended to continually provide its customers with free checking; not in this economy. And sure, their marketing is most likely perfectly legal. But is it ethical?

These tactics can lead those teetering on financial ruin right over the edge and often into bankruptcy. Worse yet, it can severely disrupt the plans of a person emerging from bankruptcy who was seeking affordable checking options.

Consumers continue to be victimized in today's post recession-landscape. And while Washington is doing what it can to adjust mortgages, ease bankruptcies and fix unemployment, there seems to still be too many sharks and plenty of guppies. Stay on your toes, folks.