Consumer banking seems to be a lot more complicated than it once was. Now, checking account holders have to meet increasing requirements to avoid fees and absorb a lot of information and disclosures from their bank.
"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, project director of the Pew Safe Checking in the Electronic Age Project. "Consumers must have understandable, transparent information that enables them to make educated choices when comparing one checking account's costs and benefits to another."
The report, "Still Risky: An Update on the Safety and Transparency of Checking Accounts," examines the financial risks consumers face when they open a checking account. It's a follow up to Pew's 2010 report that highlighted rising fees and inconsistent disclosures and bank practices.
Pew says the new study has not found a lot of improvement since them. It points to a report by Moebs Services, an independent financial research firm, that found overdraft fees cost American consumers an estimated $29.5 billion in 2011.
The new study found that 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.
According to the study, accountholders are not provided with clear and comprehensive information about overdraft options offered and their costs, with the median bank fee coming in at $35.
All 12 banks featured in the study 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, Pew says, maximizes the number of times an account goes negative, thus increasing overdraft fees. It's a constant source of complaints to ConsumerAffairs.
"I check my account balance a few times throughout the day and make sure what I have before I ever use my card," Tawney, a Key Bank customer from Bolivar, N.Y. wrote in a recent post.
Seeing she had a healthy balance, Tawney said she made a few purchases with confidence. The next day she said she was surprised to see her account had a negative balance so she called her local branch, where she was reassured that her account balance was what she thought it was. She was told she would be contacted if that turned out not to be the case.
"I deposited $100 that same day so I knew I was in the clear," Tawney wrote. "The following day I deposited another $170, checked my account and I had more than enough money to go grocery shopping. I spent $40 grocery shopping and a measly $3 at Tim Horton's. If you add those, I had at least $220 in my account. Apparently Key Bank doesn't know math? I checked my account today and had four overdraft charges in the amount of $148."
When problems like that occur, it can often be frustrating for consumers to get satisfaction. The Pew study found 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.