Pew Finds Consumers Subject to Unclear Policies, Leading to Unnecessary Costs When Navigating Checking Accounts

The Pew Safe Checking in the Electronic Age Project released Still Risky: An Update on the Safety and Transparency of Checking Accounts  today, a report that examines the many financial risks consumers face when they open a checking account. This follow up to Pew's 2010 report Hidden Risks  finds that some fees have increased and that inconsistent disclosures and bank practices expose consumers to high unexpected costs for little benefit.

According to Moebs Services, an independent financial research firm, overdraft fees cost American consumers an estimated $29.5 billion in 2011.

“Consumers are expected to wade through long, confusing documents and may be subject to steep, unexpected fees to access their own checking accounts, the cornerstone of household financial management,” said project director, Susan Weinstock. “Consumers must have understandable, transparent information that enables them to make educated choices when comparing one checking account's costs and benefits to another.”

There has been little improvement since Pew did its survey of banks in 2010. Still Risky finds the 12 largest banks and the 12 largest credit unions, by deposit volume, still need to improve. The key issues that follow have the potential of affecting the nine out of 10 adult Americans who have checking accounts.

Findings: 

• Important policies and fee information are not summarized in a uniform, concise, and easy-to-understand format that allows customers to compare account terms and conditions. Currently, the median length of bank checking account disclosures is 69 pages.
• Accountholders are not provided with clear and comprehensive information about overdraft options offered and their costs (median bank fee of $35).
• Certain overdraft fees have increased.
• All 12 banks either already reorder withdrawals from high to low or reserve the right to do so at their discretion and without notice to the customer. This practice maximizes the number of times an account goes negative, thus increasing overdraft fees (as seen in the illustration of Gutierrez vs. Wells Fargo Bank in Transaction Infraction).
• Financial institutions restrict consumers' options for recourse in the event of a dispute.

Pew's Safe Checking Project recommends that regulatory changes be made by the Consumer Financial Protection Bureau (CFPB) or Congress to protect consumers from these unfair practices.

Checking accounts are an important part of America's financial system. They allow for deposit of earnings, the ability to pay bills by check and online, and an opportunity to build a relationship with a financial institution that can open the door to more sophisticated financial products and services.

The Pew Safe Checking in the Electronic Age Project is dedicated to data driven research on deposit accounts.  The Project raises awareness, builds partnerships with industry, and advocates for policies that reduce risks and allow Americans to responsibly manage their checking accounts.  

The Pew Charitable Trusts is a nonprofit organization that applies a rigorous, analytical approach to improve public policy, inform the public and stimulate civic life.