The Pew Charitable Trusts recently released its third evaluation of bank practices – including checking account disclosure, overdraft and dispute resolution at 45 of the 50 largest retail banks in the nation. The verdict: so-so.
Large banks continued to improve their disclosures by providing a summary disclosure box that Pew designed in 2011. Seventy-eight percent of the 32 banks reviewed over all three years have adopted a summary disclosure box.
But the sticking points continue to be the predominance of overdraft fees, and account terms that showed little change or grew worse.
"Banks continue to charge $35 or more for overdraft fees and many reorder transactions in order to maximize the number of fees that are incurred," says Susan Weinstock, director, consumer banking project, The Pew Charitable Trusts.
Most banks continue to charge an additional fee if a customer does not repay an overdraft within a certain amount of time. Fifty-nine percent of the 32 banks analyzed in all three studies charged extended overdraft fees this year, up from 56 percent in 2013.
Furthermore, banks continue to limit consumers’ rights to be heard in court, including almost all checking account agreements requiring consumers to give up their right to a trial by jury, says Weinstock.
Michelle Semones, head of customer success at MoneyStream, says the percentage of banks with a pre-dispute mandatory arbitration clause, "continues to be abysmal over the three years. In 2015, 34% of the 32 banks common across all three years of the study did not have a pre-dispute binding mandatory arbitration clause."
A mandatory arbitration clause means that in order to open an account with that bank, or in order to keep an account at that bank, the consumer must waive their rights to challenge unfair or deceptive practices or other violations in court before those violations may have ever happened or been discovered. Instead, the consumer must submit to binding arbitration by a third party, with little to no opportunity for appeal, if they want to maintain an account with that bank, explains Semones.
Similarly, the percentage of banks without a class-action waiver clause, not only continues to be low, but has decreased 10% since 2013, says Semones.
"Overall, very little in this study shocks or amazes," says Semones. "Unless forced to, in general, banks will not voluntarily give the consumer any more transparency into the fees than they absolutely have to."
Weinstock points to the lack of improvement in this year’s report as further indication that fundamental reforms are needed. "The Consumer Financial Protection Bureau needs to write new rules to make checking accounts a safe and transparent product for all consumers," says Weinstock.
Semones adds that while setting up a bank account can seem as innocuous and ubiquitous as getting the electricity turned on in your new home, it’s not. "Admittedly, the banking industry has cleaned up its act a great deal since the debacle of 2008, but we are still very much in an environment of Caveat Emptor, or buyer beware."
Be mindful of all terms, especially concerning binding arbitration, class-action waivers, and loss, costs, and expenses clauses (which means the consumer pays the banks costs of fighting a dispute no matter who wins), says Semones. "The rights you blithely sign away when opening that ubiquitous bank account can cost you real money before you ever know you have a problem," she say and adds, "That old adage of ‘always, always, always read the fine print’ couldn’t be more true if it jumped up and charged you a $35 fee."