The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- 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.
- Citibank Is Next With a New Banking Fee
Los Angeles Times 01 Oct 2011
As the uproar continues over Bank of America's planned $5 monthly charge for debit card use, Citigroup has been sending letters to many Citibank customers notifying them that they soon will have to start paying for their checking accounts unless they maintain significantly higher balances. Although in many cases that means customers will have to maintain larger balances to escape fees, Stephen Troutner, Citigroup's retail banking chief, says a basic account option makes avoiding charges easier. It is possible to avoid fees on that program by maintaining a combined $1,500 balance in checking and savings accounts, or by setting up a checking account with direct deposit of paychecks and at least one automated bill-payment service. Citibank has decided not to impose "usage" fees such as the $5 a month that Bank of America, starting next year, will charge most customers who use their debit cards to purchase goods and services. "We conducted extensive surveys with our customers, and no one wanted to pay to use debit cards," says Troutner.
- Banks Plan New Fees for Using Debit Cards
Wall Street Journal 30 Sep 2011
Bank of America's decision to charge customers a monthly fee for making debit card purchases is the latest example of the banking industry's response to the heightened regulatory climate. Several other large banks, including JPMorgan Chase and Wells Fargo, are testing or plan to test similar fees in some states. New federal limits on debit-card "swipe fees" are expected to cost U.S. banks an estimated $6.6 billion a year in lost revenue. To offset that lost revenue, many banks have eliminated or scaled back debit-rewards programs, added monthly fees for checking accounts and raised minimum balance requirements for customers to avoid certain fees. As banks were lobbying against some provisions of last year's Dodd-Frank financial-reform legislation, they warned that the new rules would force them to raise fees on some products, hitting consumers with higher costs. Trish Wexler, a spokeswoman for the Electronic Payments Coalition, a trade group that represents Visa, MasterCard, and several large banks, says the new fees are an "unintended consequence" of the new rules.
- Capital One Should Keep the ING Overdraft Program
MyBankTracker.com 29 Sep 2011
ING Direct's overdraft line of credit is considered a consumer-friendly option by the Center for Responsible Lending, which believes it should be sustained in the event that Capital One's takeover of online bank is successful. In testimony before the Federal Reserve Board, CRL's Kenneth Edwards backed the policy. "Safeguards should be in place to ensure the preservation of ING Direct’s model program as well as to encourage improvements in Capital One’s current practices," he stated. The proposed acquisition of ING Direct would make Capital One the fifth-largest bank in the country. The possible repercussions of becoming another "too big to fail" institution have warranted concern and scrutiny by the government and industry groups. CRL believes that Capital One remains antagonistic toward consumers while other banks have revised their practices following new regulations in the past few years. "We are concerned that Capital One's current overdraft practices are out of step with significant reforms other large institutions have recently implemented,”" Edwards said. Capital One continues to charge steep overdraft fees on debit card point-of-sale transactions, while Bank of America and Citibank no longer charge overdraft fees on such transactions. Instead, these big banks will either reject the transaction or let customers link their checking accounts to a savings account or line of credit to cover non-sufficient funds.
- SunTrust, M&T Win Delay in Overdraft-Fee Cases During Appeal
Bloomberg 28 Sep 2011
Four banks -- SunTrust, M&T, Regions Financial, and Branch Banking & Trust -- accused of gouging customers on overdraft fees won a delay of lawsuits against them while an appeals court considers whether the plaintiffs have to go through arbitration. U.S. District Judge James Lawrence King in Miami put the case on hold as the U.S. Court of Appeals in Atlanta reviews his Sept. 1 decision allowing the plaintiffs -- customers with debit cards attached to their checking accounts -- to proceed with their lawsuits. King had rejected the banks' argument that the customers were legally bound to arbitrate the dispute. Arbitration agreements for the banks are “unconscionable” and cannot be enforced, King said in his opinion. The litigation before King involves more than 30 banks sued over their overdraft-fee policies. The customers claim the banks reorder debit-card transactions in their computers to maximize overdraft fees. Bank of America in February agreed to pay $410 million without admitting liability to settle an overdraft lawsuit brought by its customers.
- Denver Is No. 1 in ATM and Bounced-Check Fees
Denver Post 27 Sep 2011
According to Bankrate.com's 2011 checking study, the highest ATM surcharges and bounced check fees in the country can be found in Denver. The city's average ATM surcharge is $2.75, 15 percent higher than the U.S. average; and its overdraft fee is $33.50, 9 percent higher than the national average. Other cities with ATM fees above national levels include San Diego, Houston, Seattle, and New York; while Miami, Houston, Dallas, and Philadelphia are among the cities whose fees for insufficient funds exceed the norm for the rest of the country. The Bankrate study also found that the new national average ATM surcharge of $2.40 is up 3 percent from last year's $2.33. Additionally, the countrywide average for overdraft fees, $30.83, is up 1 percent from $30.47 in 2010.
- Union Bank Email Show Overdraft's Seedy Underbelly
American Banker 27 Sep 2011
While banks have long claimed that processing debit card transactions from the highest value to the lowest benefited customers, documents revealed during a federal lawsuit against Union Bank of California show that the method is used as a way to pump up revenues. CAST Management Consultants, a vendor of "high-to-low" debit transaction processing software, promised the bank that by processing customers' daily checking and debit transactions based on the highest to the lowest dollar values -- instead of in the order in which they were made -- it would significantly increase the fees that customers pay for insufficient funds. According to an amended class-action complaint, Union Bank eagerly signed on and worked to ensure that consumers never found out. The banking industry claims the high-to-low processing was legitimate and actually helped customers who wanted their largest bills paid first. Of the many similar cases against other big banks, some have been settled out of court, while others could be moved to industry arbitration panels. But documents filed in the Union Bank case appear to paint a picture of a financial institution focused on maximizing fee revenue by using the technology, while dismissing employee concerns that resequencing payments was unfair and possibly illegal. Union Bank says its overdraft practices were in line with those of its peers. The bank ended its high-to-low policy last year.
- Annals of Management Consultancy Advice, Overdraft-fee Edition
Reuters 27 Sep 2011
While banks have been ordering customers' transactions from high to low for years, some banks even paid consultants to tell them how to do it. Union Bank of California hired management consultancy CAST to show it how to tip customers into the overdraft zone as quickly as possible by prioritizing their largest payments. CAST told the bank that its fee income would increase by performing such actions. During the discovery phase of a class-action suit against the bank, it turned over documents to the plaintiff's attorney that indicate the bank agreed to pay CAST 20 percent of any extra overdraft charges generated under its high-to-low system. CAST estimated that Union Bank would grow its overdraft revenue by nearly 25 percent, or $18 million. But during its first year, the bank's overdraft revenue grew by $33 million to a total of $125 million. The system stayed in place for six years.
- Charges on Checking Accounts Rise to Recoup Revenues Lost to Lower Card-Swipe Fees
Washington Times 26 Sep 2011
A study by Bankrate has found that only 45 percent of standard, non-interest checking accounts are free, down from 65 percent last year and 76 percent two years ago. Meanwhile, the average monthly charge for interest-bearing checking accounts is $14.15, up 8.5 percent from $13.04 last year. The balances required to avoid such fees jumped about 44 percent to $5,587, from $3,883 last year. Richard Hunt, president of the Consumer Bankers Association, warned of this when Congress passed a bill to reduce swipe fees that merchants pay to banks when a consumer pays with a card. They have to make up the lost revenue somehow, he said, so they are looking at higher fees and even creating new ones. “Each bank’s going to have to do what they have to do to stay in business,” he said. “The vast majority have no choice but to raise revenue through checking accounts."
- Like Your Free Checking Account? Prepare to Say Goodbye
USA Today 26 Sep 2011
Free checking accounts have been widely available to consumers for some time, but that could be changing. According to a recent survey by Bankrate.com, only 45 percent of non-interest checking accounts are free today -- down from 65 percent in 2010 and 76 percent in 2009. Many banks are adding fees to recover revenue lost from federal regulation that caps debit interchange fees. The poll found that only 2 percent of banks and thrifts currently charge a monthly debit card fee, but some large institutions have announced that they soon will charge a fee. Many banks will waive debit and checking account fees if consumers have direct deposits and a minimum monthly balance. However, the threshold has skyrocketed in the past year, with the average minimum balance required for a free checking account now at $5,587 -- up 44 percent from 2010. Some consumer advocates believe that the new fees could cause more customers to shop around.
- Debit Fee Cuts Could Boost Credit Card Use -- Fed
American Banker 26 Sep 2011
According to a Federal Reserve Bank of Boston research paper, new regulations reducing debit card interchange fees are causing some banks to charge customers more for using debit cards -- which, in turn, could result in customers ramping up use of their credit cards. While explicit debit card fees have not been the norm, Boston Fed policy adviser Joanna Stavins said it is "feasible" that banks will begin to add fees or per-transaction charges in an effort to recoup lost interchange revenue. The Fed's July 29 ruling will limit the fees that merchants pay to banks when customers make a purchase with their debit cards. The fees will drop to between 21 cents and 24 cents per transaction, down from 44 cents on average currently. In an attempt to make up for losses in the field, some big banks have already begun to charge customers for checking accounts or related debit cards. However, the rise in debit card fees could cause more consumers to use their credit cards, as there will be no fee attached to that card. "It is reasonable to expect that an increase in the cost of debit would lead to an increase in the use of credit cards," Stavins concluded.
- Debit or Credit? Citi Places Its Bet
Wall Street Journal 20 Sep 2011
Citigroup mailed an estimated 346 million credit card offers to North American customers in the third quarter, according to figures from Mail Monitor -- more than one for every man, woman, and child in the United States. One in three credit-card offers that landed in consumers' mailboxes last month came from Citi, Mail Monitor estimates. The postal blitz is expected to make Citi the largest mailer of credit-card offers, ahead of longtime industry leader Chase, for the first time in eight years. It shows how Citi is trying to regain ground ceded to rivals after losing hundreds of millions of dollars on credit cards following the 2008 financial crisis. In its efforts, Citi is betting that customers, alienated by charges being imposed on debit cards, will turn to credit cards instead.
- Citi Raises Checking Fees, Cuts Debit Rewards
American Banker 19 Sep 2011
Citigroup Inc. is hiking the fees it charges customers for its rudimentary checking accounts and will no longer reward them for using its debit cards, in the wake of new rules limiting debit interchange fees. Beginning in December, Citigroup will charge customers $10 a month for a basic checking account, up from $8 a month currently. The New York-based bank also said it had made "the hard decision to stop giving reward points for debit card transactions," according to a Sept. 16 press release. The largest U.S. banks have largely scrapped free checking since last year, when the Dodd-Frank financial reform law cut the revenues that banks earn from processing debit card transactions. As a result, nearly two in three large banks have added fees, discontinued rewards programs, or altered the terms of their checking accounts, according to a recent survey by Moebs Services.