Bank fees prompt call for more disclosure on checking accounts
As the backlash continues over Bank of America’s new debit card fee, the acting head of the Consumer Financial Protection Bureau called for more disclosure about what customers pay for checking accounts.
Raj Date, the Obama administration advisor leading the agency until it gets a Senate-confirmed director, weighed in on the controversy Wednesday without directly addressing BofA’s new $5 monthly debit card fee.
Instead, Date said banks often are unclear about how much they charge customers for various services, and he suggested the agency might move to simplify checking account disclosures.
“This isn’t about any one fee from any one bank,” he said. “The problem is that checking accounts often come with a wide variety of unexpected costs that can quickly add up for consumers.”
Date cited a July poll that found that nearly 3 out of 4 Americans with checking accounts supported regulations requiring banks to provide better disclosure of fees, terms and conditions. The poll was commissioned by the Pew Charitable Trusts.
“Different banks charge different fees. Different fees are applied under different terms and conditions. Different banks give different names to the very same fee,” Date said. “Ideally, consumers would have a simple way to evaluate checking account costs.”
The agency, created by last year’s financial reform law, protects consumers from being gouged by banks and other financial institutions, but it generally cannot set rates or fees unless they are deemed unfair, deceptive or abusive.
The agency has focused on advocating disclosures to avoid hidden fees, and BofA has been public about its new policy.
BofA has argued that the fee is necessary because of new limits on what banks can charge retailers to process debit card transactions. Sen. Richard J. Durbin (D-Ill.), who championed those limits as part of the reform law, has called for upset BofA customers to switch banks.
Wells Fargo & Co. and JPMorgan Chase & Co. also are testing debit card fees in some states. Citibank said Wednesday that the minimum balance on one of its checking accounts to avoid a $20 monthly fee would nearly triple to $15,000 from $6,000.
The consumer agency has not said whether it will review the BofA fee. It also could force banks to standardize the checking account fee schedules they provide to customers, as they must with credit card and mortgage terms.
“A lot of changes are being made to the cost structure of bank accounts,” said Jean Ann Fox, director of financial services for the Consumer Federation of America. “If we’re going to count on a competitive market to keep fees down, consumers need a lot more information and leverage.”
Date noted that the consumer agency has the power to require banks to simplify checking account disclosures, adding that more information about fees would be “good for consumers and good for competition.” But he did not commit to such an initiative, possibly because he’s only the agency’s temporary head.
President Obama nominated former Ohio Atty. Gen. Richard Cordray to be the first director of the agency, which officially launched in July. He is expected to be approved Thursday on a party-line vote by the Senate Banking Committee.
But nearly all Senate Republicans have vowed to block any nominee for the job from getting a final confirmation vote unless the White House agrees to reduce the power of the agency. The administration opposes the changes, as do consumer groups.
