Bank of America’s liability “protection” costs them $14 million and counting

September 27, 2006

Perhaps you’ve heard the story by now. I heard about yesterday after making a presentation in North Carolina. Clark Howard, the talk show guy who helps everyone save money, had a segment on his show about Michael Shinnick who got arrested by San Francisco police at the behest of Bank of America after trying to cash a check. Shinnick had just confirmed at the BofA branch that the check had funds in it–was proceeds from a bike sale. The police arrested him for trying to pass a bad check and Shinnick had to spend $14,000 of his own money to clear his name, which he did. Bank of America apologized for its stupidity but then added stupidity onto stupidity onto stupidity. They refused his request to cover the costs he incurred to clear his name–citing their liability protection.

The bloggers took it from there and are running wild with it now. (See It’s all over Digg, etc. But what kicked this anti-BoA backlash into high gear was Clark Howard exposing the mistakes to his nationwide audience. And he suggested that BoA customers withdraw their money from the bank. Well Clark’s head must be swelling because as of 9:30 am CDT on 27th, that count is now up to over $14 million and growing rapidly. There is even a meter on Clark Howard’s website that shows how much has been reportedly withdrawn on a realtime basis.

Howard offered to pay half the man’s legal fees if BoA ponied up the rest, and they refuse. Matter of principle I suppose.

So, crisis managers, how do you handle this one? If this isn’t evidence of the growing power of the blogworld connected to MSM (mainstream media) I don’t know what is. It is a 1 plus 1 equals three equation. Clark alone couldn’t do this. His website helps, but really helps (or hurts depending on your point of view) is the connection with the blogworld that is feeding the flames. Not sure who lit the first spark, but no doubt Howard dumped a gas can on it, but now it is the bloggers and websites feeding the flames. And the meter keeps rising.

Out of curiousity, I just checked the BoA website. Of course, no reference to the Shinnick-Howard situation. Would be crazy I’m sure most people would think. But where is BoA to present their side? Certainly they have a different perspective on this. I suspect they are concerned about the precedent set by not hiding behind their liability protection. And $14 million is just a blink to them. But how big does this have to get before they start talking? And then where do they join in the conversation? Howard is having representatives on his show. Good, but Howard doesn’t like them much right now and is riding a huge wave of power and prestige in bringing them down. So where can they join in the conversation in a more neutral environment?

Anyone have thoughts about this?


6 Responses to “Bank of America’s liability “protection” costs them $14 million and counting”

  1. Wahine Says:

    I’m not a crisis manager (just an entrepreneur and Chief Worrywart in my previous career). However, I am a Clark Howard listener, and BOA accountholder.

    I would actually give Howard a lot of credit for the spread of this; it was his team who came up with an email and encouraged people to spread this to their friends and family members. Additionally, Clark tends not to be political (the one exception I remember was in regards to FEMA mistakes in Louisiana), or polarizing. Thus it’s easier for him, rather than polarizing radio figures like Rush Limbaugh or Randi Rhodes, to get the broad middle to follow his lead.

    Did you have a chance to listen to the interview between Howard and BOA representatives? (Excerpts appear on the Clark Howard website). At no time did they ever sound … well, frankly, *sorry* for what Shinnick had gone through. Shinnick has also noted that they did not, in fact, apologize for their actions. Contrite but firm would have gotten them a lot further with the radio audience.

    Another salient fact. The police could not have arrested Shinnick alone – the BOA bank manager pressed charges. Additionally, Shinnick first asked if the check was good and would clear – then attempted to cash it. That smacks of entrapment. My husband suggested that the bank was aware of existing issues with this account, set a trap, and captured the wrong person.

    So maybe BOA doesn’t want to let their own internal “tracking” get discovered – perhaps there’s more here than we see, an attempt to solve the growth of forged cashier checks and Nigerian scams. Maybe if they cop to this, there’s a risk of admitting to other irregularities (such as with HP). It seems so foolish to piss away all the goodwill the company has with customers, over $14,000.

    Anyone who accepts personal checks from strangers – whether they are small or large businesspeople, or even a person who occasionally sells on Craigslist or eBay – knows that it’s important to confirm whether there are funds in the account, or if the account is even real. Bank of America is one of the only banks that will not confirm the existence of an account, or whether a given check will clear, if you attempt to call for check verification. (More evidence that Shinnick may have been the victim of a deliberate sting.)

    This behavior – and BOA’s refusal to acknowledge their mistake – puts more than their customer relations in jeopardy.
    It shows that they don’t care if they put small business owners at risk. When you show that kind of attitude, your crisis managers, even a crisis plan, cannot fix the bad PR.

    To really manage this crisis, they need to look at the millions of people running small businesses, microenterprises or even casually selling on platforms on eBay — and learn to speak to them, and then change their policies accordingly.

  2. Dan G Says:

    This is the arrogance of a large corporate entity compounded by the bad advice of risk driven lawyers.

    Here is what should be done (based on the facts you provide):

    1. BofA should ask politiely for a meeting with Shinnick to review the facts
    2. An agreement should be quickly developed which compensates Shinnick completely based on a “misunderstanding” which got out of control.
    3. BofA should release a public apology to Shinnick and the successful agreement — details of which will not be made public.
    4. The agreement should require both parties to publicly indicate they are satisfied with the outcome.
    5. The agreement should require both parties to shut up publicly beyond that.

    The sooner this issue is out of view, the sooner BofA can get back to the business of banking.

  3. Wahine Says:

    Sounds perfect! Honestly, I don’t understand how this has been able to go on for so long. Donald Trump would have shown more restraint [/appalled sarcasm].

    My experience has been that companies will provide relief if a high ranking person is informed, usually by certified mail, of a given issue. I had luck negotiating this way with two major companies, and in those cases there was little threat of me getting national publicity or support over a few hundred dollars.

    It is shocking that BOA’s CEO or other top rank personnel have not stepped in yet.

    BOA was started by a San Francisco banker and immigrant – a man who exclusively dealt with smaller customers – who had seen people lose almost everything in the Great Quake of 1905. He went to his destroyed building, covered a wagon with the money he had left, went out to provide loans, and provided great customer service to people who had lost everything. It is truly an American success story; unfortunately *this* incident in San Francisco does not jibe with their recent commercials or this laudable past, and is going to shadow them for a while.

  4. That smacks of entrapment.

    It wasn’t entrapment. I thought it was too… probably because I’ve been reading the internet too much and had the suggestion already when I read the story.

    Upon closer examination of the Lazarus article, it becomes clear that the bank had no actual knowledge that the check was fraudulent until after he endorsed the check. It doesn’t make what they did right, though. They should have informed him, or asked him to step into a back room to discuss the situation before calling SFPD.

  5. I agree that keeping business and personal records together in one bank account can be done, but it isnt easy. You are an exceptional bookkeeper to be able to do it. I tried it the first year I was in business and got myself hopelessly confused, even though my business expenses were minimal.

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