The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- We Paid Almost $30 Billion in Overdraft Fees in 2011
Time 03 Jan 2012
A year and a half after the Federal Reserve implemented new rules requiring banks to obtain customers' permission before enrolling them in an overdraft program, U.S. consumers still paid a collective $29.5 billion in overdraft fees in 2011. According to Moebs $ervices, the fees reached an all-time high in 2009 of $37.1 billion. But according to Susan Weinstock, director of the Safe Checking in the Electronic Age Project at the Pew Charitable Trusts, many bank customers remain confused about the forms they received from banks asking them to "opt in." The majority of banks sent frightening letters to customers, warning that if they did not opt in, their debit cards could be turned down at the register. Weinstock said many people mistakenly believe that choosing to opt in means they will not be charged such fees. Research conducted by the Center for Responsible Lending came to the same conclusion. Additionally, more and more people are finding themselves paying for overdraft fees due to the decrease in "float." The term refers to money that has been charged during a transaction but that is not removed from the spender's account for a day or two. Banks also are still raking in plenty of revenue from overdrafts simply because they are charging more per infraction -- the median penalty for 2011 moved up to $29 after holding steady at $25 for several years.
- Add Umpqua to Roster of Banks Sued for Overdraft Practices
American Banker 03 Jan 2012
Joining the masses of banks being taken to court for processing debit card transactions from highest amount to lowest -- a way to maximize overdraft fees -- is Umpqua Bank in Portland, Ore. A California woman initiated a class-action suit filed on Dec. 30 in the San Francisco-Oakland Division of the Northern District Court of California, claiming the bank's unsavory practices cost her hundreds of dollars in overdraft fees. But Umpqua's general counsel, Steven Philpott countered that the fees should not come as a surprise to customers since new rules require banks to obtain customers' permission before they can cover overdrafts. Philpott admitted that the bank had participated in such practices, but does not do so anymore. The litigation follows many other class-action suits against Bank of America, Union Bank of California, and others.
- World Travelers Getting Checks in Mail
USA Today 03 Jan 2012
Travelers who used MasterCard, Visa, or Diners Club credit and debit cards while traveling abroad Feb. 1, 1996, through Nov. 8, 2006, should check their mailboxes for a rebate check. Refunds ranging from $18.04 to thousands of dollars are being sent to approximately 10 million such cardholders. The checks are the settlement of a class-action lawsuit that argued those card companies and several of their issuing banks overcharged and inadequately told users about the additional fees added onto purchases abroad. The fees, usually 1 percent to 3 percent of the charged amount, have long agitated many business travelers. The refunds have been anticipated for a while. The $336 million settlement was approved in October 2009, but close to a dozen appeals had to be resolved before the funds could be distributed. "Nobody is happy about the length of time it took," says Merrill Davidoff, co-lead counsel on the case. "But we're gratified we finally got some of these overcharges to approximately 10 million consumers who we alleged were unjustifiably charged these fees." The lawsuit drove credit card companies and banks to adopt more transparent fee disclosure practices. At least 7 million people have received checks, with the current batch going to recipients on the East Coast, according to Davidoff.
- Commerce Bank to Pay $18.3M to Settle Overdraft Suit
American Banker 27 Dec 2011
The banking arm of Kansas City-based Commerce Bancshares has reached an $18.3 million settlement in a class action over overdraft fees. A grievance lodged in December 2010 alleged that Commerce Bank improperly charged overdraft fees on certain debit card transactions. According to the complaint, the bank is one of several that manipulated the order in which customers' debit card payments were processed in order to maximize the fees the companies was able to charge.
- Bank Fees Predicted to Rise in 2012, As Banks Try to Boost Revenue
Huffington Post 26 Dec 2011
Hampered by regulations under the Dodd-Frank financial reform legislation, banks are seeking new ways to extract fees from customers. This year, customers should expect to see higher minimum balance requirements and an aggressive push to increase customers' credit card spending, according to a "2012 U.S. Banking Sector Outlook" report from Trepp, an analytics firm that delivers information to the banking industry. Other industry analysts project that some banks could hike overdraft fees from $35 to a new high of $40 and that more banks will raise monthly maintenance fees on basic checking accounts to between $12 and $15. Over the past three years, assorted new regulations under the Dodd-Frank Act and the Credit Card Act have curbed certain aggressive fee practices. More regulations this year are expected to further restrain banks' ability to reap egregious profits off the rudimentary banking activities of consumers. Yet banks' losses from Dodd-Frank and other regulations have not been as dramatic as reported. In 2007, the percentage of revenue that stemmed from fees exceeded 40 percent, according to Trepp. In 2011, that percentage fell just 4 percent to 36 percent.
- Banks Getting More Revenue From Their Overdraft Charges
Press of Atlantic City 25 Dec 2011
While the major banks have temporarily scrapped plans for monthly debit card use fees, they are not abandoning the overall goal of generating more revenue from fees. Of Wells Fargo's third-quarter revenue of $19.6 billion, nearly 50 percent -- $9 billion -- came from fees and charges. One increasingly popular source of revenue is the traditional overdraft fee, now tweaked and optimized for the Web 2.0 age. In mid-2010, the Federal Reserve required banks to inform customers of their overdraft options and give them the choice of being covered, instead of automatically enrolling them for the service. The choice is fairly simple: receive overdraft coverage and a debit card purchase will be completed even if there are insufficient funds in the bank account, but a fee will be assessed for every instance the bank covers the shortfall. Turn down the coverage and the debit card purchase will be denied. For the subsequent six quarters, bank revenue from overdraft fees fell; but in the second quarter of 2011, it jumped $700 million, according to research from Moebs Services. A survey by the financial institution researcher of 1 million checking accounts earlier this year found that three-quarters of consumers were opting for overdraft protection. Most were likely unaware of the size of the overdraft fees they were setting themselves up for, as well as the details of how the fees would be levied that make the process more lucrative for the big banks. The median overdraft fee for big banks was $35 in February, up from $33 in 2008, Moebs found. For community banks and credit unions, it was $25, unchanged in three years.
- Overdraft Fees on the Rise
WDTV-5 22 Dec 2011
Bank overdraft charges are costing account holders even more this year, despite new rules adopted in 2010 to protect consumers. Instead of automatically allowing a debit card transaction to be completed even if a customer's account lacks sufficient funds to support it, regulators gave consumers an opportunity to opt out of overdraft services or give banks consent to enroll them in such programs. With many account holders turning down the coverage, banks' revenue fees were pinched -- causing them to inflate overdraft fees. At least one bank, however, has come up with an alternative policy that is winning positive feedback. Huntington Bank is offering its customers a full day's grace period on overdrafts; they can avoid all penalties when they overdraw their funds, provided that the account is back in the black within 24 hours.
- BofA Ignited Transfer Day, But Can It Be Sustained?
Credit Union Times 21 Dec 2011
When Bank of America announced that it would begin charging debit card users a $5 monthly fee -- a decision it later reversed -- credit unions got an unexpected gift: the business of new clients fed up with big banks and seeking an alternative. That $5 fee became the impetus for Bank Transfer Day, the brainchild of Kristen Christian, a Los Angeles art gallery owner. Bank Transfer Day was touted as a way for consumers to demonstrate their dissatisfaction with major banks by moving their money to credit unions or community banks on Nov. 5. From there, speculation started as to what it would ultimately mean for the credit union industry, what types of customers it would draw, whether systems could handle the influx of deposits, and if the movement would do more harm than good. "My belief is that credit unions need to continue to promote their value regardless of how big or small Bank Transfer Day ends up being," said Bill Handel of Raddon Financial Group in Chicago. "The difference between the mega-banks and community-based financial institutions was significant even prior to the imposition of debit card fees, so the imposition of these fees was a means by which this difference could be driven home."
- BMO Harris Bank Agrees to Pay $9.4 Million to Settle Overdraft-Fee Lawsuit
Bloomberg 21 Dec 2011
Bank of Montreal's BMO Harris Bank has agreed to a $9.4 million settlement over litigation that accused the Chicago lender of illegally imposing excessive overdraft fees, according to court documents. A customer with an account at the bank complained that it purposefully processed debit transactions from highest-dollar amounts to lowest as a way to maximize overdraft penalties. The accountholder, Stephanie Blahut, pursued a class action to represent all Harris Bank customers. The Nov. 30 agreement ends the bank's role in the litigation, based on a Dec. 20 filing in federal court in Miami. Lawsuits against more than 30 banks have been consolidated before U.S. District Judge James Lawrence King in Miami in so-called multidistrict litigation. King has been overseeing pretrial exchanges of information in the cases since June 2009. The Harris Bank settlement still requires the judge's approval.
- Dems Push Banks to Follow Chase's Lead on Disclosures
American Banker 16 Dec 2011
Chase's move to adopt a more user-friendly form that discloses all checking account fees drew applause Dec. 15 from Senate Democrats who are championing the simpler form. Simultaneously, party members used the announcement by the country's largest bank to pressure other institutions into adopting the form. The document, which details basic terms and conditions for checking accounts, was written by the Pew Charitable Trusts; and Chase became the first major bank to adopt it. Chase's announcement follows a November press conference where Sens. Richard Durbin (D-Ill.) and Jack Reed (D-R.I.) asked the Consumer Financial Protection Bureau to require banks to post the disclosure form on their Web sites. On Dec. 15, Durbin and Reed used Chase's decision to compel other banks to follow suit. "Giving consumers clear, upfront and accurate information about the fees that they will be charged will allow consumers to make sound financial decisions," Durbin said in a press statement. "As we've seen over the last few months, consumers are demanding they be treated fairly and I'm pleased the nation's largest bank is listening. It's time for the nation's other banks to follow Chase's lead."
- Pinnacle's Overdraft Fees Spur Lawsuit
Tennessean 15 Dec 2011
A Pinnacle Bank customer who claims the bank tweaked overdraft charges to maximize the amount of fees collected is pursuing legal action to refund his and all Pinnacle customers' overdraft charges over the past few years. The bank shuffled transactions to process the largest ones first, instead of charging customers in chronological order, so that their accounts were depleted more quickly and charged more overdraft fees, according to the lawsuit. The bank automatically enrolled customers in a program that would allow debit card purchases to go through when customer accounts were empty, triggering a $36 fee for each purchase after a customer's available funds were depleted. Since the passage of new banking regulations in July 2010, however, banks, must give customers the choice to opt in to overdraft protection programs. Pinnacle has called its program "Overdraft Privilege." "In many instances, these overdraft fees cost Pinnacle account holders hundreds of dollars in a matter of days, or even hours, when they may be overdrawn by only a few dollars," the suit states. A similar lawsuit was settled in federal court in late November in which the Associated Bank of Green Bay, Wis., agreed to pay $13 million to customers who were illegally charged egregious overdraft fees.
- JP Morgan to Use Pew's Standardized Form for Checking Fees
Wall Street Journal 15 Dec 2011
J.P. Morgan Chase & Co., responding to calls from consumers and advocates for greater transparency on checking accounts, will begin using a standardized fee document created by the nonprofit Pew Health Group. The country's largest bank by assets and deposits also is doing away with some checking fees, it confirmed on Dec. 15 -- including one for closing new accounts, a charge that has garnered criticism. The biggest banks have faced louder calls to simplify and make transparent the fees that consumers are charged for assorted accounts and actions. Consumer advocates have already lobbied successfully to get a law passed addressing how credit card lenders raise interest rates and on how banks can charge for customers overdrawing checking accounts with debit cards. The initiative by Pew Health Group, and a similar move by the newly formed Consumer Financial Protection Bureau for credit card forms, is aimed at making it easier for consumers to see the fees they may have to pay. Pew, a public policy advocacy group, had said a study revealed the median bank fee disclosure document was 111 pages. "Far too often essential checking account information is buried," said Susan Weinstock, director of Pew's initiative aimed at safe checking.
- Customer Satisfaction Dips for Banks, Soars for Credit Unions
St. Petersburg Times 13 Dec 2011
The 2010 American Customer Satisfaction Index (ACSI) released December 13 found that customer satisfaction with credit unions has reached a record high, climbing 7 points to 87. Customer satisfaction with banks fell one point to 75, making the difference between the banks and credit unions three times what it had been a year ago. ACSI founder Claes Fornell says the data suggest credit unions and smaller banks have become "an even more attractive alternative" to big banks at a time when consumers are fighting both fees and foreclosures.
- Stores Cash In on Debit Cards
SmartMoney 13 Dec 2011
When transaction fees for debit card purchases were cut on Oct. 1, few expected merchants to pass the savings on to customers. However, a new study finds that, despite the break on "swipe fees," many retailers actually jacked up prices. Smaller retailers insist that the 21-cent cap on transactions -- plus 0.05 percent of the transaction -- hurts them; and many raised their prices in response. The Electronic Payments Coalition, an advocacy group that represents banks and credit unions, reports that 76 percent of retailers either raised prices or kept them the same since the lower fees were mandated. Before, retailers were forced to pay 1-2 percent of the transaction -- or 44 cents on most small debit card purchases. Large retailers are experiencing the benefits but not passing on the rewards, analysts say. Customers are paying an average of 1.7 percent more for the same items after Oct. 1, according to the study. "From day one -- despite the political rhetoric -- this was always a sweetheart deal for mega retailers," says Trish Wexler, a spokeswoman for the Electronic Payments Coalition. "Mom and pop businesses, and consumers, are now paying more." She says that "consumers are bearing the brunt of the Durbin amendment."
- Customers Opt to Stay With Big Banks to Avoid the Headaches of Switching
Boston Globe 11 Dec 2011
Smaller rivals and anti-Wall Street protesters have launched campaigns to persuade depositors to leave the nation's largest banks, but analysts predict the vast majority of customers will stay put. Many appreciate the convenience of vast networks of ATMs and branches and the variety of services offered by the biggest banks. Many just do not want to deal with switching accounts, especially customers who use direct deposit, online banking, and electronic bill payments. Just 1.5 percent of checking customers with all three services change banks each year, compared to 20 percent with a checking account alone, according to the financial consulting firm Celent. More than half of all bank customers use direct deposit and nearly 40 percent use online bill pay, notes AlixPartners LLP, a global consulting firm. "It takes a lot for someone to switch," says Gerard Lavoie, chief operating officer for Dedham Institution for Savings, a Massachusetts community bank with eight branches. "Someone's back has to be totally up against the wall to make a move." Convenience is a key reason customers open accounts and stick with the biggest banks. Many have trouble envisioning the leap to a small bank or credit union with a limited footprint and potential for hefty ATM fees if they need cash in a pinch. Bank of America, for instance, has 5,700 offices and nearly 18,000 ATMs, while many community banks only offer a handful of outlets.
- Fitch Expects Decline in US Bank Fees, Lower Returns
Associated Press 09 Dec 2011
U.S. banks' efforts to offset revenue losses due to regulations limiting certain bank fee hikes will fall short, contributing to lower returns for the industry, Fitch Ratings said Friday. To offset revenue losses due to the restrictions, banks have cut costs and eliminated certain products. Fitch says those efforts could potentially help boost the lenders' net income, but will fall short of completely offsetting lost fee revenue. The firm also says banks are not likely to hit consumers with new fees, especially following the fallout that came about after Bank of America floated a plan earlier this year to charge a $5 monthly debit card fee. Fitch doesn't see bank customers leaving for alternatives, such as credit unions, however.
- Bank Fees That Overdraw Teen's Account Have Mom Seeing Red
Chicago Tribune 08 Dec 2011
Daniel Ganziano's mother urged him to open a savings account with TCF Bank so the 18-year-old would learn about fiscal responsibility. What the experience actually taught him, says the McCullom Lake, Ill., teenager, was not to trust banks. Ganziano let his balance dwindle down to $4.85 and had all but forgotten about the account until he received a letter on Oct. 12 notifying him of a $9.95 "monthly maintenance fee" because his account was underfunded. The charge created a $5.10 overdraft on his account, which triggered an additional fine. At TCF, any account overdrawn by more than $5 is charged a daily overdraft fee of $28. The charges added up quickly. When he and his mother went to the nearest branch to close the account, they were told they would first have to pay the accumulated fees, totaling $229.10. His mother, Melinda Ganziano, was furious. In less than two weeks, without making any purchases or withdrawals, her son's $4.85 savings account had ballooned into a $229.10 debt. After trying unsuccessfully to get the bank to cancel the debt, she paid the $229.10 fee and in mid-November contacted this publication to share her story. TCF eventually refunded the Ganzianos for the full amount, but only after the newspaper intervened.
- Los Angeles Weighs Steps to Hold Its Banks More Accountable
Los Angeles Times 06 Dec 2011
Under pressure to make banks more accountable, the Los Angeles City Council has started debate on a proposal that would require some banks seeking the city's financial business to disclose detailed information about their local lending practices. The proposal falls far short of the ambitious agenda pressed by Occupy L.A., community activists, and union workers, as it would neither use the lending information to rate the banks when awarding city contracts for financial services nor apply the reporting requirement to banks that also underwrite the city's bonds. However, it would subject the banks' lending records to public scrutiny. Targeted banks would have to report annually on their loans to small business, as well as their participation in efforts to lower mortgage balances for distressed homeowners.
- Settling Overdraft Case to Cost PNC $15 Million
Courthouse News Service 05 Dec 2011
PNC Bank's penalty for employing improper overdraft policies has been handed down by a federal judge: $12 million, plus $3 million in legal costs to the Tycko & Zavareei law firm that served as class counsel. The settlement was the result of a class-action suit against the bank over allegations that it misled customers about their account balance, concealed its overdraft policies, and processed transactions from the highest amount to the lowest in order to incur the maximum number of overdraft fees. U.S. District Judge John Bates gave final approval of the $12 million settlement on Dec. 1, adding to it the $3 million in attorneys' fees, $77,857 in court costs, and $5,000 in incentive fees to the three lead plaintiffs.
- Customers to Banks: It's You, Not Me
Wall Street Journal 02 Dec 2011
Many big bank customers are withdrawing their funds and moving them to small institutions and credit unions out of frustration with rising fees, tough lending criteria, and foreclosures. A lot of the animosity traces back to bank plans to charge customers a per-month fee for debit card purchases; and even though the banks have abandoned those plans in the midst of public outrage, customer anger has not dissipated. Intensifying customers' ire is the move by some banks to tack on additional fees and employ stalling tactics to delay termination of accounts. Supporters of community banks and credit unions say such institutions usually have lower fees than larger banks and closer ties to local communities.