Checks and Balances

QUICK SUMMARY

Checking accounts are a vital financial tool, utilized by 9 in 10 American households. This report provides the third annual evaluation of disclosure, overdraft, and dispute resolution policies and practices of 45 of the nation’s 50 largest retail banks, totaling 66 percent of all domestic deposit volume. Pew’s Model Summary Disclosure Box for Checking Accounts served as the template for rating each bank’s disclosure documents to determine best or good practices for overdraft and dispute resolution. Additionally, this report identified trends among the 32 institutions examined in all three Checks and Balances reports to date. To ensure that all checking accounts are safe and transparent, Pew has also developed a set of policy recommendations and urges the Consumer Financial Protection Bureau to incorporate these policies in new rules on overdraft practices and arbitration clauses.

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POLICY RECOMMENDATIONS

Pew’s analysis shows that policymakers cannot wait for financial institutions to voluntarily adopt comprehensive practices ensuring that checking accounts are safe and transparent. Pew recommends that the CFPB require financial institutions to:

• Summarize key information about terms and fees in a concise, uniform format.
• Provide account holders with clear, comprehensive terms and pricing information for all available overdraft options.
• Make overdraft penalty fees reasonable and proportional to the financial institution’s costs in providing the overdraft loan.
• Post deposits and withdrawals in a fully disclosed, objective, and neutral manner that does not maximize overdraft fees.
• Prohibit, in checking account agreements, pre-dispute mandatory binding arbitration clauses, which keep account holders from accessing courts to challenge unfair and deceptive practices or other legal violations.