Hidden Fees Help Banks Increase Revenue, Proposed Bank Legislation Will Rip Off Consumers
The
average annual cost of maintaining a regular checking account has risen
to more than $217 in 1999, according to a national report released
today by the U.S Public Interest Research Group (PIRG). Bank profits
have broken new records for the last eight calendar years, reaching
nearly $62 billion in 1998, with fee income a growing piece of the
profit pie, yet banks continue to increase customer account fees and
charge hidden new fees, according to the U.S. PIRG report.
"Banks
are punishing consumers with a relentless onslaught of more and higher
fees, " said Ed Mierzwinski, Consumer Advocate for U.S. PIRG. "Worse,
many banks are hiding fee increases, by adding new fees for services
that used to come standard with your checking account. Many banks are
now charging us monthly ATM card rental fees, cancelled check return
fees, telephone call center fees and even fees to close our accounts."
“More
and higher bank fees have left at least 12 million American families
unable to afford bank accounts,” added Mierzwinski. “Congress will make
the problem worse if it approves the Financial Modernization bill,
which will make big banks bigger, raising fees for everyone without
requiring low-cost accounts. In addition, the bill will allow banks to
invade consumer privacy without recourse,” Mierzwinski added. “We urge
consumers to call Congress and demand changes to fix this one-sided
bill.”
KEY FINDINGS:
LOW COST AND HIGH COST STATES
Among 526 banks surveyed in 34 states, nationally, the most expensive
states to bank in were the following: New York (worst), Florida, Texas,
Michigan, and North Carolina. The least expensive were Nebraska (best),
Missouri, Utah, Colorado and Arkansas.
U.S.
PIRG ranked states on 12 different cost factors, including checking
account monthly fees, ATM fees, bounced check fees, and minimum balance
requirements and the number of banks offering free checking.
“The
bank strategy to increase fees, invent new fees, and make it harder for
consumers to avoid fees is working,” Mierzwinski said. “Big banks are
getting bigger, taking away consumer choice and raising prices for all,
and while small banks are still a better deal, the survey shows small
banks are raising fees as well.”
Among the other findings of the report:
REGULAR CHECKING ACCOUNTS
Nationally, in 1999, all consumers who couldn’t meet account balance
minimums paid an average of $217.32 to maintain a regular checking
account, up from $199.79 in 1997. When banks are broken down into big
banks and smaller banks, big bank consumers paid $234.87, or an average
of 16% more, ($32.08), than small bank consumers, who paid $202.79. The
big bank fee gap increased by $4.14, or 15%, from 1997, when big bank
consumers paid an average of 15% more ($27.94).
By
comparison, the survey found the average annual regular checking
account cost at credit unions to be only $111.59 in 1999, or less than
half of the big bank cost. In nearly every state, consumers can find
lower costs at smaller banks or credit unions.
BOUNCED CHECK FEES:
Nationally, big banks raised their fees for bouncing a check to an average of $23.08 in
1999, up 10% from 1997. At small banks, bounced check fees rose 4%, to $21.19. Overall,
consumers paid an average of $22.01 for bouncing a check.
DEPOSIT ITEM RETURNED (DIR) FEES
Nationally, big banks charged their customers $5.12 in 1999 for receiving someone
else's bounced check, called a deposit item returned (DIR) fee, up 5%. Small bank DIR fees
declined slightly to $4.51 in 1999, down from $4.92 in 1997. Overall, consumers paid an average $4.79 DIR fee.
FREE CHECKING ACCOUNTS
Nationally, 92 banks (17.5%) of the 526 in the survey offer completely
free checking accounts, with no fees and no restrictions, other than no
return of canceled checks. By comparison, the survey found that 45% of
credit unions offer free checking with no restrictions.
ATM FEES
Nationally, fees charged by big banks for their own customers to use
other banks' ATM machines (called “off-us” fees) increased to $1.27 in
1999 from $1.19 in 1997. At small banks, off-us fees rose to $1.03 in
1999, from $0.91 in 1997. Off-us fees averaged $1.14 overall.
Nationally, ATM surcharges imposed on other banks' customers were $1.35
at big banks in 1999. Small banks imposed surcharges of $1.08 in 1999.
“Consumers
should shop around for bank fee deals. Your best bet is usually at a
credit union or small bank," added Mierzwinski. "Wherever you bank,
look for free checking, or free or low-cost checking with direct
deposit or by linking your checking account to another account. Be wary
of NOW accounts, unless you keep a high balance.”
“Get
PIRG’s “Fight Fees Alert” at our web site, “pirg.org”, added
Mierzwinski. “Besides teaching you to shop, it will help you fight back
against unfair fee increases. Call Congress today to urge Congress to
change HR 10, the Financial Modernization bill, to require low cost
lifeline checking accounts and privacy protections for consumers,”
Mierzwinski concluded.
The
report was based on data on 526 banks compiled from bank brochures
collected between March and June by PIRG offices and local consumer
groups affiliated with the Consumer Federation of America in 33 states
and the District of Columbia. Results were compared to an April 1997
PIRG survey of 419 banks in 29 states and the District of Columbia. Big
banks were derived from banks listed among the 300 largest by deposits
in year-end 1998 statistics of the Federal Deposit Insurance
Corporation (FDIC). U.S. PIRG is the national lobbying office for state
