The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- Hidden Fees Force Poor Customers Out of Banking System -- Pew
American Banker 20 Oct 2011
Buried fees are forcing some Americans out of the traditional banking system. Roughly one in three low-income households who closed an account between 2009 and 2010 named hidden or unexpected fees as the reason why they stopped doing business with their bank, according to a new report by a division of The Pew Charitable Trusts. "This data points to a real need for banks to better disclose their fees in a concise, easy-to-understand format," Susan Weinstock, project director at the Pew Health Group, declared in a press statement. Banks have long had difficulty serving low-income individuals, who tend to more frequently patronize alternative financial services providers such as check cashers and payday lenders. Those companies have been lambasted for the egregious fees they levy, but their prices are often more transparent to consumers than the ATM fees and overdraft fines charged by banks. The Pew Health Group's Safe Banking Opportunities Project surveyed 2,000 working-poor households in Los Angeles between 2009 and 2010 and issued its findings on Oct. 18. Between 2009 and 2010, 13 percent of survey respondents with bank accounts closed those accounts. Along with the third who cited hidden fees, about 25 percent of the respondents said they terminated their accounts because of a lack of funds or unemployment, another third did not offer a reason why, and 6 percent cited poor customer service.
- Biggest Banks' Customers Are Least Satisfied, J.D. Power Says
Bloomberg 20 Oct 2011
The four biggest consumer banks in the United States got the worst ratings for satisfaction from small businesses, according to a report by J.D. Power and Associates. Bank of America, Wells Fargo, Citibank, and Chase are at the bottom of a satisfaction survey of 7,000 responses from small businesses in August and September. But the survey did show that small businesses are slightly more satisfied with their banks than a year ago, with customers expressing more satisfaction with every aspect of banks’ services, except for fees. The banks that got the highest satisfaction ratings in the survey are M&I Bank of Milwaukee, Huntington National Bank, BB&T, and M&T Bank.
- Reforms Fail to Halt Bank Revenue on Debit-Card Overdraft Fees
Bloomberg 20 Oct 2011
Financial reforms that pull back on consumer fees have not prevented U.S. banks from collecting billions of dollars in debit-card overdraft fees. According to Moebs Services, while fee revenue will be off about 16 percent in 2011 from its high in 2009, it will still come in at more than $16 billion. "Consumers are getting hit really hard by overdraft fees," said Center for Responsible Lending lawyer Rebecca Borne. This is despite a 2010 Federal Reserve order prohibiting banks from offering overdraft coverage on debit cards -- at a cost of roughly 35 per overdrawn transaction -- without getting prior consent to sign them up. Some banks responded by terminating overdraft policies; but many others rolled out or expanded them, then launched aggressive marketing campaigns to persuade customers to enroll. According to an informal poll of 150 community banks by Impact Financial Services, the share of small and midsize banks offering overdraft protection has risen to 70 percent compared to just 50 percent before the Fed rules took effect. A survey by the Center for Responsible Lending, meanwhile, found that 60 percent of consumers who chose overdraft protection did so in part to avoid penalties if their debit cards were declined, even though such fees do not exist. Additionally, two-thirds of American consumers said they signed up to sidestep charges for bounced checks, which are covered under different programs.
- Bank Fees Largest Obstacle to Unbanked, Pew Report Says
Credit Union Times 19 Oct 2011
Nearly one in three households that closed bank accounts between 2009 and 2010 did so because of unexpected or unexplained fees, reveals a report from the Pew Health Group. "Slipping Behind: Low-Income Los Angeles Households Drift Further from the Financial Mainstream" observed the drop in banking households in the lower-income Latino community and concluded that more Latino households left mainstream banks than joined during that time frame. Lower-income households also had trouble meeting monthly minimum balances required to maintain checking accounts, the report notes, and frequently resisted accounts because of a perceived lack of liquidity. The paper suggests that financial institutions adopt "fair and transparent" fees, cease the practice of delaying deposit availability, and make more ATMs available.
- Senator Sets Sights on Wells Fargo Debit Fees
Washington Times 19 Oct 2011
Sen. Richard J. Durbin (D-Ill.), who took Bank of America to task earlier this months for its plans to implement debit card fees, now is training his criticism on Wells Fargo. The company generates enough profit that it should be able to absorb the costs associated with new limits on "swipe" fees that retailers must route to card companies when customers pay with a card, rather than pass those costs on to customers in the form of debit card fees. Durbin sent a letter to Wells Fargo Chairman John G. Stumpf protesting the bank's plans to try out a monthly fee for debit-card users in five states. "Wells Fargo will make at least an estimated $1.22 billion in annual debit interchange revenue after swipe-fee reform. This amount far exceeds any reasonable measure of the cost to Wells Fargo of conducting debit transactions," he wrote.
- Consumers Will Switch Banks Over Debit Fees, Survey Finds
Bloomberg 19 Oct 2011
About 30 percent of 1,000 U.S. consumers polled signaled that they would sever ties to their bank because of debit card fees, reports Research Intelligence Group. "There's a lot of consumer discontent within financial services and I think there's a lot of frustration," concludes Rob Kaplan-Sherman, an executive with the Pennsylvania-based consulting and market-strategy firm. "People express that they're going to change their behavior, and that includes changing how and where they bank." The survey was conducted as several of the nation's top banks explore the idea of tacking on a monthly charge for debit card users; Bank of America is leading the charge, with plans to impose a $5 fee starting in 2012. "Consumers should not be required to pay a costly fee that appears to be arbitrary," wrote Consumers Union senior attorney Norma Garcia in a letter to BofA CEO Brian Moynihan. "This fee is especially egregious, imposed as it is during a weak economy, when many consumers are struggling to keep afloat." The nonprofit organization is urging banks to scrap their plans for debit card fees and consumers to find a new financial provider if they do not. However, about 43 percent of those surveyed said they would switch to paying with cash or credit cards if their bank implemented charges and 13 percent said they would pay the fee if it was “reasonable.”
- Top Banks Accused of Colluding on ATM Fees
Reuters 19 Oct 2011
A New Jersey man has filed suit against Bank of America, JPMorgan Chase, and Wells Fargo on behalf of ATM users, accusing the banks of colluding to fix the fees they charge customers to withdraw money. The lawsuit, filed in federal court in Washington, D.C., is the third such suit seeking class action status on the issue of ATM fees in the past week. The latest suit alleges the banks worked with Visa and MasterCard to set artificially high rates on ATM fees. While the earlier lawsuits were filed against Visa and MasterCard, the most recent lawsuit is directed at both the card network firms and the banks. The lawsuits all accuse Visa and MasterCard of forcing ATM operators to charge the same access fee to customers regardless of which network they use, in order to get access to the Visa and MasterCard networks. The most recent suit accused the banks, that collect the access fees, of colluding with Visa and MasterCard in setting the transaction price.
- Iberiabank to Pay $2.5 Million to Settle Overdraft Suits
Bloomberg 19 Oct 2011
Lafayette, La.-based Iberiabank Corp. reportedly has agreed to pay $2.5 million to settle consumer lawsuits accusing it of imposing illegal and onerous overdraft fees. Officials with the bank also will revise policies governing the way debit-card transactions are handled in connection with overdraft fees, according to court documents filed on Oct. 18. Overdraft suits lodged throughout the country have been consolidated in that court for pre-trial proceedings. Bank customers who are included in the settlement will receive their portion of the settlement fund "without having to do anything at all," said attorneys for consumers who sued Iberiabank over the overdraft policy. The settlement comes nine months after Bank of America Corp. acquiesced to pay $410 million to resolve similar allegations over its overdraft practices.
- The New Normal: Higher Bank Fees Are Here to Stay
Associated Press 18 Oct 2011
The newest third-quarter earnings report verify that banks are struggling to earn money the old-fashioned way: lending money to consumers and businesses. Interest rates are at an all-time low, making it tougher for banks to impose steep rates on loans. New rules, meanwhile, have capped various kinds of traditional fees, costing banks billions in lost revenue. These fees include overdraft charges on checking accounts and fees for delinquent credit card bill payments. In response, many banks are compensating for the revenue losses with fees that are not covered by the new rules. Bank of America Corp., for example, has incited a backlash over its plan to charge customers $5 a month for using their debit cards. Banks are introducing new fees across the board: Citi will charge $20 a month beginning in December to some customers who do not keep a combined balance of $15,000 or more in their checking, savings, and investment accounts; Wells Fargo & Co. started testing a $3 monthly debit card fee Oct. 14 in New Mexico, Nevada, Oregon, Washington, and Georgia; and JPMorgan Chase & Co. tested a $3 monthly debit card fee in February in Wisconsin and Georgia.
- Florida Lawmaker Seeks to Ban Debit Fees
American Banker 18 Oct 2011
A Florida legislator has introduced a bill that would prohibit banks operating in the state from charging customers monthly fees for using their debit cards. The bill, sponsored by Rep. Jeff Clemens, is aimed directly at large banks, such as Bank of America Corp. and Wells Fargo & Co., that soon plan to charge monthly usage fees to make up for lost income from new limits on interchange fees that went into effect Oct. 1. In an Oct. 17 news release, Clemens said, "Banks sold us all on the idea of a cashless society, and now that we've bought into their promise of free, easy access to our own money, they want to charge us for it. Anyone with a sense of decency should be outraged." But Clemens faces two tremendous hurdles in his efforts to stop big banks from imposing the fees. First, he must push his bill through a state legislature dominated by Republicans. Second, even if legislators were to pass the bill, federally chartered banks usually are not subject to state law.
- Debit Cards With Rewards Not Extinct (Yet)
New York Times 18 Oct 2011
A survey by Bankrate.com found that the availability of debit card reward programs declined by about 30 percent from last year. Many of the remaining programs, however, are still offered without charge; and the most common payout remained 0.5 percent back, with a range of 0.25 percent to 1 percent. Among banks that do charge for participation in their loyalty programs, fees ranged from $1.50 to $10 per month, the study found. The study included the five largest banks and the five largest thrifts in 10 major markets, as well as the five largest credit unions.
- As Banks Squeeze, Alternative Lenders Gain Traction
Reuters 17 Oct 2011
Alternative finance firms, from credit unions to online and pawn lenders, are gaining traction as banks turn off the tap for easy cash and start charging fees for services that customers are used to getting for free. Demand for short-term, small-dollar loans from credit unions, for example, jumped 52 percent in the second quarter, according to the National Credit Union Administration, and more aggressive selling is expected to boost that number further. "We want consumers to know they can fight back against big banks by saying 'no' to more fees. They should give credit unions a close look," says Bill Cheney, CEO of the Credit Union National Association.
- Will Retailers Give Debit Cards a New Life?
Reuters 17 Oct 2011
The anticipated demise of debit cards may be forestalled by retailers. Some merchants are already willing to pass to along to the consumer their newfound savings in fees from banks. Others will not, but may participate in merchant-funded reward programs. "We see that 29 percent of offers are now merchant-funded, versus 13 percent last year," says Bankrate's senior financial analyst Greg McBride. "It's a shift you expect not just to hold, but also to continue." Start-ups are also trying to capitalize on advances in behavioral marketing and gear banks to offering different sorts of incentives than traditional reward points. FreeMonee.com, for example, recently conducted a Harris poll and found that what consumers want is for their bank to help them save money and what they want most of all are cash-back offers or rebates, not discount coupons, vouchers, points, miles or anything that delays their gratification in the form of a reward they may not even use in the future. Sixty-three percent of their respondents said that they'd be "very to somewhat likely" to change to a different bank if it provided a better retail offer with no strings attached.
- Banks to Mimic Bank of America With New Fees
Bloomberg 17 Oct 2011
Following BofA's lead, other U.S. banks likely will charge customers more fees as the lenders seek to recoup revenue hit by new U.S. rules, according to Paul Miller of FBR Capital Markets. Banks may levy added fees and cut expenses as regulations erode former sources of "really strong fee revenues," such as overdraft charges, Miller said. "Banks will try to do something to recuperate some of those fees. ... They won’t recuperate all of them, but they’ll try to get some of them back."
- Dems Want Anti-Trust Probe of Debit Card Fees
CBS News 13 Oct 2011
Five House Democrats on Thursday asked Attorney General Eric Holder to investigate whether banks and their trade associations are violating anti-trust laws with their new debit card fees. The lawmakers, led by Rep. Peter Welch of Vermont, said in a letter to Holder that there's evidence to suggest big banks are coordinating their fee strategies. Bank of America's debit card fee announcement adds to the urgency of their question, they wrote. "We are concerned that BOA's announcement may be a reaction to, and participation in, price signaling or collusion that has occurred among and between banks and bank associations," the letter said. The letter points to possible evidence of collusion, such as an email from the Texas Bankers Association to its members regarding swipe fee reforms in Congress. The email said, "Now, the industry must regroup and each and every one of you must decide how you are going to pay for the use of debit cards."
- Survey Results: Many Ready to Switch From Big Banks
Sacramento Business Journal 13 Oct 2011
Two-thirds of respondents to a Sacramento Business Journal survey said they were fed up with fee increases by the big banks and are ready to move on. Forty percent said they were moving to a credit union, 22 percent indicated they were moving to a community bank, and 5 percent said they would move to an Internet bank. Among those not bothered by big banks, 20 percent stated that their bank was still treating them well, while another 6 percent said banks are just doing what they have to do to survive.
- Consumer Watch: Don't Get Burned
Army Times 06 Oct 2011
According to a Military Times analysis, more than half of all banks with exclusive agreements to do business on military bases imposed above-average fees on deposit accounts last year. The fees include everything from minimum-balance and ATM fees to charges for transferring money from one account to another -- even when from an account designated for overdraft protection. Executives at on-base banks claim the fees are justified by the unique requirements of operating at military facilities. But Washington, D.C.-based attorney and soldiers' advocate Joe Reeder, who is lobbying military authorities to require on-base banks to reduce their fees, says financial institutions on base should be allowed to charge interest only on overdrafts. He also blasts a flat overdraft fee of $25 as "exorbitant." Banks should "extend a reasonably priced overdraft line of credit to those service members whose credit is good ... no matter the loan size or duration," Reeder argues. A 2008 Defense Department survey found that a quarter of active-duty spouses said they paid overdraft fees to their financial institution two or more times in the past year.
- Bill Seeks to Help Customers Switch Banks
American Banker 05 Oct 2011
Rep. Brad Miller (D-N.C.) plans to introduce a bill that, if passed, would make it easier for customers to change banks. The measure would allow customers to close checking or savings accounts at no charge; would ensure that they can close accounts even if they have a negative balance; and would ban banks from assessing fees to an account after the customer has formally requested that it be closed. "This is about making the market work to protect consumers. It's about using competition," according to Miller, who said his legislation is being backed by the Consumer Federation of America, the AFL-CIO, Americans for Financial Reform, and other consumer groups.
- Debit Card Fees Are Coming: How to Avoid Them
USA Today 04 Oct 2011
An increasing number of banks have begun charging consumers for using their debit cards, a trend that is likely to continue. Recently, Bank of America announced that it would start charging debit card customers $5 per month for both PIN and signature debit card transactions. SunTrust, Wells Fargo, and Chase have all followed suit, charging customers between $3 and $5 per month. The higher fees are the result of a new rule -- which lowers the fee banks can charge retailers when customers use the cards, from 44 cents to 21 cents, beginning on Oct. 1. However, there are ways that consumers can avoid the fees. Consumers can always pay with cash, with some retailers even offering discounts for not using plastic. Because the new rule does not apply to credit cards, paying with credit is another option to avoid the fees. Additionally, spenders may opt to simply change financial services providers. Some smaller banks and credit unions have chosen not to charge consumers more -- likely because the rule does not apply to financial institutions with assets of $10 billion or less. Online banking is another great option. Even some big banks will likely waive the fee if consumers maintain a minimum balance or arrange a certain amount of direct deposits every month.
- Thousands Protest Against Bank of America
HousingPredictor 01 Oct 2011
Protesters held a massive demonstration and sit-in at the Boston headquarters of Bank of America on Sept. 30 to protest what they claim are predatory lending practices that the country's largest bank has used against homeowners. "The mortgage bubble created by Wall Street pushed predatory lending on urban communities, and since the bubble burst the fallout has been catastrophic," according to Right to the City Alliance executive director Rachel LaForest, an organizer of the Boston event. Dozens of families on the brink of foreclosure were among the roughly 3,000 people hoisting banners, banging drums, and confronting the lender for its part in the financial crisis. The protest symbolizes a spreading national trend against major banks and corporations as the occupation of Wall Street in New York City enters its third full week. Demonstrators have been holding court in an area close to Wall Street in Manhattan's financial district to bring attention to the damage that big banks -- including Bank of America, Wells Fargo, JP Morgan Chase, CitiGroup, and other financial companies like AIG -- have done to the United States.