Banks’ checking account disclosures vary widely, Pew study finds

McClatchy Washington BureauMay 30, 2013 

— Consumers need more clear and consistent policies from their banks in order to better understand checking accounts, avoid overdraft fees and resolve disputes, according to a report that for the first time ranks the largest financial institutions in the United States for the safety and transparency of the banks’ practices.

The rating system released Thursday by The Pew Charitable Trusts gives highest marks for what it calls “best” and “good” practices to the online banking service Ally Bank, followed by Charles Schwab, First Republic, Citibank and Bank of America.

The five lowest-ranking banks were First Tennessee Bank, Sovereign Bank, Union Bank, KeyBank and First Niagara Bank.

Fourteen of the 50 U.S. banks with the biggest deposit volume were not included in the study because they don’t allow consumers to review disclosures for checking accounts without visiting a physical branch.

No bank performed well in every category.

“None of the banks we studied consistently applied best practices, and it’s still too hard for consumers to find information about their checking accounts,” said Susan Weinstock, director of Pew’s safe checking project.

Banks were judged based on a variety of criteria, including whether they disclosed overdraft and penalty fees, whether they prohibited ATM overdrafts, and whether they limited the number of overdraft fees charged per day.

Researchers also reviewed whether, in the case of disputes, banks required customers to waive the right to a jury trial or whether banks barred customers from joining a class-action lawsuit.

“Hopefully, bringing this information to light will incent them to adopt practices to make their checking account offerings safer and more transparent,” Weinstock said.

Pew’s report urged federal regulators with the Consumer Financial Protection Bureau to standardize and simplify disclosure rules to better protect consumers.

Financial institutions should be required by law to divulge their fees, terms and conditions “in a uniform, concise and easy-to-understand manner,” the report said.

“Just as the uniformity of food nutrition labels makes it easy for consumers to compare and choose products based on sodium content or calories, checking account disclosures should allow consumers to make choices based on the minimum balance required or the monthly fees,” the report added.

The Consumer Financial Protection Bureau already is studying the impact of bank and credit union overdraft programs on consumers and will publish initial results later this spring, spokeswoman Moira Vahey said in an email.

As part of its investigation, the bureau has solicited public input on a prototype “penalty fee box” that would appear on a consumer’s checking account statement. The box would show the amount overdrawn and total fees charged so that the consumer could get a clearer idea of how much overdrafting costs.

Overdraft charges averaged between $30 and $35 per fee in 2011, an increase of 17 percent from just five years earlier, according to the consumer bureau.

The American Bankers Association doesn’t see any need for the government to intervene. Many large institutions already have spent millions of dollars developing additional disclosures in cooperation with Pew, said Nessa Feddis, the association’s senior vice president of consumer protection and payment systems.

Feddis said the new report is “a little bit unfair” because Pew based the rankings on criteria that may not reflect what consumers actually want from banks.

“One size doesn’t necessarily fit all, and banks do a lot of research about how people want to receive information,” she added.

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