Six of the nation's largest banks, with the latest being Wells Fargo, say they will voluntarily adopt Pew's disclosure summary for checking accounts. In total, 14 financial institutions have joined the transparency bandwagon.
Last year Pew researched the disclosure documents of the 10 largest banks. They found 111 page disclosure documents. This year, they looked at checking accounts again Still Risky: An Update on the Safety and Transparency of Checking Accounts, and found that the disclosure documents of the 12 largest banks had a median length of 69 pages. The report concluded that financial institutions do not summarize important policies and fee information in a uniform, concise and easy-to-understand way that allows customers to compare account terms and conditions. Furthermore, financial institutions do not provide customers with clear and comprehensive information about overdraft options and their costs. On top of that, certain overdraft fees have increased. Pew found that all 12 banks either already reorder withdrawals from highest to lowest dollar amount or reserve the right to do so without notice to the customer, thus maximizing overdraft fees.
“Nobody is going to read this much information. We wanted to come up with something that would be easier for people to understand, like nutrition labels for food,” explains Susan Weinstock, project manager for Safe Checking in the Electronic Age.
Pew created a model disclosure box to give consumers clear, consolidated information about the key fees, terms and conditions of their checking account. Researchers tested the disclosure box with consumers who said the box would be a useful and valuable tool when opening an account. The summary would also help consumers understand banking fees and important policies when comparing bank checking accounts. Check it out here.
Why all the fuss? “Transparency is key. Checking accounts are often the first financial product someone uses. People need to be able to understand an account's terms and fees so they can choose an account based on how they will use. They should be able to go online and look at different banks' information and decide what's right for them,” says Weinstock.
The push is timely, as Bankrate.com's 2012 Checking Survey showed that almost every checking fee it looked at went up, with some fees rising 25 percent or more. Then too, free checking is going the way of the dinosaur. In Bankrate's survey, only 39 percent of banks offered a checking account with no minimum balance requirement and no monthly fee, the standard definition of a “free” checking account – which is down from 45 percent in 2011 and down quite a bit from the good old days in 2009 when it was at its peak of 76 percent.
The average monthly maintenance fee for noninterest-bearing checking accounts rose to a new high of $5.48, a jump of some 25 percent over 2011, according to Bankrate.com. While banks are quick to point out that if you keep a certain minimum balance you can avoid those fees, they upped that golden number as well. On average, it takes about a $723 balance to keep the fees at bay, which is again an increase, of 23 percent from 2011.
The other biggie is overdraft fees. According to Bankrate.com's survey, the average overdraft fee, hit a new high too – $31.26, up from $30.83 last year, a 1.4 percent increase, but an increase just the same. Pew is urging the Consumer Financial Protection Bureau (CFPB) to make overdraft penalty fees reasonable and proportional to the financial institution's costs in providing the overdraft loan; and to post deposits and withdrawals in a fully disclosed, objective, and neutral manner that does not maximize overdraft fees. Says Weinstock, “The bureau appears to be looking into this. We'll be hearing more from them on this.”