The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- Susquehanna Latest Bank to Settle Excessive Overdraft Fees Litigation
Philadelphia Business Journal 27 Feb 2013
Susquehanna Bancshares in Lititz, Pa., has settled a lawsuit with customers who challenged the company's overdraft fee policy. Without admitting wrongdoing, the bank agreed to pay about $3.7 million to settle the litigation. Consumers have sued a number of banks, claiming that they wrongfully shuffled the order of debit card processing and ATM transactions as a way to maximize fee revenue. Bank of America, Citizens, PNC Bank, and TD Bank are among those that have settled or are seeking court approval of settlements.
- Bank Fees Are Rising for Checking Accounts, Overdrafts, ATMs
St. Louis Post-Dispatch 19 Feb 2013
A new survey by MoneyRates.com has found that bank fees are on the upswing. The average monthly fee for a checking account is up 18 cents to $12.26 over the past six months, while overdraft fees have also grown 18 cents to reach an average of $30.01. The fee for non-customers using an ATM has risen 20 cents to $2.60. On a positive note, MoneyRates said that 37 percent of checking accounts charge no fee at all. Fees at online-only banks are generally holding steady, while fees associated with banks with branches are climbing. For the study, MoneyRates surveyed the 50 largest U.S. banks as well as 50 medium and smaller-sized banks.
- First National Bank Won't Change Way It Processes Transactions
Pittsburgh Post-Gazette 13 Feb 2013
A U.S. District Court has granted preliminary approval to a settlement with First National Bank (FNB) of Pennsylvania over its practice of processing customer debits from highest amount to lowest. Consumer advocates complain that the policy incurs the maximum amount of overdraft fees and depletes customer accounts faster. While other banks targeted in similar lawsuits have promised to process transactions in chronological order, FNB will maintain high-to-low sequencing. However, it will step up customer disclosures to explicitly explain how the posting order for checks, debit transactions, ATM activity, and point-of-sale purchases could result in "the imposition of additional fees." FNB also will establish a $3 million fund, less one-third for attorney fees, for customers who were hurt by the high-to-low policy between June 1, 2006, and Feb. 8, 2013.
- The Tightrope Between Checking Account Fees and Consumer Defections
The Financial Brand 11 Feb 2013
Many consumers of retail financial institutions are willing to make compromises; and about half of them would rather pay for banking services one transaction at a time, à la carte. In a new survey, the Deloitte Center for Financial Services calculated that 48 percent of consumers would consider paying 25 to 75 cents per transaction, rather than a fixed monthly fee ranging between $15 and $30. The finding indicates consumers' preference for more transparency. Another 40 percent of survey respondents were interested in a digital banking plan that would offer reduced fees while providing a limited level of in-person services. Older respondents were more favorable toward high balance requirements, while younger respondents were more supportive of a discount for favorable social media activity. However, many consumers believe that banks are unfair in raising fees and say they will switch institutions if fees go up on existing services. Communication and transparency with customers remains vital for financial institutions.
- Banks Face Backlash on Checking Fees: Survey
American Banker 07 Feb 2013
About 58 percent of consumers polled say they likely would change banks if there was a $5 monthly fee increase, according to a report by the Deloitte Center for Financial Services. The finding suggests that banks could find it difficult to recoup fee revenue lost to new regulations. Consumers with checking accounts usually do not know how much their account may cost the bank. In the survey, 75 percent of customers say they believe it costs their bank less than $11 per month to service their checking accounts; in reality, the cost is closer to $20. The report, based on responses from more than 4,200 checking account customers, also found that 74 percent of customers are either satisfied or very satisfied with their primary bank. Interest margins have shrunk as new regulations make it tougher for banks to earn money from overdraft fees and debit card swipe fees, and fewer customers have free checking accounts. Only 39 percent of interest-free checking accounts are available for free, compared to 76 percent in 2009, according to Bankrate.com. Rather than raising prices broadly, the Deloitte report suggests that banks target specific offers at specific customers, based on demographic and certain psychological traits.
- Urban Trust Stops Charging Overdraft Fees on Prepaid Cards
American Banker 05 Feb 2013
Urban Trust Bank of Lake Mary, Fla., has eliminated overdraft fees on its prepaid cards, effective Feb. 1. Consumer advocates had complained that the charges were tantamount to payday loans with interest topping state caps. Indeed, the cards were sold at the outlets of payday lender CheckSmart; they offered overdraft protection for a fee of 15 cents per $1 in negative balance, a rate that exceeded limits in several states. Urban Trust said that it would continue to offer the cards but that they would no longer carry the overdraft protection. "Urban Trust Bank did the right thing and rid its prepaid cards of overdraft fees," commented Lauren Saunders of the National Consumer Law Center. "Prepaid cards should be just that: prepaid and not vehicles for evading state interest rate caps and payday laws."
- Helping the ‘Unbanked’ Get Affordable Financial Services
Holly Springs Sun (NC) 15 Jan 2013
A recent survey by the Federal Deposit Insurance Corp. and the Census Bureau found that 17 million U.S. adults lack a traditional checking or savings account. On top of that are 51 million "underbanked" Americans, who patronize alternative lenders such as check-cashing services or payday loans because their basic financial needs are not all met by a bank or credit union. Americans may not conduct financial transactions through a bank for many reasons, including lack of sufficient funds to need or open an account, lack of proper identification, language barriers, lack of trust in banking institutions, or ineligibility due to a bad banking track record. Retailers and other alternative providers are trying to fill the void for customers who cannot or will not use banks or credit cards. Bankrate.com lists dozens of prepaid cards that offer functionalities such as direct deposit, online purchases, and bill pay. Other businesses may provide check cashing, money orders, or wire transfers. However, these services can carry fees and other charges that can add up to much more than the $5 to $15 a month that a regular bank's checking account may cost. Consumers can find competitive bank account rates at Bankrate.com and can seek a credit union for which they may be eligible at ncua.gov.
- Banks Bury Fees in the Fine Print
MarketWatch 14 Jan 2013
Pew Charitable Trust's Safe Checking in the Electronic Age Project points out that banks are embedding many checking account disclosures in 6-point type, if they are disclosing them in print at all. "No one actually reads 65 pages of disclosures," acknowledges the director of the project, Susan Weinstock. "Fees get buried in there and people don't know about them." There are as many as four dozen different potential fees tied just to checking accounts, but the wording and definitions in the disclosures sometimes leave consumers even deeper in the dark. Some of the biggest offenders, which most checking account holders never know exist until they are slapped with a corresponding fee, are disclosures governing mandatory arbitration; posting order for debits and deposits; and fees for closing an account early, handling a bounced check, using a coin-counting machine, making a very large deposit; having a dormant account for six months to a year; or having mail returned to the bank, such as if the consumer changes residences and fails to provide the new location to the bank. Alex Matjanec of MyBankTracker.com says it is difficult to get a full fee schedule until an account has been opened; but, even so, banks are constantly changing their fees. Some banks will force the customer to contact customer service to learn about a fee, he notes, "and then they charge you for talking to customer service."
- Activist Group Flags BankUnited's Lending Practices
American Banker 10 Jan 2013
Nearly 100 neighborhood housing groups in New York City have banded together to keep BankUnited out of their community, based on what they say is poor treatment of low-income and minority borrowers. Despite the bank's claim of a solid Community Reinvestment Act rating, the Association for Neighborhood & Housing Development (ANHD) argues that BankUnited's track record is smudged. It points Broward and Miami-Dade counties in Florida, where it says the bank has failed to generate an appropriate volume of loans for low- and moderate-income residents and made no loans at all to African-American borrowers in 2011 and to just four blacks in 2010. As BankUnited prepares its New York expansion, the critics complain that it has not applied to set up branches in the city's more disenfranchised sectors. ANHD "does not believe that banks with a documented history of troubling lending practices should be given regulatory permission to do business in our city," according to a press release.
- Introducing A La Carte Checking
Wall Street Journal 04 Jan 2013
The American Bankers Association said it predicts more banks will begin offering services "a la carte" in an attempt to avoid the industry's fee-charging pitfalls, such as some rivals' disastrous attempts to charge for debit-card use. Frost Bank, a $20.9 billion-asset, San Antonio-based unit of Cullen/Frost Bankers, for instance, charges a $5 monthly fee for basic checking that includes online and phone banking, account-balance email alerts, and overdraft protection. For an additional $2 a month, customers can get mobile bill-payment. Experts say that unbundling these services lets banks offer customers an array of services now and add more as they become available, potentially upping revenue for years to come.
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- Consumer Bank Card Delinquencies Are Lowest Since 1994, ABA Says
Bloomberg 03 Jan 2013
The American Bankers Association (ABA) reported that U.S. bank-card delinquencies dropped to the lowest level in 18 years as consumers bolstered their personal finances amid uncertainty over the country's economy. Bank-card accounts overdue by 30 days or more fell to 2.75 percent of all accounts between July and September 2012 from 2.93 the previous quarter, the ABA said. ABA Chief Economist James Chessen said the decline in bank-card delinquencies was a bright spot in a report that neglected to show improvement across eight loan-installment categories tracked by the industry group.
- New Rules on Debit-Card Processing Start to Pinch Small Banks and Credit Union
Washington Post 31 Dec 2012
Financial reform laws have cut into debit-card processing revenue for community banks and credit unions, these institutions are reporting. This contrasts with reports by the Federal Trade Commission and the Government Accountability Office, which found that a provision of the Wall Street reform law has fulfilled its purpose and protected small banks from losing revenue. The provision exempted smaller financial institutions from lowering their card processing fees, or “swipe fees," but capped them for large banks in October 2011. Because of the rule, regulators say, credit card companies created a two-tiered pricing system where small banks can continue charging customers higher rates for using their debit cards. Community bank and credit union executives, however, say otherwise. Local banking executives expect the revenue decline to continue, which could drive community banks and credit unions to levy new fees and reduce free services -- a move that larger banks have been criticized for making.
- Appeals Court Backs Wells Fargo on Method of Assessing Fees
Los Angeles Times 27 Dec 2012
The U.S. Ninth Circuit Court of Appeals on Dec. 26 ruled that banks may post checking account withdrawals in an order that allows them to accumulate higher overdraft fees. The decision overturned a District Court injunction that prohibited Wells Fargo from charging Californians overdraft fees when the bank posted the biggest debit card transactions first. The appellate judges ruled that a California consumer law was preempted by a federal banking law. They also overturned an order that Wells Fargo pay $203 million in restitution to California customers. However, the appeals court let stand a 2010 finding that the bank violated state law by misleading customers about its posting practices. While the bank had told customers that debit card purchases were deducted immediately from the user's checking account, it actually posted the withdrawals in order from highest to lowest -- which maximizes overdraft fees. The case will return to district court, which could order the bank to pay restitution for misleading customers on posting practices. A spokesman for Wells Fargo said the bank now posts withdrawals in chronological order.
- Q&A: What Is a Zombie Bank Account?
WPXI.com 19 Dec 2012
A "zombie bank account" is created when a bank reopens a closed checking account -- or brings it "back from the dead" -- without notifying the account holder. Several of the largest U.S. banks reserve the right to reopen a closed account if the account receives a credit or debit charge, rather than decline the transaction. Bank of America, Chase, and Fifth Third Bank outline this practice in their checking account agreements. They also are not required to notify customers if a closed account has been reopened. This means that consumers may be unaware of the zombie account until they receive a statement in the mail. While customers are responsible for updating direct deposit and automatic debit payments, it can be easy to miss one or two because of the growing popularity of online billing and mobile banking. Reopening a closed account could lead to the accumulation of fees and the trouble of having to close the zombie account. Consumers who are having a difficult time getting rid of a zombie account can contact the Consumer Financial Protection Bureau through its online complaint form.
- Overdraft Revenue Begins to Rebound
American Banker 17 Dec 2012
Annualized overdraft revenue at banks and credit unions slumped to $31.1 billion in the 2011 third quarter but gained back 2 percent during the same three months of this year. Moebs Services calculated the volume at $31.8 billion for the period, which is still down from a peak of $37.6 billion in the third quarter of 2008. Overdraft revenue had been falling since then, largely due to banks slashing fees in response to outcry over their practice of shuffling the order to transactions in order to trigger as many overdraft penalties as possible. The slow creep in fee volume now may be the result of the growing use of debit cards. According to Moebs, the number of debit card transactions nationwide surged 11 percent in the third quarter compared to a year earlier.
- Report Urges Banks to Expand Service to Unbanked
American Banker 14 Dec 2012
A new report from the Federal Deposit Insurance Corp. says banks may attract more underbanked customers by lowering initial deposit requirements, offering banking services to non-customers, and working harder to let customers know they offer small-business loans. The FDIC said in a summary statement that banks that are most successful at reaching this group tend to employ multi-lingual staff; have more off-premise automated teller machines; and, in some cases, offer longer hours on weekdays and weekends. The FDIC cited minimum requirements for opening an account as an impediment, with almost half of all banks requiring an initial deposit of $100 or more to open a basic checking account and 6 percent requiring more than $100.
- Payday Loans, Overdraft Fees Are Predatory Products
Daytona Times 13 Dec 2012
More than 37 million American households were under- or unbanked last year, estimates the Federal Deposit Insurance Corporation (FDIC). African-American and Latino households represented more than 60 percent of the nation’s under-banked households, according to its report, and unbanked Hispanic households use more alternative financial services (AFS) compared to other racial or ethnic groups. The FDIC also found that use of prepaid debit cards is growing, especially among unbanked consumers and those who no longer have a bank account. From 2009 to 2011, use of prepaid debit cards by consumers who have never held bank accounts nearly doubled to 11 percent and surged to 27 percent from 19 percent for those that previously did have a bank account. Easier access is one of the primary reasons that consumers choose AFSs such as prepaid cards and payday loans. However, the Center for Responsible Lending (CRL) warns that payday loans often lead to long-term debt. CRL's Uriah King remarks, “Usurious payday loans and overdraft fees are clearly predatory products. No wonder so many consumers simply opt out completely. These findings uncover how far afield big bank practices are from serving the needs both families of color and/or low-income communities.”
- More Than Half of Top 12 U.S. Banks Now Use Pew's Model Checking Account Disclosures
Sacramento Bee 05 Dec 2012
SunTrust, Suncoast Schools Federal Credit Union, and UW Credit Union are the latest financial institutions to adopt a model checking account disclosure developed by The Pew Charitable Trusts. SunTrust's participation makes it the seventh out of the 12 biggest U.S. banks to embrace the simple box summary, which aims to clarify and make more transparent banks' checking account terms and fees. "As more and more banks adopt greater transparency about the fees, terms, and conditions that apply to accounts, consumers are able to educate themselves, understand the products they are using, and comparison shop to find the best product to meet their needs," remarked Susan Weinstock, director of Pew's Safe Checking in the Electronic Age Project. "With more educated consumers, we hope other banks will follow suit and adopt an easy-to-understand format for their information." Other major banks that are already on board with Pew's model disclosure include Bank of America, Capital One, Chase, Citibank, Fifth Third Bank, and Wells Fargo.
- Judge Lets Customers Sue Comerica as a Class for Overdraft Fees
Bloomberg 18 Jul 2012
Comerica Inc. customers, claiming that they were wrongfully hit with overdraft penalties, have won a petition to sue the Dallas bank as a class. More than 30 banks so far have been targeted by consumer litigation charging them with shuffling the order of account transactions so as to trigger more overdraft fees. Several of the defendants, including Bank of America, have already agreed to settle the claims; but seven banks, including Comerica, have tried -- and failed -- to force customers to pursue their claims individually.
- Wells Fargo to End All Free Checking Accounts by August
Huffington Post 18 May 2012
Wells Fargo intends to phase out all remaining free checking accounts by the end of the summer, the bank has disclosed. It stopped offering free accounts to new customers in 2010, but some existing customers -- including those transferred from Wachovia following its 2003 merger with Wells -- were allowed to maintain their no-cost status. Beginning in August, however, they, too, will begin paying a monthly service fee. An Essential Checking account with the bank will cost $7 per month. Those who sign up for paperless billing will pay $5; and the fee will be waived completely for those who maintain a daily balance of $1,500 or who have a minimum of $500 in direct deposits each month. "We make changes based on industry trends and what's going on in the economic and regulatory environment," explains Richele Messick, a spokesperson for Wells Fargo. It and other banks are looking for strategies to boost revenue in the new financial reality -- which restricts how they can impose overdraft and debit card fees. Recent actions by other banks on this front include U.S. Bank's plans to hike overdraft fees to $35 from $33; doubled costs for a checking account at Citizens Bank, as of April; and JPMorgan Chase's planned summer debut of a credit card costing $4.95 per month, billed as an alternative to checking accounts.