The latest news on overdraft fees, overdraft fees and other bank fees from the Center for Responsible Lending.
- 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.
- Consumer Bureau Targets Checking Overdraft Fees
Chicago Tribune 19 Sep 2011
A controversial new federal agency is targeting a consumer pariah: checking account overdraft fees. The de facto head of the Consumer Financial Protection Bureau, Raj Date, said in a speech in Philadelphia in mid-September that the new regulator is going to begin scrutinizing overdraft programs with the goal of clarifying the cost of free checking accounts. "With these free checking accounts, much of the costs to the consumer were buried in overdraft fees," said Date, special adviser to the Treasury Secretary on the consumer bureau. "Going forward, the bureau will carefully assess how we can best ensure that the overall market for short-term credit is fair, transparent, and competitive." Date -- who is running the consumer bureau as it anticipates the confirmation of its first chairman -- said that one of the CFPB's first major decisions could be establishing guidelines for banks to make sure consumers understand what they are doing when they accumulate overdraft fees.
- Regions Adding Debit Card Fee
Jackson Clarion-Ledger 17 Sep 2011
Mississippi-based Regions Bank has announced that it will soon join the growing number of banks across the country that now impose a monthly debit card fee. Beginning on Oct. 1, Regions customers with entry-level LifeGreen Checking and Basic Checking accounts will incur a $4-per-month debit card fee per account they have with the bank. The charge will be applied for point-of-sale purchases, but not for use of the ATM. A number of banks have been making the change due a provision in the 2010 federal financial reform law that capped swipe fees charged to merchants from an average of 44 cents to about 25 cents. "Regulations have changed and, as a result, we and other banks are adjusting how we cover the costs of providing debit cards," said regions spokeswoman Evelyn Mitchell. Regions customers who had free checking accounts also could face a $10 monthly maintenance fee if they do not have a $1,500 average monthly balance or at least one direct deposit of $500 or more each month. Mitchell says that customers are free to switch to other accounts if they are unhappy about the debit card fee changes, but other checking accounts with the bank have monthly fees of $12 to $20.
- Wells Fargo Tests Debit Card User Fee Outside S.D.
Madison Daily Leader 09 Sep 2011
Larger financial companies like Wells Fargo are beginning to test limited markets with a debit card user fee. Staci Schiller, a Wells Fargo spokesperson for the South Dakota region, said the $3 per month debit card activity fee is being tested for customers who opened accounts in Oregon, New Mexico, Nevada, Georgia, and Washington. She said the fee is triggered if a customer makes a debit card purchase, but it does not apply to ATM withdrawals. The once-monthly charge is not based on the number of transactions made. This new fee comes in response to lower interchange fees that take effect Oct. 1 for cards associated with banks with assets of $10 billion or more.
- Consumers, Banks Face-Off Over Fees
Smart Money 08 Sep 2011
Consumers are getting increasingly angry over the expanding schedule of bank fees they are being hit with, and some are questioning whether the fees are justifiable. A new survey from the marketing firm Russell Herder finds that greater than 70 percent of consumers polled consider bank charges are unfair, and 90 percent say their financial institution could have more clearly communicated the fees they charge and what triggers them. The findings of the survey, which encompassed more than 500 bank and credit union checking and savings accounts, also suggested that customers still do not understand why they are charged certain fees. To the contrary, banks say most consumers manage to evade fees. A recent industry-sponsored survey by Ipsos Public Affairs shows that 71 percent of bank customers pay zero fees, while 11 percent pay $3 or fewer.
- The Best Banking Deals for College Students
SmartMoney 07 Sep 2011
Banks have been wooing college students, pitching products that feature better terms. Among them are longer zero-interest promotional periods and better rewards programs on credit cards; no-fee checking accounts, which excuse students from direct-deposit requirements and save them from having to maintain a minimum balance; and more flexible debit-card rules that, for example, give students more leeway when using out-of-network ATMs. In most cases, these and other incentives are tied to credit cards and checking accounts that the banks have tailored exclusively for students. There is a lack of data on the growth of products specifically targeting students, but banking experts say the number of deals is growing and will continue to do so.
- SunTrust, M&T Customers Win Court Ruling on Overdraft Fees
Bloomberg 03 Sep 2011
Customers of SunTrust Banks, M&T Bank, and two others are being permitted to use federal courts instead of arbitration to pursue claims that the financial institutions overcharged them on overdraft fees. According to a ruling from U.S. District Judge James Lawrence King, customers with debit cards linked to checking accounts are not required to use arbitration rather than class-action lawsuits. The banks had argued that a U.S. Supreme Court decision in April related to AT&T customers' class-action suit set the precedent on arbitration agreements. But King said the arbitration agreements by the banks are "unconscionable" and cannot be enforced. The litigation involves customers at more than 30 banks that were sued over their high-to-low transaction processing policies, which customers claimed allowed the banks to maximize overdraft fees.
- What Regulators Have Proposed for Overdraft Fees
South Florida Sun-Sentinel 02 Sep 2011
The federal watchdog for national banks and thrifts has drafted updated rules on overdraft charges. The proposals would mandate a grace period of at least one day for a customer to add more money to an account before an overdraft fee is levied; that withdrawals be processed in an order not "solely designed or generally operated" to maximize fees; and that customers opt in for overdraft coverage on checks and wire transfers -- not just for transactions involving automated teller machines and debit card charges.
- Customers Still Avoid Fees, Survey Finds
American Banker 02 Sep 2011
A new study released by the American Bankers Association found that despite claims that free banking is in danger due to new regulations, more than 70 percent of customers are still receiving this service. The online survey, conducted by Ipsos Public Affairs on behalf of the ABA, polled more than 2,000 adults and showed that 71 percent of them reported paying no fees. Another 11 percent said they paid $3 or less in monthly bank fees, while 6 percent said they paid $4 to $6 a month. The findings come at a time when banks are preparing for reduced customer fees due to restrictions on debit interchange. According to research firm Moebs Services, nearly two-thirds of large banks have ended free checking since 2009 while adding fees or changing terms for an estimated 4 million consumer deposit accounts.
- Consumer Groups Say Overdraft Fees Still Too High
South Florida Sun-Sentinel 02 Sep 2011
One year after Congress aggressively went after overdraft fees, consumer advocates say banks are still imposing egregious fees to customers who overspend the cash available in their accounts. The median overdraft fee at the country's 14 largest banks, $35, remains unchanged from 12 months ago, according to a study conducted in June by the Consumer Federation of America. In total, national banks and other lending institutions will collect an estimated $38 billion in overdraft fees this year -- up from $35 billion in 2010 and from $31 billion in 2006, consumer watchdogs say, referencing estimates from economic research firm Moebs Services. Federal bank regulators are shaping new rules on overdraft fees, but many consumer advocates complain that the proposed rules still do not go far enough. For example, many of them would like to see banks blocked from manipulating the order of customer withdrawals from the largest amount to the smallest -- a practice that generates additional overdraft fees.
- Monthly Debit Card Fees Taking Shape
Chattanooga Times Free Press 01 Sep 2011
Big banks are phasing in monthly fees on debit card usage starting in October, while smaller banks are taking a wait-and-see stance before deciding whether to charge customers for bank card purchases. The new fees are designed to compensate for lost revenues stemming from the Durbin Amendment to the federal Dodd-Frank Act. First Tennessee, Regions Bank, SunTrust and Wells Fargo are among the large Tennessee-area banks testing fees ranging from $3 to $6 on certain accounts. "For those accounts with a monthly debit card fee, it will be assessed when at least one point-of-sale transaction is made with that card during a statement cycle," except for ATM withdrawals, says Mel Campbell, media relations manager for Regions Financial Corp. Meanwhile, smaller community banks like Chattanooga-based Cornerstone Community Bank may be able to avoid charging the fees, thanks to an exemption in the Durbin Amendment for small banks with less than $10 billion in assets. "I think what you'll see, at least at this bank, is us keeping things the way they are to try to bring customers to the community banks from the regional banks," says Frank Hughes, president and CEO of Cornerstone Community Bank. However, smaller financial institutions are concerned that eventually they may also have to start charging similar fees. "Nine times out of 10, when they do stuff like this it trickles down," says Blake Strickland, president and CEO at the 92,000-member Tennessee Valley Federal Credit Union. "I fully expect to see some kind of ramification from it."
- Capital One Deal With ING Could Be Slowed by Federal Reserve
Politico 25 Aug 2011
The Federal Reserve has hinted it may slow down a deal allowing Capital One to acquire ING Direct's U.S. operation, which would create the fifth-largest U.S. bank. Opponents say a merger would create a risky "too-big-to-fail" megabank. The Fed's board of governors this week ended public comment on the proposed merger, typically the last step before it approves a major deal, despite objections from activists and a letter from Rep. Barney Frank (D-Mass.), the ranking member of the House Financial Services Committee. Frank and others wanted the board to remove the deal from fast-track approval so the impact on consumers, and allegations that Capital One has a poor track record in low-income and working-class communities, could be more thoroughly examined. In an unusual step, however, the board indicated it would allow more comment on the matter, potentially giving activists more time to present their case. A Federal Reserve spokeswoman said earlier this week that no decision on the merger was imminent.
- City Holding Settles Overdraft Suit
American Banker 25 Aug 2011
Charleston, W.Va.-based City Holding Co. announced that it has entered into an agreement to pay $3 million to settle a class-action lawsuit that accuses it of improperly assessing overdraft fees. Additionally, the firm said in a Securities and Exchange Commission filing that it will forgive $2.5 million in unpaid overdraft fees. Depositors brought the litigation against the company in July 2010, and Judge Jennifer Bailey of the Kanawha County Circuit Court recently approved the settlement.
- Debit Rewards Are Still Available—in New Form
Associated Press 24 Aug 2011
Debit card rewards are undergoing a transformation. Several major banks in the past year ended or scaled back their debit rewards programs. To compensate, a few banks are teaming up with retailers to offer revamped programs that reward customers for spending at specific stores. The migration away from traditional rewards programs is a response to the changing business environment. Starting in October, a regulation will cap the fees banks can collect from merchants whenever customers swipe their debit cards. Under the new reward programs, retailers pay the banks a fee or share a portion of the profits whenever customers act on an offer, which is expected to help banks offset the loss in revenue from swipe fees. Financial research firm Aite Group estimates that banks will reap $1.7 billion a year in revenue from these merchant-funded rewards by 2015. Aite found that about 30 percent of customers enrolled in merchant-funded programs end up redeeming at least one offer, a figure that could rise significantly once more retailers join the programs and the offers become more customized.
- Miami Has the Nation's Highest Overdraft Fees
Miami New Times 23 Aug 2011
More than one in four Americans with checking accounts -- 26 percent -- overdraw their available funds at least 10 times a year, but Miamians are paying steeper overdraft fees than anywhere else in the country. Moebs $ervices collected information from 1,240 banks, 1,292 credit unions, and 832 national retailers and found that the average overdraft fee varies from city to city. Miami, Fla. has America's highest median fee for overdrafts under $100, at $30.95. Across the country, in San Francisco, overdrafters are paying only $22.50 in fees. "Obviously the institutions in the Bay Area of San Francisco recognize the consumer need for a safety net, while in Miami an overdraft is still a penalty," said Michael Moebs of Moebs $ervices.
- Big Banks Offer Payday Loans by Another Name
CBS News 23 Aug 2011
A number of the country's biggest banks may begin offering payday loans under a different name. While a few large banks already allow customers to borrow against their paychecks for a fee, there are signs that the option could soon become more widely available. Banks say the short-term loans are meant for emergencies, but consumer advocates claim the direct deposit loans carry the same predatory traits as payday loans. Consumer groups claim the bank emergency loans also have fees that amount to triple-digit interest rates, are characterized by short repayment periods, and have the potential to trap borrowers in a cycle of debt. But banks claim the direct deposit loans provide safeguards to prevent over-reliance. Wells Fargo offers the short-term loans and allows customers to borrow up to half of their direct deposit amount or $500, whichever is lower. However, its interest rates still add up to 261 percent, higher than any traditional loan. Some consumer advocates claim that even half the amount of borrower's next direct deposit can be a significant setback and is likely to make him or her need another loan to cover living expenses in the near future. A recent study by the Center for Responsible Lending found that direct deposit loan users relied on the short-term loans for almost six months of the year. "When you're allowed to be indebted for six billing cycles in a row, that's not a short-term loan," says CRL's Uriah King. "They call them short-term loans, but that's just not how they're used. And banks know that."
- UVA Researcher Looks at Banks' Effects on Neighborhoods
National Public Radio 19 Aug 2011
It is not surprising that banks are drawn to wealthy areas; but as it happens, they may also help make communities safer and better off. To find out more about that relationship, a University of Virginia researcher has been studying what transpires when banks move out of poor areas and why credit unions and banks can pay large neighborhood dividends. Greg Fairchild, director of the University of Virginia's Taylor Murphy Center, analyzed communities where banks have closed branches over the past few decades as a result of consolidation. "The areas outside of Northern Virginia, outside of Richmond, outside of general affluence were where the areas where bank branches were likely to decline," he determined. And when the banks vacated, he said, predators moved in. "These would be check cashers, payday lenders, automobile loan companies, title loan companies," he specified. Such businesses frequently charged very steep rates, up to 300 percent on loans, and predatory lenders were not the only ones who swooped in on bankless consumers. Moreover, the dearth of banking services made these workers vulnerable to violent crime -- robbery especially -- after paydays, Fairchild says. But when communities had banks, crime rates decreased, and that helped drive up property values.
- US Banks Begin Charging Monthly Debit-Card Fees
Dow Jones Newswires 17 Aug 2011
Wells Fargo is joining a growing number of banks that are introducing or testing a monthly fee for debit cards, casting around for revenue lost to debit-card regulatory restrictions. Wells Fargo will charge a $3 fee for debit and ATM cards as of Oct. 14 in several states if such cards are used for purchases (but not for ATM usage). The bank says it is a pilot program, and it will monitor how people respond. JPMorgan Chase has been testing a fee in a small market in Wisconsin since February. Other banks, such as Regions Financial and SunTrust Banks, decided recently that debit cards for some of their checking-account customers will carry a $4 and $5 monthly fee, respectively. Like Wells Fargo, Regions says it will charge the fee only if the card is used for purchases. TCF Financial is mulling monthly debit-card fees for customers as well as charging customers who use their cards more than a certain number of times, a spokesman says. "Every bank around I think will ultimately end up with some type of fee," he says. "We are in the decision phase."
- Debit Overdraft Fees, While Voluntary, Are Still Steep
New York Times 16 Aug 2011
A review by the Consumer Federation of America finds that even though banks now must get permission from their customers before charging overdraft fees on debit card purchases, the fees they charge are still high -- and some big banks have increased the maximum number of overdraft fees customers can run up each day. The typical overdraft fee at 14 large banks in the year since the Federal Reserve required banks to have customers "opt in" to debit overdraft protection is still $35, with some charging as much as $37 per incident. That far exceeds the typical debit card overdraft of $20, the report notes. While the Federal Reserve now requires customers to actively choose the debit overdraft option, they can always change their minds and "opt out" if they are paying too many fees. The federation would prefer that regulators require that banks simply deny debit transactions if an account lacks the funds to cover a purchase or withdrawal. Citibank has always followed that policy for debit cards and ATM transactions, the report notes, and HSBC does now as well. Bank of America does not permit debit card overdrafts for single purchases, the report says, but does allow consumers to overdraw at the ATM -- at a cost of $35 per transaction -- with customer approval each time, at the point of transaction.