Nearly half of teens feel “clueless” about money management, a TCF Bank-sponsored poll found.
To help young people become more financially literate, Wayzata, Minn.-based TCF began offering money management classes this month, both online and at more than 100 high schools in the eight states where it has branches.
Nationwide and at the University of Minnesota, the bank has been the subject of criticism for practices that target students, causing some to express concern about the potential effect of the classes.
Last month, a U.S. Public Interest Research Group report, using data from the Consumer Financial Protection Bureau, found that TCF was the bank with the most complaints per billion dollars in deposits. Top complaints included overdraft fees and checking account issues.
Associate family social science professor Catherine Solheim teaches personal finance classes, and said her students have opened TCF accounts for questionable reasons.
“It’s not illegal, but it verges on taking advantage of people who really don’t know a lot about financial management,” she said. “You can go up to a line that’s still legal but borders on predatory, particularly for vulnerable audiences.”
Architecture senior Lindsey May said she opened an account with TCF during her freshman year because she felt a “big push” from the University to do so.
“It was confusing, based on what they told us, whether it was tied to your U Card or how the card worked,” she said.
May said she doesn’t feel she has a good understanding of personal finance, because she’s never taken any formal classes.
Mark Goldman, TCF’s director of corporate communication, said financial literacy is a critical topic in today’s personal finance environment.
“One of the things that has become increasingly clear is that level of financial literacy, particularly for young people, but also just for the adult population in general, is really lacking,” he said.
Of the 500 teenagers surveyed nationwide in the TCF poll, 90 percent said they’re not learning everything they need to know about money management.
Along with the poll, TCF declared a goal to improve the financial literacy of 2 million people over the next three years with its classes.
In a press release, TCF Vice Chairman Tom Jasper called the classes “a genuine effort to help people become better consumers of financial services.”
“I guess I’m glad if they are genuinely offering education,” Solheim said. “Because they are trying to rectify something that is getting people into trouble, which is those overdraft fees and those tricks around accounts that cost people money.”
Solheim said students often don’t compare or change banks, so they tend to be long-term customers with their first bank. Sponsoring finance classes also gives TCF brand recognition at an early age, she said.
“A good question is, ‘If a 16-year-old has a financial management course sponsored by TCF, would they be likely to bank at TCF in the future?’”
‘Banks don’t overdraft; individuals overdraft’
TCF charged global studies junior Molly Rinehart about $60 in overdraft fees after an online money transfer took multiple days.
“I wasn’t really happy about it, because I would have paid or put money in my account if I knew right away,” she said. “They send letters; they don’t notify you right away. That’s what made me more mad than anything.”
Overdrafts are among the financial topics TCF intends to cover in its classes.
TCF has come under fire from consumers in the Midwest because of its overdraft policies, according to the U.S. PIRG report.
The bank has had three versions of its overdraft policy since 2011.
That year, TCF first adopted a $28-per-day fee. This meant it charged $28 every day for up to 14 days, until the account had enough money in it, allowing the bank to charge as much as $392 for a single overdraft.
In 2012, the bank altered the policy to give consumers a choice between the $28-per-day fee with a maximum charge of $210, or a $37-per-overdraft fee.
Goldman said TCF makes more money working with customers who understand the fundamentals of the financial system and partnering with them long-term.
“It’s our goal to make overdrafts never happen,” he said. “[But] at the end of the day … banks don’t overdraft; individuals overdraft.”
TCF ranked first in complaints per billion dollars in deposits for all five issues the CFPB tracked, from opening accounts to using check cards.
Legal Services Advocacy Project Supervising Attorney Ron Elwood has been fighting predatory practices against consumers for 15 years and said learning personal finance is just as important as learning how to read and write. He said the need for being financially savvy spans all generations, but students are especially vulnerable because they lack life experience.
“It just stands to reason the potential to get into some sort of a scam or trouble is just that much more prevalent [for young people],” he said.
Solheim said she doesn’t think banks are intentionally tricking young people.
“But, if you can get them as a customer and they are not really paying attention,” she said, “they can end up spending more money over the long haul.”