In a scene right out of Office Space, one week ago we read that TD Bank, the fourth-largest retail bank in Massachusetts, was pulling out its coin-counting equipment for "servicing" following reports that the machines were short-changing customers who came in to exchange their nickels and pennies for bills. As a recent NBC’s Today show revealed when it tested several coin counting machines, it found that TD’s Penny Arcades weren’t accurate. In one case, the bank’s machine gave $43 less than the change deposited.
TD officials said they were disappointed by the “Today” show’s experience. “All of our coin-counting machines are in the process of being taken out of service and will be evaluated and retested,” TD said in a statement.
What else were they going to say: that they literally nickel and dime their customers?
But while that excuse may have flown, another far more egregious example of "nickel and diming" from one's clients was revealed today when Massachusetts' top securities regulator alleged a unit of custody bank State Street Corp routinely overbilled customers for items such as messaging services, even as an executive worried one client might "discover that we are taking them to the cleaners."
According to Reuters, in its administrative complaint, Secretary of the Commonwealth William Galvin said State Street has engaged in a pattern of overcharging, noting the company often labeled charges for secure electronic messages, also known as SWIFT messages, as "out-of-pocket" expenses that contained concealed markups of up to 1,900 percent.
In a statement e-mailed by spokeswoman Anne McNally, State Street said in December "it discovered invoice errors on some expenses and notified authorities including Galvin's office. It will repay clients and reform its billing practices as needed."
Here is an artist's impression of how shocked the bank was when it "discovered" it was stealing from its customers.
The bank also has been in talks with clients over the matter, it said, as well as with government authorities, with whom it pledged to cooperate. "We deeply regret this error," the statement said, adding the bank cannot comment further because an internal review is still ongoing.
This is not the first time State Street has gotten in trouble for nickel-and-diming. In a 2014 settlement with the United Kingdom Financial Conduct Authority, State Street agreed to pay of a fine $32.91 million for charging clients "substantial mark-ups" they had not agreed to pay.
Apparently the bank thought that a few years later nobody would remember, so it reverted back to its old ways.
Also, in what Galvin's complaint calls "a related matter," U.S. prosecutors earlier this month alleged two former State Street executives conspired to add secret commissions to fixed-income and equity trades.
Galvin's complaint claims State Street routinely concealed markups to clients and earned hundreds of millions of extra dollars, in what it describes as "a dishonest and pervasive culture of overbilling."
He could have used another perfectly acceptable word: stealing.
But why didn't State Street fight the accusations? Simple: it admitted long in advance that it was aware it was stealing from its customers.
The complaint quotes several internal emails suggesting its own employees were concerned about how it billed expenses. One wrote that a charge of $5 per message was "an exorbitant markup that will certainly piss off clients when they figure this out."
Another wrote of a concern that a large client might discover that "we are taking them to the cleaners on SWIFT charges."
Even better: State Street knew it had been exposed when clients described in the complaint as "an international financial organization" and "a boutique investment manager" did raise concerns about their bills but got little relief at least initially, the complaint states.
Only when the regulator stepped in did the stealing stop.
Galvin's complaint seeks a censure, an administrative fine and other actions including client reimbursements.
Translation: State Street will repay what it has stolen and will quietly resume doing so in a few months. Meanwhile, all other financial companies that engage in identical overbilling and massive markups - which is most of them - will continue doing just that.