Checks and Balances

2015 update

Report May 12, 2015 Read time:

Projects: Consumer Banking & Consumer Finance

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.

Download the full report.

Downloads Checks and Balances: 2015 Update (PDF)Overview: Best and Good Practices, 2015 (PDF)

Key Findings for the 45 banks studied

62 percent of large banks have adopted model summary disclosure boxes for terms and fees.

Among all 45 banks evaluated, 62 percent had adopted a complete disclosure box that meets Pew’s standards. Just 25 percent of banks reviewed had a comparable summary box in place in 2013.

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71 percent of large banks clearly disclose the default option for overdraft is to decline debit and ATM transactions.

Federal rules require customers to opt in to debit card overdraft services; fewer than half of banks clearly disclosed the default option in 2013.

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58 percent of large banks charge extended overdraft fees if a customer does not repay an overdraft within a certain number of days.

Among the banks studied over three years, 59 percent charge these fees, up from 56 percent in 2013.

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13 percent of large banks do not require customers to waive their right to a jury trial for dispute resolution.

Banks are increasingly placing limits on consumers’ options for resolving disputes. Only 6 percent of the 32 banks studied over three years did not require customers to waive their right to a jury trial in 2015, compared with 19 percent in 2013.

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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.

Downloads Checks and Balances: 2015 Update (PDF)Overview: Best and Good Practices, 2015 (PDF)