Just a few days after several big banks bowed to customer outrage and eliminated new debit card fees, banks are facing criticism on another front. Some policy think tanks and government officials are starting a new push to get all banks to come clean on fees.
Sens. Dick Durbin, D-Ill., and Jack Reed, D-R.I., held a press conference today to urge the Consumer Financial Protection Bureau to take on banks' fee disclosure policies. Here's what Durbin, whose name you may remember the amendment that caps the swipe fees banks can charge merchants for processing debit transactions, had to say:
"Transparency and competition are the two pillars of a strong free market economy. Those are the rules that Main Street American businesses live by, but for years, big banks have tried to play by a different set of rules," Durbin said. "We saw this week that the consumers of America have had enough. Today we're calling all of the nation's financial institutions to adopt a one-page, easy-to-read model disclosure listing the fees and key terms for their checking accounts. Giving consumers information clear, upfront and accurate information about the fees that they will be charged will allow consumers to shop around and make sound financial decisions."
Durbin asserts banks need to do a better job of making fee disclosures for checking accounts easier to understand. He's gotten some ammunition on that charge from the Pew Health Group, which did a study on checking account disclosures and found some serious issues.
From the April Report, "Hidden Risks: The Case for Safe and Transparent Checking Accounts":
Pew's research showed that the median length of bank disclosures for key checking account policies and fee information was 111 pages. In addition, the banks often used different names for the same fee or service; put the information in different documents, different media (Web or hard copy), or different locations in a document; and did not summarize or collect key information anywhere.
As someone who's spent a lot of time on bank websites researching fee information, I can vouch for the fact that the effort it takes to find the information, and the clarity with which it's presented can vary wildly. One site will have a simple chart you can get to in two clicks from the homepage comparing all its checking accounts' fees. The next will have that information buried so deep within its site that you have to end up using a search function to try and find it; once you get there, it's buried in some footnotes at the very bottom of the page.
And if you don't do your banking online and are looking for a hard copy of fee disclosures, you might have an even harder time getting answers. An April study by the U.S. Public Interest Research Group found that less than half of banks had fee schedules ready on hand for customers:
Fewer than half (38 percent) 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 law. In a finding virtually identical to GAO’s results, nearly one-quarter (23 percent) of branches surveyed refused to comply at all. Others provided often weighty piles of useless other brochures.
The problem here isn't that all banks hide their fees. Many banks are clear and upfront when it comes to what they charge, and any customer enterprising enough to spend 5 minutes looking can find out exactly what they'll be charged for everything from not meeting a minimum balance requirement to stopping payment on a check.
That being said, there are other banks that don't, and I think that is exactly the kind of problem the Consumer Financial Protection Bureau was created to address. The need for clear disclosure is going to be pretty acute in the next few months. This is a time of significant change in the banking industry. Banks are adapting to a new regulatory landscape created, in part, by Sen. Durbin's amendment, and many are going to be raising fees on consumers in the near term.
Those fee increases are likely going to lead to a lot of confusion about why increasingly large amounts of money are missing from people's checking accounts, and to a lot of people switching banks. Both of those situations need to be addressed with clear disclosures that help people make the most informed decisions possible about checking accounts.
What do you think? Do bank fee disclosures need to be more clear? Is government intervention going to be required to get all banks on board?