A new study from The Pew Charitable Trusts, a nonprofit organization that aims to improve public policy, reveals that not all checking accounts in the United States are created equal.
Pew has been a staunch advocate of checking account transparency since it began to tackle the challenge of overwhelmingly long and confusing checking account disclosures. In 2011, the average length of these documents was a whopping 111 pages, making them nearly impossible for any consumer to read completely. In response, the organization developed a simple, one-page summary disclosure box to make checking easier to understand.
Pew's new study, "Checks and Balances: Measuring Checking Accounts' Safety and Transparency", reveals that many banks still haven't embraced easy-to-understand checking accounts. The study looked at 36 of the biggest banks in the country, with the results varying in different states. For example, 68 percent of big banks in New York have adopted Pew's disclosure box. In Ohio, that figure falls to 38 percent, and in Tennessee, it drops to a measly 22 percent.
"The bottom line is that, when it comes to banking, it matters where you live," says Susan Weinstock, director of Pew's Safe Checking in the Electronic Age Project.
Of the 36 banks involved in the research, Weinstock says only 13 have adopted the disclosure box. However, Weinstock and Pew want banks to do more than offer simple account terms. The organization also wants banks to eliminate the potential for account holders to overdraw their accounts at ATMs or while making point-of-sale transactions at retail stores. In addition, they are asking banks to stop re-ordering transactions in a manner that can result in more costly overdraft fees.
While some members of the banking industry are already revising their checking terms to become more consumer-friendly, no banks in the study adhered to all of Pew's best practices.
"It is important to note that all banks have room for improvement," Weinstock says.
To spur that improvement process, the organization is recommending that the Consumer Financial Protection Bureau, or CFPB, begin to require the entire banking industry to adopt easy-to-understand account summary disclosure boxes, make their overdraft fees reasonable and proportional to what they actually cost the bank and prohibit transaction re-ordering.
What do you think? Will the CFPB act on the recommendations and make checking clearer for consumers across the country?