I have been the victim of a bank fraud in depositing my American Express travelers cheques. It is clear that my experience is not an isolated incident but part of a pattern of defrauding of American Express' clients (and others). The seriousness of this incident is compounded by the fact that the offending bank is Filanbanco, the institution that represents American Express in Ecuador. That the franchisee of American Express is engaged in systematic exploitation of American Express clients presents a serious moral hazard to American Express and a grave danger to its international reputation. I strongly urge American Express use whatever influence it has on its franchisee to encourage it to reform their treatment of clients. Failing that, I would urge American Express to sever its relationship with Filanbanco.

       The peril to American Express posed by Filanbanco's predatory behavior has to do with the special nature of its flagship product, the travelers check. The travelers check is now an endangered financial species; its niche crowded by the ubiquity of ATMs and credit cards. The principal attraction of the travelers check is the offer of a certain measure of security, the promise that if you are in trouble far from home, you can count on a some form of rescue or support from American Express. This is why I have used American Express travelers cheques in many previous travels despite the growing availability of somewhat more convenient and less expensive alternatives. It is in this sense that Filanbanco's exploitation of the trust that people have in American Express is so dangerous - American Express' representative in Ecuador is the bank that is the most predatory on American Express' clients. If reform is not possible, then separation is the only safe course for the future of American Express' good reputation.

       As indicated by the letterhead, I am a professor of Anthropology at the University of Connecticut in Ecuador for most of the year doing fieldwork with the support of a grant from the National Science Foundation. Our field site is in the tropical forest of Eastern Ecuador documenting the life histories of the Waorani, a group of Native South Americans. Our project office is in Puyo, the capital of the province of Pastaza where most of the Waorani live. I also spend part of the time based in Quito. I am a cognitive anthropologist, particularly interested in how it is that knowledge is transferred in natural settings. I believe my research interests are evident in the investigation section of this letter.

       The balance of this letter is dedicated to describing the details of this case. The first section lays out a chronology of events; the second section presents the results of my investigation of Filanbanco policies and practices; while the third and fourth sections offer my policy recommendations and conclusions.

Chronology

       On February 9th, I opened a savings account at the Puyo branch of Filanbanco; account number XXXXXXXXXX. When I opened the account, I was informed of fees regarding the monthly maintenance of the account and for using the ATM card but of no other charges. I was not given a brochure detailing the fees for various services, nor was I shown an example of the list of other fees. (As I discovered later, such a brochure is available from most other Ecuadorian banks, but not from Filanbanco.) I opened the account with an initial deposit of $40 in cash.

       On February 19th, I made an initial deposit of $500.00 in American Express travelers cheques into the account at the Amazonas and Robles branch of the bank in Quito (teller number 052005). The updating of my bankbook at that date showed a total of $540, the sum of the initial deposit of $40 and the subsequent deposit of $500. The teller did not tell me that there would be any additional charge for depositing the cheques nor was any such charge indicated on the bankbook statement.

       On March 7th, I went to the main Quito branch of Filanbanco at Amazonas and Unión Nacional de Periodistas to make a second deposit of travelers cheques. When I told the teller on the ground level that I wished to have a portion of my travelers cheques in the form of cash, I was directed upstairs to the mezzanine level to the section of the bank devoted to money exchange. Before I made the deposit, I first asked the teller to show me the current state of the balance in my account, to check to see whether the deposit of $500 had been made appropriately. I was told that the deposit made 16 days earlier on February 19th had not yet cleared. I was not given an answer to my original question, so I did not learn until later that the balance had dropped to $520 from the $540 that was recorded in my bankbook. I inquired why it had taken so long, since travelers cheques are the equivalent of cash.

       At this point the teller (number 054038) referred me to Mr. Leonardo Bravomalo Castillo who was the supervisor of the exchange section ("supervisor de cambios"). He explained that there was a 15 working day hold on all travelers cheques, and that the cheques would not be credited to my account for another couple of days. I protested that I had not been informed of the fact that there would be a delay and that although I could tolerate it, it was important always to inform me in advance of any such constraints. He apologized that this had not been done and we proceeded with the transaction. I asked whether it were possible to exchange the travelers cheques for cash and then deposit the cash in the account. Mr. Bravomalo dissuaded me from this course of action, explaining that there would be a 2.8 commission on the cheques if I wished to have them immediately in the form of cash. (I assumed that the 2.8 referred to a percent commission, which is the most usual way of charging a check cashing fee. Instead, I later learned that the 2.8 referred to a $2.80 charge for each travelers cheques. This amounts to a 14% commission on $20 cheques.) I declared that I did not wish to pay any such commission and was told that the only way to avoid the commission was to deposit the cheques directly into my account. I agreed to this approach, explaining that I could get cash from an ATM and that I could afford to wait and preferred to save the money.

       Although Mr. Bravomalo's clearly implied that there was a commission if one exchanged the travelers cheques for cash, but no commission if one deposited them directly into an account, this implication was false. At no point prior to making my deposit was I told that there would be a commission for depositing them directly into the account. At this point I began the lengthy process of signing and endorsing the eighty $50 travelers cheques that I was depositing into my account for a total deposit of $4000.00.

       After the eighty cheques had been signed and endorsed, the teller and I walked across the room of the exchange section to ask a clerk to update my bankbook with the deposit. At this point, a number of charges appeared on the bankbook statement prior to the recording of the deposit. There were ten of these charges, all dated February 20th (the day after my deposit of February 19th) and all ten were for $2.00 with a teller number of 165081. This left the final balance prior to my deposit of the $4000 at $520. (It is thus significant that I was never given the exact balance in response to my question of a few minutes earlier, for if I had been told the figure of $520, I would have been able to infer that there had been an undisclosed charge of $20 to the account.) These charges are illustrated in Figure 1. I asked the teller and the clerk what these charges were and neither of them knew. The clerk suggested that perhaps it was a fee for keeping too low a bank balance (which in itself would have been an undisclosed charge). We crossed the room again and the teller began an investigation on his computer of the origin of the charges. After some period, the teller came up with the answer that there had been a $2.00 charge for each of the ten $50 travelers cheques that I had deposited on February 19th.

       This news upset me, for I felt that I had been deceived. Not only did the charges signal an earlier undisclosed charge of $20 but it also indicated that the transaction that we were just completing would also have a previously undisclosed charge of $160. (The eighty charges of $2.00 to my account are shown in Figures 2, 3, 4, and 5, although they did not appear immediately on March 7th. The bottom of Figure 5 shows a balance of $4360 in my account after the charges had been deducted, which is equal to the $4540 deposited minus $180 in charges for depositing 90 travelers cheques.) Since I had gone to considerable lengths to avoid a commission, agreeing to an unusually long hold time for a financial instrument that is the equivalent of cash, it seemed dishonest for the bank to withhold the information that there would be a two dollar charge per travelers check deposited. I declared that the charge was outrageous; that I had never been informed of any such charge; and that if the charge were not removed, I wished to cancel the transaction and close my account. Mr. Bravomalo again joined the discussion and asked me to be calm; that he was confident that a reasonable solution to the charges could be found; that it was not necessary for me to stay because it would take a little while to work out a solution, but that he would call at the end of the afternoon with the resolution. The initial "reasonable solution" discussed was to treat all of the cheques of the transaction as though they had been only one check, for a net charge of $4 for the two deposits. He also informed me (falsely, it turned out), that once I had signed the cheques, they became the property of the bank, and that I could not take them with me to cancel the transaction. (The 90 fifty dollar American Express travelers cheques deposited in my Filanbanco account were sequentially numbered from HA348-929-340 to HA348-949-429, and were originally obtained from the Liberty Bank branch office in Storrs, CT on January 7, 2001.)

       On leaving the bank, I asked my travel agent (Angermeyer's Enchanted Expeditions) for the number of the main office of American Express in Quito. They gave me what turned out to be the number for authorizing use of the American Express credit cards (444-450), but which was represented to me as the main contact number for American Express. I then called the number to explain what had happened and to ask that the travelers cheques be cancelled so that new ones could be issued. The representative of American Express told me it was my own fault that I did not know the bank regulations and that they would do nothing to help me. The representative also told me that Filanbanco was an affiliate of American Express, the implication being that it was in American Express' interests to help their business partners rather than their clients when the two were in conflict.

       What the representative did not tell me is that she was in fact an employee of Filanbanco and that Filanbanco represents American Express in Ecuador and handles American Express credit cards here. In fact, the principal listing for American Express in Ecuador on page 39 of the 2001 Quito telephone directory is as "American Express - Filanbanco," and the main American Express office clearly shows both the American Express and Filanbanco logos. (See Figures 6 and 7.) (As the supervisor of the Quito American Express office, Ms. Veronica Ribadeneira explained later, "Filanbanco is the bank and American Express is a product of Filanbanco") This conflict of interest was concealed from me in the telephone call, and I had no reason to believe that I was not dealing with someone who genuinely represented the interests of American Express and its clients. The representative also did not tell me that her office was not authorized to handle questions of lost or stolen cheques, and that I should call the contact number in the US. In denying me this information, she was protecting the interests of her employer, Filanbanco, rather than those of American Express and its clients. Because I thought I had contacted American Express and had been refused help, it was some time before I learned that this office was not the appropriate venue to deal with my case. Had I received the explanation at that point that indeed it was my right to take away the travelers cheques from the bank, to declare them as damaged, and get replacement cheques, I would have been saved a charge of $160. I certainly was disappointed in what I believed was American Express's response to my situation.

       When I called Mr. Bravomalo later in the afternoon, he told me that the matter had not quite yet been resolved and that I should call back the next day. When I called on the following day (March 8th), he said that as yet nothing had been made final, that the matter required the approval of the vice-president in charge of the Quito region (Ms. Estela de Neumman, who was away in Guayaquil) and the manager of the branch office in Puyo where I had opened the account. However, the tentative solution was still to treat all of the cheques in each of the two transactions as a single entity, given that they were all from the same firm, but that the charge would likely be five dollars for each set rather than the two dollars we had originally discussed, for a total charge of $10. I made a mild protest of this change, but affirmed that although I preferred no charge to $4, and $4 to $10, I vastly preferred either alternative to the pending charge of $180. I made it clear that I did not just want a solution to my particular case, but a change in the policies of the bank that would prevent this from happening again in the future, either by revising the fee structure so that the charges were per transaction rather than per check or by insuring that all clients were properly notified of the charges prior to making a deposit. I believed him when he assured me once again that my patience would be rewarded with a reasonable solution of the matter. He said that the final resolution was unlikely to take place before the weekend and that I should call back on Monday. I said that I was going to Puyo on Monday, and so would call him on my return to Quito.

       On March 12th, I went from Quito to Puyo and met with Mr. Patricio Zurita, the Filanbanco branch manager, on the morning of March 20th. Although he had already been informed of the situation, I described the history of events from my vantage point. He responded that he would support me in my quest for a reasonable solution. We agreed that, if there were to be a charge for the deposit, the fair amount to charge was two dollars for each transaction, for a total of $4. I repeated to him that my goal was not simply a redress of my case but also a change in bank policies to prevent such a large undisclosed fee charged to other clients in my situation. I argued that the policy was not only unjust to me; it was unjust in general. I saw him again the following day and he confirmed that he had sent his recommendation that the total charge be $4 to his superiors. On my return to Quito, I made a couple of follow-up telephone calls to Mr. Bravomalo to determine whether the resolution we had discussed had been put into place; in the second of these he told me that the final crediting to my account of the over-charge would probably not happen until the cheques had cleared on the 28th of March. I said that the first set of twenty cheques had already cleared and that Filanbanco could show its good faith in crediting my account for the over-charge in the first case of the $20 charge; that way I could be better assured that they would credit my account for the over-charge in the second case of the $160 charge. We closed the conversation with the agreement that I would call him back when second set of cheques had cleared on the 28th.

       On March 29th, I again called Mr. Bravomalo who informed me that my account had not yet been credited, but that the amount of the charge had been revised upward to a 1% commission on the total amount, or $45, up from the $10 that had been the maximum amount discussed previously. I protested that this was much higher than anything we had discussed up to this point and that I would carry my protest to the highest levels of the bank. The following day, I called the main branch bank to ask for an appointment to see Mr. Adrian Galindo Pinto, the Chief of Operations and Services of the Quito Region and went to his office that afternoon. On arrival, I explained my reasons for wanting to meet with Mr. Galindo to his secretary. His secretary relayed my concerns to Mr. Galindo, who sent back word that he would investigate the matter, and that I should return on Tuesday for a final resolution. He declined to see me in person at that point. His secretary confirmed that the new figure for the charge for the two transactions was 1% of the value of the travelers cheques, or $45, a figure that I said was unacceptably high. Also on this day, I went to the American Express Travel Services office (administered by Ecuadorian Tours) where I learned that when I had called the main American Express office, I should have been informed that all calls regarding problems with travelers cheques should have been directed to the US - that no one in Ecuador is empowered to help resolve problems with lost or stolen cheques.

       On the afternoon of Tuesday, April 3rd, I returned to meet with Mr. Galindo. Mr. Galindo informed me that, unfortunately the bank was unable to deviate from its published fees for services, and that my account would be charged the full $180 for my deposit of the travelers cheques. He asserted that there would be chaos if each bank employee was given permission to change the rates at will. I was stunned and reiterated the history of the events that had brought us to this moment. I repeated that I had never been informed of any charge for depositing travelers cheques prior to depositing them; that the first time I had learned of the charges was after I had made the second deposit; that I had never seen the list of fees that he said were posted in every window; that it was clear at the time of the March 7th deposit that none of the three bank employees working on the matter knew what the charges were for until they looked it up on the computer, and that it was highly unreasonable to expect that a patron of the bank would have a better understanding of the fees for services than the bank's own employees. Further, I said that as soon as I had learned of the charges I had asked to cancel the transaction, but had been told that it was impossible. The system had worked like a trap that was impossible to extricate oneself from once caught. As I had told Mr. Bravomalo and Mr. Zurita on earlier occasions, I explained that my goal was not just to recuperate my money but also to ask that the policies be changed to prevent this from happening to others in the future.

       Mr. Galindo acknowledged that the fees were high, even excessive; that he understood why I was upset, but asserted that there was nothing that he could do as the fees were posted in every window of the bank; that indeed what I should have done is take the travelers cheques away with me if I had wanted to cancel the transaction, and that Mr. Bravomalo had been wrong to tell me that this was impossible once the cheques had been signed. But he concluded that Filanbanco had every legal right to charge whatever it wanted from its customers, and that it was the responsibility of the customers to learn the fees for services from the posted tariffs, and it was not the responsibility of the bank employees to correctly inform the customers of those fees. He argued that the charge for depositing travelers cheques is clearly stated on the listing of tariffs, and that I should have understood that there will be a charge simply by reading the posting. He told me that there were so many rates that it was unreasonable to expect that the tellers would inform the clients of all of the charges they were incurring as they made their transactions.

       Mr. Galindo then summoned Mr. Bravomalo to join us in the office, at which point Mr. Bravomalo falsely asserted that he had told me of a two dollar charge for depositing the cheques into my account, although he did say that he had mistakenly informed me that the fee was two dollars for the entire transaction rather than per check. I protested that that was not true, that I had never had ever been informed of any charge whatsoever for depositing to my savings account, but that without a tape-recording of the conversation I was powerless to refute it. (It is possible to note that Mr. Bravomalo's account does not make sense: if he had stated to me that the fees were $2.80 for cashing the travelers cheques and $2.00 for depositing them, why would I protest a difference of 80 cents when I had wanted cash and my alternative was to pay a higher fee at the ATM? One can also note that Mr. Bravomalo's alternative version is equally damning of Filanbanco, as in this version of events I would have been charged 80 times more than the amount I had been quoted as the rate.)

       At this point, Mr. Galindo asserted that I had indeed been informed of a charge prior to depositing the cheques (accepting Mr. Bravomalo's version and not mine); the fact that I had been misinformed (by a factor of eighty) was not the bank's problem, as the bank is not responsible for the mistakes of its employees. He said that the only possible recourse was to have Mr. Bravomalo pay for the charge, but that it was not the bank's responsibility. I argued that a bank is not just a set of walls but human beings as well, that clients have to be able to trust the word of the bank employees, and that the bank as an institution had to take responsibility for what its employees tell their customers, but to no avail. I also argued that it was clear that Mr. Bravomalo had been ignorant of the actual charges at the time of the deposit, along with the other employees, and just as it was unfair to hold me responsible for what I did not know, one should not ask Mr. Bravomalo to pay what would be a substantial fraction of his monthly salary. (One hundred and sixty dollars is equal to the "salario minimo vital general," 'the basic salary' roughly equivalent to the wages of a public employee such as a schoolteacher and presumably at least half the monthly salary of a bank supervisor. Nevertheless, I believe it is more reasonable to expect that bank employees should have a thorough knowledge of the bank policies than it is to have the same expectation of the clients.)

       At this point, Mr. Galindo began to indicate that he was a busy man and that he had wasted more than enough of his valuable time on my problem. He told me there was nothing more he could do about my situation, that the rates set by the tariffs were inflexible and that it was impossible to have exceptions in particular cases. He had repeated several times in the conversation "we just can't have the employees of the banks setting the rates however they like." He told me that I had every right to complain if I wanted, but that I should go to Guayaquil and lodge my complaint there at the Filanbanco head quarters. It was only after some time pointing out the difficulty and expense of going to Guayaquil to seek redress and my inquiry as to who was in charge of the Quito region, that Mr. Galindo acknowledged that it would be possible to take my complaint to Ms. Estele de Neumman, the Vice-President in charge of the Quito region. Mr. Galindo asserted that I would have had to pay a commission of some amount at wherever bank I sought to deposit the money and that I should resign myself to the charge. At this point, Mr. Bravomalo suggested that the fair solution might be for me to pay the average fee that banks charge for deposits of travelers cheques into accounts and that he would pay the difference. I balked at that, maintaining again that it should be the bank as a whole that should be responsible, not an individual employee. The meeting ended with no final conclusion being reached, Mr. Galindo said that he would give the matter some further thought, and I closed by saying that I could not believe that Filanbanco would not in the end do the just thing in this case. However, I was not given any basis for believing that there would be a change in Mr. Galindo's position. In fact, throughout the conversation with him, I felt I was being treated with barely concealed contempt, which is not the attitude that I had expected from the head of services at a financial institution. Nothing had happened to contradict the impression that I had been cynically strung along for a month so that my other options of resolving the matter would be exhausted and that I would have no recourse when the "reasonable solution" that had long been tangled in front of my nose was finally withdrawn. As this conversation with the individual in charge of overseeing services and operations of the entire Quito region was my best chance to understand the corporate culture and policies of Filanbanco, I will return to a consideration of it in the investigation section below. That section will present a summary of the policy statements and substantive assertions made by Mr. Galindo in this conversation as well as the results of my efforts to assess their accuracy or accordance with bank practice.

       On April 4th, I called the American Express Refund and Information number in the US (801 964-6665), and explained to Hyrum (employee number 2295) the details of the case. In tracing the check numbers I gave him, Hyrum told me that the cheques deposited on March 7th cleared on March 13th. Hyrum confirmed that Mr. Bravomalo had been incorrect in stating that my travelers cheques were worthless to me once signed, and that, had I brought them to the local representatives (American Express Travel Services - Ecuadorian Tours), an exchange for new cheques could have been arranged. Although I had initially asked to talk to a supervisor at American Express, given the complications and policy implications of the case, it was decided that for now, I would make an initial report and talk to a supervisor when American Express had had an opportunity to do a some investigation of their own. I gave him Mr. Galindo's name as a person to contact at the bank, as well as the general telephone number of the bank. Hyrum promised that American Express would email me shortly, giving me a case number and a means of sending a written version of the events to them.

       I then went to the U.S. embassy and explained to the American consul Suzanne Payne that I was the victim of bank fraud. Consul Payne agreed that $180 to make a pair of deposits into a bank account was excessive. She gave some helpful advice about how to proceed and offered to write a letter on my behalf "to protect the interests and property of U.S. citizens in Ecuador."

       I then went to the local authority that governs the banks (Oficina de Consultas, Peticiones, y Reclamos of the Superintendencia de Bancos), to find out how to make a formal protest. A translation of this letter will form the basis of my formal complaint to that body.

       Late on the afternoon of April 5th, I went to the main office of American Express - Filanbanco (where I had called on March 7th and was denied help) to speak with a supervisor and to explore the issue of the conflict of interest that they encounter when American Express clients called them with complaints about Filanbanco. I spoke at some length with Ms. Veronica Ribadeneira who is far and away the most sympathetic and helpful employee of Filanbanco that I have encountered. She confirmed that her office was the principal representative of American Express in Ecuador, although she was an employee of Filanbanco. As mentioned earlier, she explained that Filanbanco is the bank, and American Express is the product and that Filanbanco is a franchisee not just of American Express but of Visa as well. Having established that I was in the right place, I described to her the problem that I had encountered when I had called their office and had not been told I had reached the wrong office but instead was refused help, I thought by American Express but in fact by Filanbanco. Her initial reaction to my account was "That response [referring to being told 'its your own fault, we won't help you'] is really not a good thing … because we are not responsible for travelers cheques." After I elaborated the history a bit more, she reiterated that the response I had been given surprised her because the members of her office knew nothing about the management of travelers cheques, implying that they had no business denying help to a client who called them. She disagreed with Mr. Galindo's assertion that banks are not responsible for the actions of their employees. She also volunteered that it pained her that this had happened to me because I should have received a more precise answer that I was not calling the right number when I had called their office on March 7th. She made some effort to identify the person I had talked to that day, but was unable to find her, presumably because the individual worked in the authorization section and not in the section issuing credit cards. She asserted that while the bank did have the right to set its own rates for its services, it should inform the clients of the charges for the services. I agreed. I reiterated to her that my goal was not just to recover my money but also to change the bank's policy. I explained that there are probably many others who had suffered the same treatment that I did, but had not said anything about it. She acknowledged that if the bank employees do not adequately inform the clients of the charges, the client has no way of knowing what the charges are. It was reassuring to learn from her that the sort of contempt for clients displayed by Mr. Galindo was not universally shared within Filanbanco. She went so far as to tell me that she felt ashamed that I had been treated the way I had.

       In my second and final meeting with Mr. Galindo on the afternoon of April 6th, the attitude he displayed toward me was less contemptuous and more collegial than shown in our first meeting. He offered to revise the charge for depositing the travelers to a 1% commission of $4500 or $45. (However, on April 9th when I began the process of closing the account, I discovered that even in giving a partial refund of the over charge, they made an arithmetic mistake, subtracting 1% of $4500 or $45 not from the 4% of $4500 or $180 that had been charged in total, but from the amount of the 4% commission on the second deposit of $4000 alone, $160, leading to a credit of $115 rather than the $135 that should have been credited. This credit is reflected on the fifth page of the bankbook, shown in Figure 8. I attribute the discrepancy to incompetence rather than dishonesty.) Unfortunately, the offer was too little too late: only after I had complained to American Express and to the U.S. consul, and spent most of three days investigating their practices, did Filanbanco offer what I had already told them was an unacceptably high charge for a service that almost all other banks render for free. I am not sure what waves generated by my activities reached him, but I suspect that the contemptuous attitude he displayed toward me in the initial meeting probably better represents what other people in my situation can expect. The palliative he offered also does not address the broader policy issues raised by their practices of denying their responsibility to properly inform their clients of their charges and of denying their responsibility for the consequences of the misinformation given by their employees. These policy issues are discussed in the following section.

Investigation

       My conversation with Mr. Galindo on the afternoon of April 3rd was an important opportunity to gain an insight into Filanbanco corporate culture, through the positions and assertions of the individual in charge of overseeing operations and services at this bank. The following is a summary of his statement of bank policy positions:

1. It is the client's responsibility to learn the charges imposed by the banks by reading the posted tariffs and not the responsibility to the bank to inform the client of those charges. This implies that information about the tariffs is readily available and that the tariffs are so clearly written that any competent adult should be able to understand the nature of all charges.
2. When a bank employee gives erroneous information or instructions to a client, and the client is harmed by following those instructions, the bank bears no responsibility for the harm caused to the client, as it is simply a problem between the individual employee and the individual client. The bank bears no responsibility or liability for the errors of its employees.
3. Rates and tariffs are absolutely immutable, even in situations in which the application of the rule leads to an absurd or excessive result (e.g., the equivalent of a school teacher's monthly salary to make a bank deposit).

       In addition to these policy positions, Mr. Galindo made a number of substantive assertions.

1. All banks will impose some charge for depositing travelers cheques into an account.
2. Filanbanco's tariffs are posted in every teller's window and are readily visible.
3. It is unreasonable to expect that the tellers would inform the clients of all of the charges they were incurring as they made their transactions.
4. The charge for depositing travelers cheques is clearly stated on the listing of tariffs, and that clients should understand that there will be a charge simply by reading the posting.

       The following is an assessment of whether Mr. Galindo's substantive assertions are accurate and whether his statements of bank policy are tenable.

       To test the accuracy of assertion [A], I took a sample of banks and exchange houses by stopping at each one I saw walking down the Avenida Amazonas from Avenida Colon to Avenida Patria and up the Calle 12 de Octubre, from Avenida Patria back to Avenida Colon in the financial section of Quito. I asked how much they charged for cashing travelers cheques, and, if they were a bank, how much they charged for depositing the cheques in a personal account. (The rates quoted by banks for cashing cheques are typically for those who have an account at the bank. Many banks will not cash travelers cheques for individuals who do not have accounts and two banks that I encountered, Banco Confiec and Banco Centro Mundo, did not accept travelers cheques at all.) The following table summarizes what I learned.

       It can be seen that Filanbanco charges more than any other bank for cashing travelers cheques. They charge more than five times as much for $50 cheques and more than fourteen times as much for $20 cheques as the average of the other banks. But if the ratio of the fees Filanbanco charges to what the other banks charge for cashing travelers cheques is high, the ratio of the fees than Filanbanco charges to what other banks charge for depositing travelers cheques into an account is much higher. Only one of the other seven banks that I visited charged anything at all for depositing travelers cheques into a personal account and that bank charges half of what Filanbanco does. In fact, the rate that Filanbanco charges for depositing cheques is higher than what any of the other banks charge for cashing travelers cheques, and four times higher than that average. A client of Filanbanco would have no reasonable expectation that there should be a charge for depositing travelers cheques into an account because almost no other banks do so. (The only other bank to impose a charge, Produbanco, has only started to do so this month so that even the agents in their customer service section are ignorant of the existence of the charge.) Thus Mr. Galindo's substantive assertion [A] that all banks charge something for depositing travelers cheques is plainly inaccurate.

       Mr. Galindo's assertion [B] that a tariff of fees for services was posted at every window of the branches of Filanbanco and is plainly visible is also false. In each of the two bank branches that I visited, the full set of tariffs was only posted once, if at all. (On April 6th, for example, there was not a full tariff posted anywhere in the main branch, although there had been one posted on April 5th.) In the case of the Amazonas and Robles branch, where I deposited the 10 travelers cheques on February 19th, the only place that the full set of tariffs is posted is in the customer service section of the bank. This is on the side of the building off the main hall, well away from the counter with the deposit slips and the tellers' windows, and hidden from the deposit slip counter by an intervening pillar. There is a second partial set of tariffs posted over the counter with the deposit slips, but this partial listing does not include the service charge for depositing travelers cheques, or indeed most of the various fees that Filanbanco charges for services. It is possible to enter the bank, fill out a deposit slip, wait in line for the teller, and make the deposit without coming within 15 meters of the posted tariff and never to have it come into the direct line of sight. (Although an agent in the customer service section gave me permission to take photographs of the tariffs themselves, the branch manager denied me permission to photograph the spatial relationship between the location of the tariff and the rest of the bank, ostensibly for security reasons.) There is no set of tariffs at all posted in the exchange section on the mezzanine of the main branch where I deposited the eighty cheques of March 7th. The relative scarcity and invisibility of the tariffs also bears on the implications on Mr. Galindo's first policy position, as discussed in the next paragraph.

       In an effort to test whether information about the tariffs was readily available (an implication of Mr. Galindo's policy position [1]), I asked an agent in the customer service section of the Amazonas and Robles branch on April 4th for a copy of the fee schedule in the form of the sort of brochure that most other banks provide. Just as when I opened the account in Puyo, again I was told that such a brochure is not available and that the only way to learn the rates was to read them as posted on the wall of the bank. The schedule of tariffs is a large document (47 cm. X 33 cm.) in small print, with 91 boxed categories of charges with from one to 10 charges per category as shown in Figure 9; If one must stand at the wall to study a document of this complexity to learn the tariffs, the information cannot be deemed "readily available." On April 5th, I asked the branch manager, Mr. Rene Luna, for a copy of the rates and he complied. However the copy he provided contained only about a fifth of the categories of charges on the full set of tariffs and did not include the fees for services such as depositing travelers checks. The partial listing of tariffs I received from Mr. Luna is shown in Figure 10. When I pointed this out, Mr. Luna said that the full set of rates was not necessary because the tellers always told the clients of all the charges at the moment they delivered the services. To clarify, I asked him whether the system depended on the tellers giving all the necessary information at the time of the transaction and Mr. Luna replied "Eso es" ('That's it'). I then asked whether they told of all of the charges at the time of rendering the service and he answered "Claro" ('Clearly.') This is in direct contradiction to Mr. Galindo's assertion [C] that it is unreasonable to expect that tellers will tell clients of the charges at the time of the transaction.

       Of course, Mr. Luna's assertion that tellers always inform their clients of any applicable charges at the moment of the transaction is itself false, as my experience in making the two deposits of travelers cheques bears out. It should be interpreted as a rationalization for why it is impossible for a client to obtain a copy of the rates and not as an actual statement of practice. I only use it to show that it is reasonable to expect tellers will inform clients of all charges, if branch managers tell clients that that is the practice. When I returned the next day with my bankbook and pointed out that in my case, the teller had not done what he had said they always do, Mr. Luna denied any responsibility for the consequences of his employee's actions and retracted his earlier remarks.

       Mr. Galindo's assertion [D] was that the charge for depositing travelers cheques is clearly stated on the listing of tariffs, and that any client should understand that there will be a charge simply by reading the posting. There is indeed a section of the tariffs entitled "Cheque de Viajero" ('Travelers check') which includes a listing of fees for buying cheques of $20, $50, $100, $500, and $1000, as well as the $2.80 charge per check for cashing each check ("CANJE comisión flat por unidad 2.80" - 'Exchange flat commission per unit 2.80'). This section is labeled "A" in the overall view of the full tariffs in Figure 9 and in the close-up of this section in Figure 11. However, the section covering travelers cheques does not include the $2.00 charge for depositing travelers cheques into an account. This charge is covered by a line twenty one entries and four major sections lower down as "deposito de Ch. exterior en cuenta local (Gestion cobro) 2.00" ('deposit of a foreign check into a local account (Management charge') 2.00). This line is labeled "B" on Figures 9 and 11. Because the charge for depositing travelers checks into a personal account is covered in a separate section about a quarter of the way further down the form from the section devoted to travelers cheques, and the term used to refer to it does not explicitly mention travelers cheques, it is impossible to know that the charge applies to travelers cheques without being explicitly told by an employee of the bank. This interpretation was confirmed when I asked the information clerk at the main branch (on April 5th) how was one to know that the phrase "deposito de Ch. exterior en cuenta local (Gestion cobro)" applied to travelers cheques. Her answer was simple: a bank employee has to tell you. The fact that it would have been relatively simple to add a line to the travelers check section stating a $2.00 fee for depositing travelers cheques into an account, suggests that the motive for the obfuscation was a desire to deceive their clients about the existence of the charge. Again, Mr. Galindo's assertion [D] was false.

       Given that information about the fees is not readily available nor is the language of the posted tariffs clear enough to allow clients to correctly infer the rates from the postings, I believe it is fair to say that Mr. Galindo's policy position [1] (that the bank bears no responsibility to inform clients of the charges for transactions) is untenable. Indeed, this is exactly what Ms. Ribadeneira, the American Express credit card supervisor had stated: that although the bank has the right to set its own rates, it also had the responsibility to properly inform its clients of those rates prior to charging them.

       Mr. Galindo's position [2] that the bank cannot be held responsible for the mistakes of their employees is absurd on its face: I know of no other corporate entity that completely denies responsibility for the actions of the employees that make it up. After all, the very concept of a corporation is of a corporate individual composed of a number of individual humans: the bank is more to be identified with its employees than with its walls.

       Ironically, the very fact that in the end Mr. Galindo offered to deviate from the published tariffs belies his position [3] that those tariffs are fixed and immutable.

Policy Recommendations

       It is clear from my experience and investigation that a number of reforms of bank policy and procedure are called for:

1. Signed consent forms for fees that are not charged at the moment of transactions so that it is assured that clients are properly informed of fees prior to transactions, with the proviso that if a client is able to show charges for these services and the bank is unable to supply the signed consent for those charges, the charges would be revoked;
2. A removal of all charges for the deposit or exchange of American Express travelers cheques, given that most other banks do not charge for the deposit of travelers checks and that Filanbanco represents American Express in Ecuador;
3. If the charge for a deposit is not removed, a revision of the table of tariffs so that all charges relating to travelers cheques are in the same section and the tariff clearly states "deposito de cheques de viajero en cuenta personal, por unidad 2:00" ('deposit of travelers cheques in personal accounts, per unit 2:00');
4. A review of the entire table of tariffs to ensure that clients are properly able to infer how the stated fees apply to their transactions and the removal of all obscure or ambiguous language;
5. The development and distribution of brochures that clearly list and explain the most important fees for services, like those distributed by other banks.
6. An acknowledgement of the bank's responsibility for the actions of its employees and their duty to redress the harm done to clients when they follow misinformation.
7. A shortening of the hold times of travelers cheques at least to eight days (given that the cheques typically clear in less) or to zero (given that travelers cheques are the equivalent of cash and that one is in effect exchanging American Express travelers cheques at the representative of American Express).
8. Intensive education of tellers and supervisors in the banks own policies and rate structures with periodic testing;
9. Instructions to all employees of Filanbanco that answer the telephone on behalf of American Express that in cases in which clients mistakenly call that number is search of help with a problem with their travelers cheques that the caller be clearly informed that they have reached the wrong number and that they should make a collect call to 1(801)964-6665 in the U.S.

       American Express should also ask its Travel Services office at Ecuadorian Tours to post a table of rates given by different banks and exchange houses so that their clients can intelligently chose an institution offering the best rate. The table I have developed might serve as a starting point. Although these reforms are clearly called for, it is not clear that the corporate culture at Filanbanco as represented in the attitudes displayed by Mr. Galindo and Mr. Luna will permit these reforms to take place.

Conclusion

       In sum, I believe I have been the victim of a systematic bank fraud that has probably been practiced repeatedly on other American Express clients. Filanbanco does not clearly state the charges it imposes on it clients either by the posted tariffs or by the bank employees at the times that transactions are made; it does not make available to its customers a brochure stating the charges; it imposes fees for services that virtually no other bank charges; and yet maintains that it is the responsibility of the customer to divine what the tariffs are without being told by the bank employees. Furthermore, even in cases in which the bank acknowledges that an employee has grossly misinformed a client, it asserts that it bears no responsibility for the resulting harm caused to the client. In short, Filanbanco departs so far from the norms that govern most other financial institutions that it is a great hazard to American Express' reputation to be associated with them. If the reforms described above are not enacted, I would urge them to sever their relationship with a company that so patently abuses American Express customers and find another Ecuadorian bank to serve as its franchisee for its credit cards. I also ask, given that Filanbanco is American Express' representative in Ecuador, that American Express take some responsibility for the harm caused me by their affiliate and restore to me any fraudulently taken charges.

Figures:

Figure 1: Bankbook showing the charges that appeared on March 7th.

Figure 2: Page one of the bankbook after updating with the charges incurred on March 7th.

Figure 3: Page two of the bankbook after updating with the charges incurred on March 7th.

Figure 4: Page three of the bankbook after updating with the charges incurred on March 7th.

Figure 5: Page four of the bankbook after updating with the charges incurred on March 7th.

Figure 6: Listing of American Express on page 39 of the 2001 Quito telephone directory.

Figure 7: Outside of the main American Express office on Avenida de los Shyris.

Figure 8: The last page of the bankbook, reflecting the credit of $115 on April 9th.

Figure 9: Listing of the fees for services. The original is 18.5" by 13". The letter "A" indicates the position of the statement of fees for buying and cashing travelers checks, while the letter "B" indicates the position of the line indicating the charge applied for depositing travelers cheques into an account. The second listing does not use the term "cheques de viajero" ('travelers cheques') but rather "deposito de Ch. Exterior en cuenta local" ('deposit of a foreign check into a local account').

Figure 10: Partial listing of tariffs given to me by the branch manager of the Amazonas and Robles branch of Filanbanco on April 5th. Note that it does not include mention of the charge for depositing travelers cheques into an account.

Figure 11: Closeup of the section of the tariffs including charges for buying and cashing travelers cheques (A) and for depositing travelers cheques into an account (B).

Names, addresses, and telephone numbers

American Express - Filanbanco
Avenida de los Shyris 3147 y Tomas de Berlanga
256-332; Autorizaciones 444-450
Casilla 17-17-22

Verónica Ribadeneira
American Express
Supervisora
Vribadeneira@filanbanco.com

Filanbanco Sucursal Mayor
Avenida Amazonas y Unión Nacional de Periodistas
Conmutador 265-000 (main number)
Email www.filanbanco.com

Puyo Branch
Patricio Zurita
Jefe Agencia Puyo
03 884-298

Suzanne Payne
Cónsul de los Estados Unidos de America
payneSP@state.gov

Leonardo Bravomalo Castillo
Supervisor de cambios
265-000 x2047

Rene Luna
Jefe Agencia Amazonas
Avenida Amazonas 477 y Robles
220-960

Adrian Galindo Pinto
Gerente de Operaciones y Servicios
Regional Quito

Estela de Neumman
Vice Presidente Regional Quito

Señora
Directora de Consultas, Peticiones, y Reclamos
Superintendencia de Bancos
Quito