New Study Shows Big Banks Equal Bigger Fees

Since Congress largely deregulated consumer checking and savings accounts in the early 80s, the U.S. Public Interest Research Group (US PIRG) has tracked bank deposit account fee changes and documented the banks’ long-term strategy to raise fees, invent new fees and make it harder to avoid fees. A recent study over the last six months, interviewing 250 banks and 116 credit unions in 17 states and the District of Columbia and reviewing bank fees online in these and seven other states resulted in the report “Big Banks, Bigger Fees: A National Survey of Fees and Disclosure Compliance”.

The report examined the following questions:

  • How easy is it for consumers to shop around? Are banks complying with the Truth in Savings Act, which requires disclosure of a schedule of account fees to prospective customers?
  • Can consumers still find free or low-cost checking accounts or has free checking ended?
  • What can the Consumer Financial Protection Bureau (CFPB) and other regulators do to help improve transparency in the financial marketplace?

Key findings included some of the following:

  • Only 48% of bank branches visited provided researchers with fee schedules as required by law on their first request. After two or more requests, eventually a total of 72% complied with the law. More than 1 in 10 (12%) of branches never complied and refused to provide fee information. Another 16% provided only partial information.
  • Researchers found a wide variety of free or low-cost checking options, with 63% of small banks and 60% of credit unions providing totally free checking. Although the biggest banks have recently tightened requirements to obtain totally free checking (available at only 24% of big bank branches), it is still available at more than half of big banks with a regular direct deposit (59%).
  • While more than half of big banks (62%) posted their full fee schedules on the web, versus less than one-third of small banks (29%), finding the fees was often a scavenger hunt. Many banks, especially big banks, placed fees in massive, clunky PDF files. Some banks even hid fee schedule links in footnotes or, worse, in their “site maps,” with no link available from the “compare checking accounts” page or any other pages.

The study also provides a list of key recommendations for both consumers, as well as regulators. Some of the consumer recommendations included the following:

  • Review your bank statements and count your fees. In addition to ATM surcharges, you may be paying your own bank an “off-us” ATM fee that only appears on your statement, whenever you use another owner’s ATM.
  • Examine how many fees you pay. Watch for a la carte fees you can avoid, for example, by only using online check images or statements. Use available text alerts to warn you of low balances that could result in overdrafts. Shop around. Look for better accounts. Bank at a credit union, not at a bank. Credit unions are member-owned, lower-cost alternatives to banks and often offer the same variety of services. It is easier to qualify for membership than most consumers think. Certainly, consider banking at a small bank, not a big bank. Consider moving your money by voting with your feet.

To access the full version of the study please click here. The recommendations might prove helpful to you if you are considering changing your financial institution or are looking for information on the type of fees you are being charged at your current financial institution.