Pew Releases Ratings of Largest Banks on Key Consumer Protections

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Findings Show Checking Account Practices Have Improved but Stronger Safeguards are Needed

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Checking accounts are a fundamental tool for managing money and they need to be safe and transparent. Consumers should have strong protections no matter where they bank.

The Pew Charitable Trusts released today its fourth evaluation of checking account practices at the nation’s largest banks, finding that risks still remain for consumers. While certain practices have improved in the past year, others remain unchanged or have worsened. The report underscores the need for action from the Consumer Financial Protection Bureau to ensure that checking accounts have fair and effective standards.

“Checking accounts are a fundamental tool for managing money and they need to be safe and transparent,” said Susan Weinstock, who directs Pew’s safe checking research. “Consumers should have strong protections no matter where they bank. We urge the Consumer Financial Protection Bureau to make fair checking account practices a priority by issuing new rules.”

More than half of the banks reviewed in the report still reorder consumer withdrawals from high-to-low dollar amount, a harmful practice that can magnify overdraft fees by charging many fees on small amounts rather than one fee on a larger amount. And significantly more banks are requiring mandatory binding arbitration agreements and limiting customer options to resolve disputes.

The report also shows that even as banks have lessened the likelihood of overdrafts at the ATM, they have not done so at the cash register. The number of banks that allow consumers to overdraw their accounts with their debit cards when making purchases is unchanged from last year.

Banks have made important progress on their disclosure practices, however, including increased transparency of overdraft policies. Forty-three percent of the banks studied have adopted a summary disclosure box of terms and fees that meets all of Pew’s criteria, up from 22 percent in 2013. In fact, 14 of these banks have worked with Pew to voluntarily adopt a model disclosure box for checking accounts. More banks are also making their account agreements and fee schedules available online.

The new report, Checks and Balances: 2014 Update, evaluates “best” and “good” practices at 44 of the 50 largest banks across three categories: disclosure, overdraft, and dispute resolution. Pew defines best practices as those that are the most effective in:

  • Providing checking account holders with clear and concise disclosure about costs and terms.
  • Reducing the incidence of overdrafts and eliminating practices that maximize overdraft fees.
  • Offering consumers a meaningful choice to resolve a problem with their bank rather than including mandatory binding arbitration clauses in checking account agreements.

The findings are an update to Pew’s 2013 report, which found no bank with best or good practices across the board. Earlier reports in 2011 and 2012 examined a smaller group of banks using different criteria.

As in last year’s report, Pew provides the following policy recommendations to the Consumer Financial Protection Bureau to make checking accounts safer for consumers:

  • Summarize key information about terms and fees in a concise, uniform format.
  • Provide account holders with clear, comprehensive terms and pricing information for all available overdraft options.
  • Make overdraft penalty fees reasonable and proportional to the financial institution’s costs in providing the overdraft loan.
  • Post deposits and withdrawals in a fully disclosed, objective, and neutral manner that does not maximize overdraft fees.
  • Prohibit predispute mandatory binding arbitration clauses in checking account agreements, which prevent account holders from accessing courts to challenge unfair and deceptive practices or other legal violations.    

To conduct this study, Pew sought to examine disclosure documents made available online for the 50 largest banks based on domestic deposit volume. If the information was not available online, Pew phoned the banks’ toll-free customer support number to request the information. Using these methods, Pew was able to obtain full documentation from 44 of the 50 banks. The remaining six are noted but were not rated because they did not provide this information online or when requested.

The Pew Charitable Trusts is driven by the power of knowledge to solve today’s most challenging problems. Pew applies a rigorous, analytical approach to improve public policy, inform the public, and stimulate civic life.

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Andrea Risotto
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