The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- Debit-Fee Limit Hits BofA the Hardest, Study Shows
Charlotte Business Journal 06 Apr 2012
A government cap on debit-card interchange fees has negatively affected Charlotte-based Bank of America more than any other bank in the country. According to a recent analysis by SNL Financial, the banks revenue from debit and credit-card process fees fell from $486.5 million to just $1.05 billion in the last quarter of last year. The numbers fell 32 percent from the $1.54 billion the bank earned in 2010. The bank is seeking to make up for the lost funds by charging consumers for banking services and that is expected to continue.
- Consumer Loan Delinquency Rates Drop Across the Board
International Business Times 05 Apr 2012
Consumer loan delinquency rates fell in all 11 categories that the American Bankers Association (ABA) tracked in the fourth quarter of 2011. This indicates that Americans are reducing private debt and stabilizing their personal finances. "It's very rare that delinquencies improve in every single loan category. The last time that happened was in the fourth quarter of 2004," ABA Chief Economist James Chessen said. Despite the declines, however, loans in certain housing categories remain high compared to historic levels. The health of the jobs market also remains poor compared to pre-recession levels, though this market has seen improvements since mid-2009. The Federal Reserve's financial obligation ratio (FOR) is also below pre-recession levels. The FOR compares obligations in debt, automobile, rental, homeowners' insurance, and property tax payments to disposable personal income; it is now at the lowest level since 1984.
- TD Bank Overdraft Fee Lawsuit Certified as Class-Action Case
Bloomberg 04 Apr 2012
U.S. District Judge James Lawrence King has ruled that a claim against Toronto Dominion Bank can proceed as a class-action lawsuit. Bank customers claim that they were gouged on checking account overdraft fees. The judge certified the class in federal court in Miami. Customers claim that the bank, Canada’s second-largest lender, reordered account withdrawals to maximize fees when customers overdrew accounts. The class includes all Toronto Dominion Bank customers who had paid an overdraft fee because of the reordering, from the statute of limitations until Aug. 13, 2010. King ruled that different statutes of limitations apply in different states. The bank would not comment on the suit, but attorney Bill Kayatta argued against the certification, saying that each customer had a different situation: some knew of the bank's policy of reordering overdrafts, some learned after the overdraft fees, and some possibly never knew.
- BancorpSouth Settles Overdraft Fees Complaint for $1.75 Million
Bloomberg 28 Mar 2012
BancorpSouth Inc. has reached a $1.75 million settlement with customers who allege the company unfairly levied overdraft fees against them. According to the lawsuit, the bank had manipulated customers' transactions to trigger as many overdraft fees as possible. U.S. District Judge Robert T. Dawson in El Dorado, Ark., gave preliminary approval to the accord on March 26. BancorpSouth asked a judge in Florida, where similar cases against banks were consolidated, to halt proceedings against it until the settlement is complete. The settlement class includes more than 350,000 current and former customers of BancorpSouth.
- New: State Lawmaker Wants to Regulate Overdraft Fees
Go Local Prov 27 Mar 2012
Rhode Island Sen. James C. Sheehan (D-Dist. 36, Narragansett, North Kingstown) has introduced a bill to limit bank overdraft fees to protect consumers from added financial distress. The measure, 2012-S 2437, also would prohibit banks from charging a fee for an overdraft amount of less than $10 in a single calendar day. Banks additionally would be limited to a total of three overdraft fees per day, unless the total overdraft amount is more than $100. Another provision stipulates that banks and credit unions must allow customers to "opt in" to a program that would require debits to be taken chronologically rather than in order from largest to smallest. This would keep financial institutions from employing tactics such as shuffling transactions in order to charge as many overdraft fees as possible. "Overdraft fees may be a legitimate mechanism for banks to deal with customers who, inadvertently or otherwise, bounce a check or debit from time to time," Sheehan said. "But it should not be a mechanism to allow financial institutions to gouge their customers, and the process that many institutions are following seems like nothing more than an arbitrary, made-up procedure to collect more fees."
- Do Bank Policies Promote Extra Fees?
Click2Houston.com 21 Mar 2012
Several consumer groups claim that some banks manipulate the order in which transactions are processed to accumulate higher consumer fees. Attorney Bill Voss represents 20 bank customers in a suit against First Convenience Bank in Texas. According to the lawsuit, processing customers' debit charges out of chronological order can cause higher penalty fees if customers spend more money than what is in their accounts. If a customer with $50 left in an account makes four $10 debit charges, another $100 debit transaction would put the account over the remaining balance and incur one overdraft fee. However, if the bank processes the $100 charge first, sending the account into overdraft protection, then the customer would pay four overdraft fees for the four $10 purchases. An attorney for First Convenience Bank says that the bank processes all charges and checks at the end of every day, from the largest amount to the smallest amount, but deducts automatic bill pay before anything else. Many banks say that processing the largest amount first makes sure charges for bigger expenses, like mortgage payments, make it through, but some consumer groups doubt this explanation. "The argument that this benefits consumers is just absolutely false," said Josh Frank, a researcher for the Center for Responsible Lending. "It's confusing and it's just a way to create fees and harvest extra fees." He says that some large banks like Citi and Wells Fargo stopped reordering account charges last year, an example other banks should follow. Meanwhile, he recommends that consumers opt out of overdraft protection.
- SECU Issues Letter Supporting CFPB's Overdraft Reforms
BankCreditNews.com 20 Mar 2012
The State Employees' Credit Union (SECU) has issued a letter in response to the Consumer Financial Protection Bureau's call for public comment on overdraft practices. The letter highlights SECU's overdraft services, practices, and moderation efforts, focusing specifically on its low-cost or free options to help customers avoid overdraft fees. More than 80 percent of SECU's account holders choose the standard overdraft option, which prevents the fees associated with bounced checks. With this option, members can choose a credit card, deposit account, or open-end loan to be used as an overdraft safeguard, with a 50-cent fee charged to the overdrawn account for the service. SECU customers can avoid fees entirely by using a two-way text alert system that informs members of potential "red flags" such as a low account balance.
- Citizens Bank Boosts Checking Fees
Boston Globe 20 Mar 2012
Citizens Bank, the second-largest retail bank in Massachusetts, will make several key changes next month. Starting April 23, the bank will double the monthly charge for its Green Checking account, from $4.99 to $9.99. Customers can avoid the fee with a balance of at least $1,500 or by making five qualifying transactions, such as using a debit card, each month. The bank will also increase the monthly fee for its personal checking with interest account to $11.99 next month. An average daily balance of $2,500 or five qualifying transactions each month can prevent this fee. Other bank changes include eliminating its basic checking and its Business Partners II, III, and Plus checking accounts. Basic Checking customers will be moved to the Green Checking; business customers will be switched to the new Business Advisor Checking account. The bank will eliminate free or discounted fees for check orders for its Circle Checking accounts. According to spokeswoman Lauren DiGeronimo, these changes at Citizens Bank are part of a review that began a year and a half ago to boost profits and standardize the bank's products.
- SECU Writes CFPB With Example of Overdraft Program
Credit Union Times 19 Mar 2012
North Carolina's State Employees' Credit Union has written the Consumer Financial Protection Bureau with a description of its own checking account program and is asking the agency to consider it as a prototype for what a consumer-friendly program can look like. The 1.7 million-member, $23.6 billion credit union says more than 80 percent of its 900,000 checking account holders utilize the SECU's regular overdraft option to avoid steep fees for bounced checks. "This option provides members with the opportunity to select their deposit accounts, open-end loans or credit card to be used for automatic transfer of funds, when needed to 'pay' a checking account item," SECU wrote. "A $0.50 transfer fee is debited from the protected checking account for the service." SECU added that its members can avoid fees altogether by using text messaging or going online to transfer funds.
- Chase Lowers Fees, Bank Shifts Focus From Low Balance to High Net Worth Clients
Huffington Post 14 Mar 2012
While many of the country's biggest banks are contemplating raising fees, JPMorgan Chase recently announced that it plans to cut them. In a letter sent to customers, the bank said it will reduce its overdraft protection transfer fee from $12 to $10. The bank also said it will cut its stop payment fee from $34 to $30; and if it is done online, it will cost $25, down from $27. Chase said the new fees will take effect on March 19, 2012. Other banks continue to move in the opposite direction on fees, however, with Bank of America recently confirming plans to charge customers monthly fees on certain checking accounts beginning in May and Citibank now requiring checking account holders to maintain a minimum balance of $15,000 -- up from $6,000 -- in order to dodge its monthly fee of $20.
- Prepaid Cards, Housing Top the Week's Congressional Agenda
American Banker 13 Mar 2012
Lawmakers on Capitol Hill this week will address the prepaid card market as well as housing issues. Sen. Sherrod Brown (D-Ohio) is convening a hearing on March 14 that will focus on how prepaid card regulation might be expanded to better protect spenders. Testimony is expected from representatives of the National Consumer Law Center -- which favors better disclosure, tighter security, and limits on prepaid card fees. Sens. Robert Menendez (D-N.J.) and Jack Reed (D-R.I.), meanwhile, have scheduled a hearing the following day that is expected to examine principal reduction for Fannie Mae and Freddie Mac mortgages. "Strengthening the House Market and Minimizing Losses to Taxpayers" will feature testimony from Federal Housing Finance Agency Inspector General Steve Linick and housing expert Laurie Goodman, who believes the FHFA should support principal write-downs. Also on Thursday, Rep. Shelley Moore Capito (R-W. Va.) will hold a hearing in Las Vegas that is expected to focus on a Nevada program that uses mediation between homeowners and lenders to avert foreclosures.
- Citizens Bank, Customers Agree to Mediation in Checking Overdraft Lawsuit
Bloomberg 13 Mar 2012
Citizens Bank of Pennsylvania and plaintiffs in a lawsuit challenging overdraft fees asked for a delay in proceedings while they pursue private mediation, according to a court filing. At least 30 banks have cases pending in the same Miami court. The customers say the banks reorder debit-card transactions in their computers to maximize overdraft fees.
- Wells Fargo to Charge $7 Monthly Fee for Checking
Associated Press 08 Mar 2012
Wells Fargo customers in six states who had free checking accounts will pay $7 a month starting in May. The bank confirmed that it started shifting customers in 23 states into the $7 fee schedule last year and is expanding to six more: Georgia, New Jersey, New York, Connecticut, Delaware, and Pennsylvania. Customers can avoid the fee by maintaining a minimum balance of $1,500 or making direct deposits of at least $500 a month. They also can get a $2 break on the fee by switching to online statements. Wells Fargo said it has not offered free checking to new customers since 2010. It intends to expand the fee to all 39 where it has branches, although it did not offer a timetable. For customers, the fees add up. Personal finance Web site NerdWallet said it found that customers who fall short of the minimum balance and other requirements are charged an average of $110 a year by the five largest banks. Consumer advocates are up in arms over the fees, especially considering the nation's steep rate of joblessness. "Banks don't realize they are going to lose much more in the way of lost customers than they are going to make on these ridiculous fees," said John Tschohl, a customer service expert who consults with banks.
- Wyoming ATM Fee Limit May Soon Be Withdrawn
Billings Gazette (MT) 08 Mar 2012
The Wyoming Legislature approved a measure that, if approved by the governor, would abolish the statewide $2 ATM fee limit. Wyoming is the only state in the nation with a legal cap on ATM fees; and backers of the bill, Senate File 82, say it is unfair to local ATM owners who often cannot earn enough on the fees to maintain the machines, especially those in rural regions. Critics argue that if the cap is scrapped, ATM owners will rip off customers with exorbitant fees. The bill's sponsor, state Sen. Bruce Burns (R-Sheridan), said that while fees are likely to go up in some places -- such as resort areas -- he does not anticipate that ATM owners will begin fleecing their customers.
- Durbin Blasts B of A Over Checking Fees
American Banker 02 Mar 2012
Following an announcement by Bank of America that it will soon roll out a new monthly fee on some checking accounts, Sen. Richard Durbin (D-Ill.) blasted the mega-bank. A recent story in the Wall Street Journal reported that BofA plans to assess monthly fees to customers who do not bank online, maintain a minimum balance, or buy other banking products. The move follows the bank's earlier attempt to assess a $5 monthly fee on debit card holders, which was later abandoned. "Four months to the day after Bank of America rolled back plans to squeeze their customers instead of serving them, they are at it again," said Durbin. He is urging banks to make a clear disclosure to customers regarding all fees in an "upfront, transparent and consumer-friendly manner."
- OK, Consumer Advocates: How Would YOU Set Bank Fees?
BusinessWeek 01 Mar 2012
As regulators move to rein in bank fees and financial institutions continue to seek different avenues of profit, consumer advocates have their own thoughts about how people should be charged for services. Transparency is the primary unifying theme among them, with Ed Mierzwinski of the U.S. Public Interest Research Group citing reports that many banks fail to disclose pricing information as mandated under the Truth in Savings Act. "Hidden fees are one of the worst problems," he declares. "If we have clear fees, then we have the ability to comparison shop." However, adds Kathleen Day of the Center for Responsible Lending, even transparent fees should not be "punitive." As an example, she points to the charges associated with overdrawing an account or taking out a high-interest payday loan at a bank; these fees "pound customers into the ground," she says, because they snowball rapidly and force borrowers deeper into the red. As fees do become more transparent, though, Day warns that consumers will have to inure themselves to seeing costs upfront that previously were hidden. "It may take the public time to get used to having fees a la carte," she notes. Bundled services in the past have left consumers paying for services they do not actually need, but Consumers Union senior policy counsel Pamela Banks insists that bank fees should be assessed only for the services that account holders do use. As a case in point, she says consumers who have just a checking account tend to pay more than those who have multiple lines of business with a provider and, thus, tend to use more services. "Why should I have to pay the fee for someone who is wealthy or has more means than I?" she questions. Rather, Banks suggests that financial services providers offer "a menu that [consumers] can select from and get what they need."
- Study: Fees Driving Customers Away From Big Banks
CreditCards.com 27 Feb 2012
A new study by J.D. Power and Associates reflects a jump in the number of Americans who are switching from larger banks to smaller financial institutions, motivated largely by a bevy of new fees introduced by big banks. Michael Beird of J.D. Power stated in a press release that consumers vote "with their feet" when banks start charging them more for basic services. "It is apparent that new or increased fees are the proverbial straws that break the camel's back," said Beird, who added that across banks of all sizes, more than 50 percent of customers who said fees were the main reason they were leaving also complained about the service at their former banking institution. The study found that the number of consumers switching banks has increased every year for the past three years, from 7.7 percent in 2010 to 8.7 percent last year and 9.6 percent in 2012. About one in 10 customers at a big, regional, or midsize bank switched in 2011 compared to small banks and credit unions, where only about one in 100 customers switched, according to the study.
- Consumer Agency Wants Your Comments on Banks' Overdraft Fees
Everett Daily Herald 26 Feb 2012
Overdraft fees, triggered when an individual spends more money than what is available in their bank account, have the potential to siphon hundreds of dollars a month from the consumers least able to afford them. The average charge has ballooned 17 percent in five years, notes the Consumer Financial Protection Bureau, and now range between $30 and $35. The regulator plans to investigate overdraft policies, taking a close look at whether financial providers follow certain practices specifically to raise the odds of overdrafts occurring -- such as by shuffling the order in which transactions are processed so that funds are tapped out faster. Another example was aired at a recent town hall meeting in New York. The case involved a single mother whose account was being automatically debited by payday lenders and whose bank allowed the withdrawals to continue even though the account was already overdrawn and even though payday loans are illegal in the state. The bank also refused to close the account, which incurred nearly $1,400 in overdraft penalties over the course of two months. The customer was "caught in a spiral of payday loan debt, gouged by her bank's abusive overdraft practices, and the victim of illegal debt collection practices," testified Sarah Ludwig, whose Neighborhood Economic Development Advocacy Project was contacted by the woman. Consumer advocates hope the CFPB's involvement will end those kinds of scenarios. "Americans spend billions of dollars in overdraft fees every year, and overdraft fees are the number one reason that bank customers lose their checking accounts, driving more and more Americans into the ranks of the unbanked and underbanked," said Center for Responsible Lending senior policy analyst Rebecca Borne. "We are so pleased that there is finally a regulator, the CFPB, whose primary responsibility and commitment is to ensuring that reasonable rules of the road are in place to reform harmful and reckless financial practices."
- Whitney Bank Will Pay $6.8 Million to End Case on Overdraft Checking Fees
Bloomberg 23 Feb 2012
Whitney Bank has reached a tentative $6.8 million deal to settle claims that it overcharged customers on overdraft fees. Court records indicate that the agreement would resolve allegations by customers over fees charged to debit cards tied to checking accounts. "While the company admits no wrongdoing, in order to fully and finally resolve the litigation and avoid significant costs and expenses that would be involved in defending the case as well as the distraction caused by the litigation, Whitney Bank has entered into an agreement in principle," the bank said. Approximately 30 banks have been sued over overdraft fee policies after it came to light that many banks use a method to process transactions from the highest dollar amount to the lowest, regardless of the order in which they actually occurred.
- Complaints Spur Investigation of Overdraft Fees
Los Angeles Times 22 Feb 2012
Following a flood of complaints about excessive overdraft fees, the Consumer Financial Protection Bureau (CFPB) has launched an inquiry into bank practices and is seeking public input on a disclosure box that would explain the charges. Despite 2010 Federal Reserve rules that block banks from automatically signing up customers for overdraft protection, consumer advocates are still unhappy about the penalties, which run $30 to $35 per overdraft. Also, according to the CFPB, the average overdraft fee is up 17 percent over the past five years. In response, the bureau on Feb. 22 announced that it is launching a new campaign called "What's your overdraft status?" to encourage consumers to learn if they have overdraft coverage and to understand the fees associated with it. CFPB director Richard Cordray said that current technologies make it easier for individuals to accidentally overdraw on their accounts. "We want to learn how consumers are affected and how well they are able to anticipate and avoid paying penalty fees," he said. The watchdog also identified four components that it will focus on in its evaluation: the reordering of transactions; missing or confusing information; misleading marketing; and disproportionate impact on low-income and young consumers. It also is asking for public input on a draft "penalty fee box," which would show up on an individual's bank statement and highlight any overdrafts and related fees.