A growing bank divestment movement is pushing universities to move their money from big banks to small local financial institutions. So far, bank divestment successes are few and far between.
On one November day, some 40,000 Americans joined a credit union, mostly to protest actions by big corporate banks and to nurture small banks. That protest, dubbed "bank transfer day," is part of a larger movement.
Reminiscent of student divestment movements begun in the 1960s, groups are forming to pressure universities across the United States to move their money from large banks to smaller, community-focused alternatives. If successful, the nascent bank divestment movement could have a lasting effect far beyond the single day of protest.
"Changing your bank account is awesome," says Dan Apfel, executive director of the Responsible Endowments Coalition (REC), which is building a responsible-investment movement with more than 100 colleges and universities. "But getting your school to change their bank has a substantially larger impact."
Many students are asking for the equivalent of 1 percent of their school's endowment to shift toward community banks and investments. Collectively, that would shift nearly $3.5 billion of the combined endowments of more than 450 colleges and universities and support some serious community development.
"As a student at WashU, I've benefited a lot from being in St. Louis," says Molly Gott, an REC student leader at Washington University in St. Louis. "I want to make that relationship reciprocal." She wants to push her school to consider what it can do to alleviate local problems including foreclosures and poverty.
The jury is still out on how much the protest can accomplish.
The REC, which had been laboring in relative obscurity for seven years, got a huge boost this fall when Bank of America announced it would charge some of its debit-card users a $5 monthly fee to replace swipe fees it was losing as a result of federal legislation. Consumers began to organize protests via social media. Fees became a rallying point for the "Occupy" movements around the US. In November, some 500,000 people joined credit unions, just shy of the total for all of 2010, according to the Credit Union National Association. By Nov. 1, all banks, including Bank of America, had backtracked on charging debit-card fees.
But are big banks losing customers?
"Banks ... haven't seen any significant movement whatsoever," says Richard Hunt, president of the Consumer Bankers Association, whose members include Bank of America. "Some people opened accounts at credit unions but didn't close their existing accounts."
"People try to make this a big bank versus small bank issue, but it's much broader than that," he adds. With new federal caps on fees, "everyone in the industry – small banks and credit unions included – are looking at cutting costs and raising revenue."
Student groups are also running into roadblocks. Ian Trupin, a junior at Brown University, helped mobilize 40 students to open community bank accounts following bank transfer day. "More people were interested [in opening accounts]," he says, but were kept from doing so because they shared accounts with parents or were expecting to graduate and move away. He and his peers plan on direct talks with the school next semester.