CALPIRG Study : Basic Banking Fees Varied--and Rising
The costs of maintaining basic accounts at many Los Angeles-area savings institutions have risen significantly since 1987, with annual checking fees rising as much as 43% at one institution in the last two years, according to a survey released Tuesday.
The California Public Interest Research Group, a nonprofit consumer advocacy group, said its survey of about a dozen California-based banks and savings and loans showed that fees varied widely between the lowest-cost accounts and the highest.
“Since deregulation, the financial services industry has made a perplexing array of options available to consumers,” said Henry Holmes, the group’s consumer advocate. “In that environment, it is vital to have useful information so you can comparison shop.”
The report is further evidence of a nationwide trend toward higher fees for basic banking services stemming from industry deregulation in the early 1980s. Before deregulation, institutions kept fees down in part because they could pay artificially low rates on deposits. Rules limiting deposit rates were lifted under deregulation. Banking officials justify higher fees by noting the higher rates paid on deposits and increased administrative costs.
Concern about these rising costs, along with the need for a massive federal bailout of the ailing savings and loan industry, has spurred Congress to consider legislation that would require institutions to offer low-priced “lifeline” accounts for low-income consumers, students and others who cannot afford basic banking services. The federal government estimates that about one in every six American families does not have a bank account, presumably because some can’t afford one.
A Senate bill, for example, would require institutions to offer a checking account that could be opened with a minimum deposit of only $25, with no minimum balance and the ability to write up to 10 checks a month for a low monthly fee set by the Federal Reserve Board.
The Calpirg survey found that most of the institutions surveyed did not offer anything that would qualify as a “lifeline” account, Holmes said.
Three of four institutions surveyed don’t cash government checks for those who are not customers, he said. Because high fees and minimum balance requirements prohibit many consumers from maintaining deposit accounts, “people on fixed incomes are denied basic services by most institutions,” Holmes said.
The survey also found that:
* The annual cost of maintaining a regular, non-interest-paying checking account rose as much as 43% since 1987 at Gibraltar Savings, Holmes said. Most others rose between 11% and 43%, he said. However, two institutions, Wells Fargo Bank and First Nationwide Bank, significantly lowered the cost of their least expensive accounts, so that the average annual cost among all institutions surveyed actually declined 7%, Holmes said. Minimum and average balance requirements to avoid service charges remained from $250 to $1,200 a month.
* The average annual cost of interest-bearing checking accounts rose 27% in the last two years, to $89 from $70. Most institutions require consumers to maintain $1,000 or more in their checking account to earn interest.
* The average monthly service charge for regular savings accounts rose 31%, to $1.70 a month from $1.30 a month. These charges are incurred when the consumer does not meet minimum balance requirements.
To help consumers, the group publishes a consumer guide with tips on how to shop for banking services and rankings of institutions and their fees. To obtain a copy, send a $3 check or money order to Calpirg, 1147 S. Robertson Blvd., Suite 203, Los Angeles, CA 90035.
REGULAR CHECKING FEES
Institutions are ranked below from least expensive to most expensive. The ranking assumes the account holder does not meet minimum or average balance requirements, writes 15 checks a month, makes five automated teller withdrawals a month and receives canceled checks in the monthly statement. If an institution has more than one regular checking plan, the lowest-cost account is noted, excluding special accounts with qualifications, such as senior citizen accounts. (Actual costs may vary depending on whether the ATM withdrawal was made at a machine other than one provided by an individual’s own bank or S&L.;)
MONTHLY YEARLY INSTITUTION CHARGES CHARGES First Nationwide Bank $3.00 $36.00 Wells Fargo Bank* 3.50 42.00 Sanwa Bank of California 4.50 54.00 California Federal S&L; 5.00 60.00 Gibraltar Savings 5.00 60.00 Great American 1st 6.00 72.00 Great Western Bank 6.00 72.00 Union Bank 7.50 90.00 Sumitomo Bank of Calif. 8.50 102.00 First Interstate 8.75 105.00 Bank of California 10.00 120.00
Source: California Public Interest Research Group
* Assumes all transactions are made at an ATM
