Banks are responding to the pressures on profitability in the aftermath of the subprime mortgage lending morass in a variety of ways. Some of these practices have come to the attention of our legislators, and none are in the best long-term interest of the banking community or the individual banks. Let's look at some examples of short-term fee generation thinking at the expense of the bank's future.

First is the case of one top-ten bank that is currently in the headlines as the defendant in a class-action suit. The lawsuit claims the bank turned a blind eye to telemarketers who used their own accounts to perpetrate fraud on unsuspecting consumers. Allegedly, the telemarketers have been drafting funds from consumers' bank accounts and depositing them into accounts at the major bank. The complaint cites significant fees generated by those accounts as the basis of the bank's inaction, and it also accuses the bank of ignoring warnings from the Social Security Administration and other large banks, including Wells Fargo and Citizens.

Another top-ten bank is being cited for arbitrarily raising rates for credit card customers who are paying on time and have had no change in their credit rating. The bank claims to be using internal criteria that are unspecified and not made available to consumers. There are documented examples of customers whose rates were raised from 9.99 percent to 24.99 percent without any clear basis. Bank analysts claim that it is a move to shore up profits.

Another example claimed that the bank, complimenting certain cardholders' strong payment history, raised their credit limits one month, only to raise the rates in a subsequent month to 25.99 percent. The bank's explanation? The new balances were "too high" for the old rate. Further angering customers, the bank in question sent out notification of the rate hike in late January 2008, and cardholders who wanted to reject the new rate were required to respond in writing by January 29, and state that they "no longer use the card and will pay off the balance at the old rate."

Other problems have surfaced regarding the pay-and-charge philosophy that some banks have taken with debit card transactions and ATM withdrawals. Customers are taken unaware until they see the fees on their monthly statements—a $35 charge on a $3.50 item is not unheard of.

The intelligent alternative to these fee practices is to address bank efficiency, a long-term solution to profitability that helps banks understand the process from the customer's point of view. It also provides an avenue to review the fairness of fees and adjust them in either direction based on market and value. The banks that have routinely worked to redesign their delivery processes to effectively meet customers' needs at the right cost avoid the urge to find revenue in ways that are possibly unscrupulous.

We believe, as do many bank analysts, that this commonsense solution is the best way to position any bank to thrive in the face of thin margins and lower fee income. We believe that short-term thinking may result in short-term survival. It is a matter of choice.