The Bottom Line / You Asked for It

The heads of the two big banks, Hapoalim and Leumi, were full of complaints yesterday over MKs' gross intervention in the work of the banking system.

The heads of the two big banks, Hapoalim and Leumi, were full of complaints yesterday over MKs' gross intervention in the work of the banking system. In separate press conferences, Galia Maor, CEO of Leumi, and Zvi Ziv, CEO of Hapoalim, spoke of the plethora of law proposals (some 30 in number!) currently in various stages of the legislation process, and defined them as a danger to the banking system.

The issue of bank charges and fees is indeed an internal business matter, but it is difficult not to come away with the impression that the banks have brought this intervention on themselves because of the cross-subsidizing between households and the business sector.

A perusal of Leumi's financial reports of recent years reveals a far more serious phenomenon than the cross-subsidizing. The reports show that on four separate occasions, which have come to light, the bank exacted various charges from its customers but was subsequently required to reimburse its clients at the behest of the supervisor of banks.

The freshest and most significant case of all concerns the Leumi-Phone service. For eight years (1995-2003), Leumi provided a telephone-based information service for which it charged its customers a monthly fee of NIS 6.70. A review by the supervisor of banks revealed that Leumi added numerous customers to the service in an improper manner, without the customers having ever signed up for it.

Despite the rejection of a class-action suit filed against the bank in this regard, Supervisor of Banks Yoav Lehman didn't throw in the towel. He demanded that the bank reimburse those customers who were improperly recruited to the service, with interest and linkage differentials. Leumi reported yesterday that it would be paying out some NIS 56 million to these customers.

The Bank Leumi group has a rather dubious history when it comes to delving into the pockets of its customers and improperly charging bank fees. Some two years ago, Leumi Mortgage Bank was forced to repay customers NIS 12 million after collecting inflated interest rates on variable-interest mortgage loans.

In another case, Leumi customers were charged commission fees of $10-20 for credit cards that they didn't request, but were issued to them nevertheless; and in another case, some 3,500 Leumi customers were erroneously charged a fee of $25 after being added to the LeumiCard and El Al customers' club.

In all cases, the bank was required to reimburse its customers, and indeed did so.

The series of incidents raises concerns that Leumi's aggressive marketing approach may prompt its employees and managers to walk a fine line, and sometimes cross it, in their efforts to increase the bank's profits.

A modus operandi under which a commercial entity tries its luck and delves into the pockets of its customers - and if it works, it works; and if it doesn't, it doesn't - crops up frequently in the business sector. But when such a system of operating is employed by a bank, it is likely to severely prejudice its reputation and undermine the trust of its customers.