Nuisance Fees and the Brand: You Are What You Charge

Article excerpt

FeeDisclosure.com ... allows mortgage customer to break down the fees they can expect to pay if they buy a new house or refinance their current one. It calls out the fees that are bogus. Example: $100 email fees. It benchmarks more standard costs. such as title searches across the country, and it's bringing sorely needed transparency to that business. Its tagline: Transparency breeds trust.

--By Don Peppers & Martha Rogers. Ph.D.

My wife and I recently experienced one of those wonderful spur-of-the-moment weekend getaways in the Caribbean. It was perfect and the place where we stayed was just exquisite. In fact everything about the trip was idyllic except one thing: At checkout, they charged us a 10 percent condominium maintenance fee that had not been disclosed at the time we booked the place nor was it on the written confirmation. We paid the fee, but it left a bad taste in our mouth.

Fees have become prevalent. I am, in many respects, a believer in fees because they can have the virtue of charging only those who use or access special privileges. Toll roads charge only those who use the road. Change fees for airline tickets only apply to those who change their flights. ATMs charge only noncustomers who extract cash. Overdraft charges only apply to those who make unauthorized loans on the bank's funds. Fees reimburse for the unique cost associated with a service.

Yet fees exist in the context of a relationship, and it seems that increasingly institutions hungry for revenue are using fees to weaken customer relationships. They have created weasel ways to classify parts of the base offering as a fee or to overcharge for what should be minor additional costs. It feels like tricked-up revenue that takes advantage of customer misfortune.

For example, when the cost for the three-minute phone conversation to change the airline reservation is a fee of $100 on a $400 airline ticket, it gives me pause. Let's see, the cost to change the ticket represented 25 percent of the cost of the plane, maintenance, airport facility, fuel, crew, and head-office expenses? It says to me, you really want that fee more than you want me. Somewhere you got out of the business of serving for profit and got into to the business of punishing for profit. I don't expect you to lose money on nay misfortune. However, I really would prefer for it not to be your primary source of profit.

Banking is no different. Oliver Wyman estimates that there are now about 400,000 ATMs in the United States compared to 139,000 in 1996. …