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Report: Consumer Protection
Bigger Banks, Bigger Fees
Since Congress largely deregulated consumer deposit (checking and savings) accounts beginning in the early 1980s, the state PIRGs have tracked bank deposit account fee changes and documented the banks’ long-term strategy to raise fees, invent new fees and make it harder to avoid fees. Over the last six months, state PIRG staff conducted inquiries at 250 bank and 116 credit union branches in 17 states and the District of Columbia and reviewed bank fees online in these and 7 other states. This report, “Big Banks, Bigger Fees: A National Survey of Fees and Disclosure Compliance,” examines the following questions:
- How easy is it for consumers to shop around?
- Are banks complying with the Truth In Savings Act, which requires disclosure of a schedule of account fees to prospective customers?
- Can consumers still find free or low-cost checking accounts or has free checking ended?
- What can the Consumer Financial Protection Bureau (CFPB) and other regulators do to help improve transparency in the financial marketplace?
The CFPB writes the consumer law rules for all banks and supervises or examines compliance of the largest banks (over $10 billion in deposits). For the purpose of this report, we call those “big banks” and others “small banks.”
- Only 48% of bank branches visited provided researchers with fee schedules as required by law on their first request. After two or more requests, eventually a total of 72% complied with the law.
- More than 1 in 10 (12%) branches never complied and refused to provide fee information at all, claimed that they didn’t have it or that it was only available if you applied for an account or told researchers to “go online.” Another 16% only provided partial information.
- Researchers found a wide variety of free or low-cost checking options, with 63% of small banks and 60% of credit unions providing totally free checking. Although the biggest banks have recently tightened requirements to obtain totally free checking (available at only 24% of big bank branches), it is still available at more than half of big banks with a regular direct deposit (59%).
- The survey found that small banks had lower average checking account fees, overdraft fees and foreign or off-us ATM fees, as well as lower balance requirements to avoid checking fees, than big banks.
- In a surprising finding, fully one-quarter of small banks are no longer charging their regular checking account customers so-called “off-us” ATM fees through a variety of regional and national ATM networks, including Plus, Smartpass, Presto, the SUM network and others. Additionally, others are providing at least 2-4 off-us transactions monthly at no charge. These practices undercut one of the presumed major benefits of an account at a big bank—access to large no-cost ATM networks. Some small banks are also reimbursing several or all surcharges paid monthly (surcharges are the fees imposed by the off-us ATM owner). Conversely, only two big banks (6%) waived ATM fees on basic checking accounts and one of those only did in one of its markets.
- While more than half of big banks (62%) posted their full fee schedules on the web, versus less than one-third of small banks (29%), finding the fees was often a scavenger hunt. Many banks, especially big banks, placed fees in massive, clunky PDF files. Some banks even hid fee schedule links in footnotes or, worse, in their “site maps,” with no link available from the “compare checking accounts” page or any other pages.
For Regulators (A more detailed list occurs later in the report):
- The Consumer Financial Protection Bureau has an important opportunity to make markets work better for consumers and good actors in the marketplace; it should make bank account fee disclosures more transparent by enforcing the current law and improving the law’s disclosure requirements.
- The CFPB should both enforce and extend the requirements of the Truth In Savings Act to the Internet. It should require that banks post fees in a searchable web format (e.g., xml or similar), to encourage the establishment of local online shopping guides by community groups.
- The CFPB should require that the most important savings and checking disclosures required by the Act be provided prominently in a tabular format, such as the simple disclosure being widely promoted by the Pew Charitable Trusts. It has already been adopted by at least 9 banks and several credit unions.
For Consumers (A more detailed list occurs later in the report):
- Review your bank statements and count your fees. In addition to ATM surcharges, you may be paying your own bank an “off-us” ATM fee that only appears on your statement, whenever you use another owner’s ATM.
- Examine how many fees you pay. Watch for a la carte fees you can avoid, for example, by only using online check images or statements. Use available text alerts to warn you of low balances that could result in overdrafts. Shop around. Look for better accounts. Bank at a credit union, not at a bank. Credit unions are member-owned, lower-cost alternatives to banks and often offer the same variety of services. It is easier to qualify for membership than most consumers think.
- Certainly, consider banking at a small bank, not a big bank. Consider moving your money by voting with your feet.
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