Study Reveals Bank Practices Putting Consumers at Financial Risk

A Pew Charitable Trusts study of consumer checking accounts revealed five bank practices that put consumers at financial risk:

1) Banks provide policy and term conditions in lengthy, technical documents that make it difficult for customers to compare account terms and conditions among banks. The median length for disclosures of checking account policies and fees examined in the study was 111 pages.

2) Banks do not provide accountholders full information about the respective costs of overdraft options. Currently, when a customer is opting-in to overdraft protection, a bank is not required to provide information about any lower-cost overdraft protection options it may offer.

3) Bank overdraft penalty fees are disproportionate to the size of the median overdraft amount. As of 2011, the median overdraft amount was $36, and the median overdraft penalty fee was $35.

4) Banks may reorder transactions in a manner that will maximize overdraft fees. Banks reserve the right to reorder deposits and withdrawals to a checking account in a way that will reduce the account balance as quickly as possible, resulting in more overdraft fees.

5) More than 80% of the accounts studied included binding mandatory arbitration agreements or fee-sharing provisions that require the accountholder to pay the bank’s losses, costs, and expenses in a legal dispute regardless of the case’s outcome.