Last year the Occupy movement was born out of frustration of millions of Americans who felt as though their banks were overwhelming them with a never ending list of bank fees. When Bank of America and other big banks announced a $5 ATM usage fee each month, people realized if something wasn’t done, then this would continue.
As a result of that movement, most banks rescinded that $5 fee. Now, though, a new study conducted and released by Pew Charitable Trusts says not only are banks once again raising fees, but they’re hiding them too.
In fact, says the report, there are at least 12 banks – all considered major players in the American financial sector – that have done little to improve their fee, terms and conditions transparency efforts over the eighteen months. Here’s just a bit of what the report found:
Locating a fee schedule is not listed at all on many websites. The report also revealed there are some banks that make its fees discoverable only when the search box on the bank’s website is used.
Many banks had no fee schedule at all, but instead, had massive disclosures and the fees were scattered within those documents. It should be noted that even though the average length of bank disclosures have decreased overall, there are still too many that repetitive information, confusing verbiage and lack of flow in terms of how the documents are prepared. On average, the disclosures associated with the average checking account is a whopping 69 pages.
So why are banks taking a less ethical approach? They’re losing money, courtesy of the new banking regulations, including the passage of the Dodd Frank bill. You may recall lawmakers drew the line in the sand and essentially prevented the banks from overwhelming customers with burdensome, duplicate and exorbitant fee structures. One bank, Wells Fargo, reportedly has seen a 32% drop in its revenue that comes from debit card purchases. This drop occurred in just one year.
It’s challenging for many banks to find ways of closing the gap between the limitations and their bottom line profits. While NSF and ATM fees are nothing new, banks are looking for other ways to include new and different fees that are both allowed under the new laws and that will allow them to increase profits and alienating as few consumers as possible.
CNN reports that watchdog groups, including Pew, have been concerned, and frankly, suspicious over the banks over-compensatory efforts and that they “are looking to make profits by driving up penalties unfairly.” The report, at a minimum, highlights concerns that some consumers have already voiced and that bank regulators are beginning to re-focus their attention again on these fee structures (or lack of).
Other findings in the report include uncovering the practice that allows larger overdrafts to hit customers’ accounts first. This means some consumers will fact several overdraft fees instead of one. For instance, if a customer has four outstanding checks, three of which are less than $100 and a fourth check that totals $250, and there’s only $300 in that customer’s account, instead of paying the three checks and instituting an NSF for the single, larger check, that did not clear, banks often will pay the single big check while allowing the rest of the checks to be hit with NSF charges.
Even with the frustrating findings of bank practices, there were a few silver linings, albeit small ones. The typical fees, such as NSF charges, haven’t increased over the past year and the fee structure changes that have actually helped consumers are more easily located. This, of course, suggests banks know the higher fees aren’t going to be met well, which could explain why the increases are hidden. Plus, more banks now promise not to kick an account into overdrawn status due to a small debit card purchase, such as a cup of coffee and pastry. There really are any definitive guidelines, though, but instead, those kinds of courtesies are decided on a case by case basis.
There’s also a very interesting finding in this report. Many consumers have turned to their local credit unions to bypass the higher bank fee structures. Unfortunately, even the credit unions are sometimes guilty of the same complicated disclosures. In fact, 75% of the credit unions the Pew Institute looked into often make decisions on the fly associated with fees, policies and other important consumer related documents.
The real question is why the banks are going to such great lengths to hide these fees? Consumers are becoming far more savvier when it comes to their financial products and it appears this would be too much of a gamble for banks these days. Consumers are frustrated with the policies anyway and to further complicate matters seems a big gamble for financial institutions. Not only that, but the new regulations were designed to prohibit these kinds of tactics.