The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- Suit: First Midwest Shuffled Records to Increase Overdraft Fees
Chicago Tribune 02 Nov 2011
A class-action lawsuit has been filed against First Midwest Bank of Itasca, Ill, accusing it of processing checking account transactions in a way that maximized the number of overdraft fees incurred. According to the complaint, the bank deliberately posted higher-amount debits before lower-amount ones and also deducted debits before credits were applied. Plaintiff Laura Barnes of Indiana would have been hit with a single overdraft charge of $35, instead of three for a total of $105, "if First Midwest had not manipulated and re-ordered [her] transactions … and if First Midwest had not deducted the debit transactions prior to applying the deposit," said her attorneys. Additionally, they said First Midwest did not adequately inform customers of their right to opt out of overdraft coverage -- in which case a transaction would be rejected, but the customer would not trigger fees for overspending. The suit is petitioning for class-action status and is seeking unspecified damages and restitution.
- Debit-Fee Retreat Complete
Wall Street Journal 02 Nov 2011
Just one month after Bank of America announced that it would charge some debit card customers a $5 monthly fee to use their cards for purchases, the banking giant reversed its decision. The move came after four other major U.S. banks retreated on their plans to charge a similar fee after encountering significant opposition to the fees by customers across the country, who flooded customer service departments and branch managers with complaints. "We have listened to our customers very closely over the last few weeks and recognize their concern with out proposed debit usage fee," said David Darnell, co-chief operating officer at BofA. The back-pedal on debit card fees represents a win for consumers, but other bank fees are expected to surface as the finance sector tries to find a way to recoup some of an estimated $2 billion annually it is expected to lose as a result of new federal restrictions on debit cards. Already, they have largely eliminated free checking and ended rewards programs for the cards; the next steps may be to hike existing fees on checking accounts, find new areas for additional charges, and adopt more internal cost-cutting.
- Retreat From Debit-Card Fees Continues
Wall Street Journal 01 Nov 2011
SunTrust Banks Inc. and Regions Financial Corp. said they will stop charging customers for making purchases with debit cards, signaling the latest industry drawback from a monthly fee that elicited an outraged response from customers. The announcements follow decisions in late October by Wells Fargo and J.P. Morgan Chase to drop customer testing of the new fees. Together, the banks run an estimated 15,000 U.S. branches, while controlling more than $2.2 trillion in deposits and $1.6 trillion in loans -- more than 20 percent of the entire sector. The sudden retreat by the four big banks represents a rare concession to customer ire over lucrative fees. Pummeled by a soft economy and tightening regulations, banks have been adding fees on services -- charging, for example, for many checking accounts that were once free. But none of those moves seems to have generated the fierce response of the debit card fee. "Consumers have clearly said this is a no-go," said Patricia Hewitt, who specializes in debit cards at Maynard, Mass.-based Mercator Advisory Group Inc. The moves leave Bank of America as the only major bank that is still planning to impose the fee on some customers next year.
- Durbin Calls on Banks to Release Earnings From Fees
The Hill 31 Oct 2011
Sen. Dick Durbin (D-Ill.) is calling on the nation's largest banks to disclose how much they make in fees, especially those earned from consumers credit card usage. Durbin wants banks, which he says are now pushing customers toward credit card use where merchant fees remain unregulated, to release in monthly statements how much they make in unregulated interchange fees. The lawmaker said he was pleased and even surprised to see banks reversing their decision to charge a monthly fee for using debit cards, but added, "It's not over by a long shot. ... The big banks still have enormous power and resources and they're going to continue to find ways to make money at the expense of their customers."
- Big Banks Blink on New Card Fees
Wall Street Journal 28 Oct 2011
Following the unwelcome reception Bank of America's plans for new debit card fees received, most other big U.S. banks are steering clear of imposing similar charges. Following eight months of consumer testing, J.P. Morgan Chase, for example, has decided that it will not charge customers who use their debit cards to make purchases, according to an insider. U.S. Bancorp, Citigroup, PNC Financial Services Group, KeyCorp and other large banks have also said in recent days that they will not impose monthly fees on debit cards.
- Credit Union Memberships Rise: New Bank Fees Drive Customers to Consider Other Options
Frederick News-Post 26 Oct 2011
Three weeks after Bank of America announced plans to impose a $5-a-month debit card fee, credit unions nationwide are experiencing an uptick in membership as consumers opt for a less expensive banking option. The Credit Union National Association reports, for example, that Bethpage Federal Credit Union in New York opened 1,500 new checking accounts -- double its usual amount -- in the three weeks following Bank of America's announcement. No data have been tabulated, but Cindy Hobbs of Spectrum Federal Credit Union said the Frederick, Md., branch has seen an increase in the number of new accounts after Bank of America's announcement. "Our business has definitely picked up since then," she confirmed. "People seem to be upset particularly with Bank of America's $5 debit card fee." Customers who open new accounts say they are "tired of being nickled-and-dimed by big banks," Hobbs added.
- West Coast Bank Will Pay $390,000 Fine to FDIC, $350,000 to Customers Hit With Overdraft Fees
Oregonian 25 Oct 2011
In response to allegations from regulators, West Coast Bank has agreed to pay the Federal Deposit Insurance Corp. a $390,000 fine and earmark at least $350,000 to repay customers charged fees for electronically overdrafting their accounts. The order, announced Oct. 24 in a regulatory filing by the bank, settles FDIC allegations that Oregon's second-largest bank deceived customers with its "Courtesy Coverage" overdraft protection. In signing the order, the Lake Oswego-based bank did not admit or deny the allegations. The charges, which surfaced during a routine bank exam last fall, stem from a relatively new federal statute intended to protect consumers from unwanted and egregious overdraft fees. That rule, established in 2009, requires banks to notify customers that they can opt in to overdraft protection rather than automatically be enrolled for it.
- Finding Info on Bank Fees May Take Digging
USA Today 21 Oct 2011
With banks exploring monthly debit card fees, many consumers are taking a close look at the cost of their accounts. USA TODAY examined the expense of opening a basic checking account at the 10 biggest banks and credit unions. In most cases, information about monthly maintenance fees, fee-waiving requirements, and the minimum needed to open an account are clearly presented on the institutions' Web sites. Other fees, such as the cost of withdrawing money from an out-of-network ATM or closing an account, are not prominently displayed. To find such information, seekers must unearth a "Schedule of Fees and Charges," or a more detailed list of service fees. Some financial institutions, including SunTrust Bank and Alliant Credit Union, feature a link to the fees on the primary checking account page. This, however, was the exception rather than the norm; in some cases, USA TODAY had to Google "Schedule of Fees" and the name of the bank or credit union. Credit unions proved more transparent than banks; with the exception of Security Service Federal, all the other credit union Web sites included a schedule of fees, although it sometimes took some perusing. Web sites for Bank of America, Chase, and Wells Fargo also included fee schedules. But even Google could not find a fee schedule for HSBC, TD Bank, Citibank, and Capital One. To obtain their fee information, the newspaper had to email or call the banks. Pew Health Group's analysis of checking accounts at the 10 largest banks, meanwhile, found that disclosure statements were a median 111 pages long; yet none of the providers put key information about fees on a single page. Subsequently, Pew concluded, "consumers must navigate a confusing maze of disclosure documents in their efforts to locate all of the important account information."
- 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.
- 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.
- 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.
- 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.
- 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.”
- 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.
- 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.
- 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.
- 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.