Report: Student Consumer Action Network

Since Congress largely deregulated consumer deposit (checking and savings) accounts beginning in the early 1980s, the 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, PIRG staff conducted inquiries at 392 bank and credit union branches in 21 states and reviewed bank fees online in 12 others. This report, “Big Banks, Bigger Fees: A National Survey of Bank Fees and Fee Disclosure Policies,” 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 new Consumer Financial Protection Bureau (CFPB) do to help improve transparency in the financial marketplace, an important goal as consumers seek to make ends meet in response to the lingering recession?

Findings:

1) Fewer than half (38%) of branches complied easily with the simple researcher request for fee schedules required by the Truth In Savings Act; only after two or more requests did a total of 55% percent of branches provide fee schedules as requested and as required by the Truth In Savings Act. In a finding virtually identical to recent U.S. Government Accountability Office (GAO) results, nearly one-quarter (23%) of branches surveyed refused to comply at all. Others provided often weighty piles of useless other brochures.

2) Despite the difficulty in obtaining full fee information, we found that free checking was available at half the branches visited (50%) and that an additional 29% offered free checking with direct deposit. The free accounts are widely available at small and regional banks and credit unions, a finding that has also been obtained by others.[ii]  While some big banks have raised fees and restricted or eliminated free checking, some still provide it, especially with a regular direct deposit.

Recommendations:

For Regulators (A more detailed list occurs later in the report):

The new 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 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 “Schumer Box” required for credit card disclosures.

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 are likely 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. 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.

See, for example, “Big Banks, Bigger Fees” (1999 and 2008), Double ATM Fees, Triple Trouble (2001), The Campus Credit Card Trap (1998 and 2008).

[ii] A financial reporter had similar results recently. See Jonathan Epstein, “Check It Out,” Buffalo News, March 14, 2011 story, available at http://www.buffalonews.com/business/moneysmart/article366488.ece  Excerpt: “Major national and large regional banks like Bank of America Corp. and HSBC Bank USA are eliminating free checking accounts, spurred by the loss of significant fee income because of new laws and regulations. But such accounts are alive and well at community banks, credit unions, and even big banks like M&TBank Corp. and First Niagara Financial Group.”