Banks are hurting these days, and consumer groups say customers
are feeling their pain in the form of rising fees for account
overdrafts and late credit card payments. Bankrate.com, which
tracks consumer borrowing trends, estimates that insufficient-fund
fees have risen 34 percent in the past decade.
By Lou Hirsh, McClatchy News Service
Banks are hurting these days, and consumer groups say customers are feeling their pain in the form of rising fees for account overdrafts and late credit card payments.
Bankrate.com, which tracks consumer borrowing trends, estimates that insufficient-fund fees have risen 34 percent in the past decade.
More recently, say some experts, some financial institutions are leaning on fees to see them through a time of tight credit, loan losses and nationwide bank closures.
A statistical survey by Professor George Easton of Emory University, covering more than 2,000 banks, savings institutions and credit unions nationwide, found that as of June 22, about 44 percent of all banks and credit unions now have overdraft income greater than their net income.
According to the Emory study, this year marked the first time that overdraft fees have increased during a recession, with the $26 national median up a dollar from a year ago.
The latest Bankrate data, from October, put the average fee in 2008 at $26.95, up 2.5 percent from 2007.
U.S. banks will collect more than $38 billion in fees this year from consumers who overdraw their checking accounts, according to financial research firm Moebs Services.
While relief from some fees charged by credit card companies is on the way, legislation recently passed by Congress won’t take effect until mid-2010.
On the bank-fee front, the Federal Reserve is considering policy changes — for instance, whether to require financial institutions to make overdraft protection opt-in or opt-out — and separate legislation is currently before a congressional committee.
Rebecca Borne, a policy counsel at the Center for Responsible Lending in Washington, DC., said the consumer advocacy organization would prefer that overdraft protection be only opt-in.
For instance, the consumer would get no overdraft protection unless opting in for such coverage.
Borne’s group and other consumer groups favor a system where for point-of-sale transactions, consumers would be notified at the counter that there is not enough money in the account.
That way, they can decide whether to proceed with the purchase.
“Most of these purchase transactions are for very small amounts anyway,” said Borne, many for less than the fees charged for overdrafts.
Costs and benefits
Banks counter that overdraft protection is a service most consumers want to have, and fees are necessary to cover costs of providing that service, especially in the current economy.
Beth Mills, spokeswoman for the California Bankers Association in Sacramento, said the trade group has noticed no unusual recent uptick in overdraft fees, though banks have had to hold the line on those fees because of rising write offs on loans.
“Most revenues for banks are still generated through lending, not through fees,” Mills said.
Mills said the association opposes a measure currently before Congress which would require point-of-sale notifications to consumers that a potential purchase will cause an overdraft.
Mills said that move would be costly for banks to implement, and impractical because some debit card purchases don’t post to accounts immediately, making immediate notification impossible for many transactions.
Banks contend they offer several ways for customers to keep track of account balances, such as online banking, text messages and e-mail notifications of when balances have dropped below a certain level.
“Customers should record their transactions immediately so they can monitor their account balance and activity,” said Amy Savicky-Injaian, a spokeswoman in the San Diego regional office of Wells Fargo, which has more than 70 Inland branches.
Mark Hawkins, CEO of Riverside-based Altura Credit Union, said by phone that the cooperative’s latest courtesy-fee policies have been in place for several months and have drawn few complaints from its more than 110,000 members.
Holding the line
“We haven’t considered raising our fees,” Hawkins said. “Now would not be a good time to do that — our members would not appreciate it.”
Altura’s insufficient fund fee is $25 per truncation. At San Bernardino-based Arrowhead Credit Union, the fee is $22 on the first item, and rises to $27 for the second through fifth item.
The three retail banks with the largest Inland footprint — Bank of America, Wells Fargo and Chase, with a total of more than 200 branches — charge above what research groups say is the national average.
All three charge $35 per transaction, though Wells Fargo charges $25 if there hasn’t been an overdraft in the prior 12 months.
Reach Lou Hirsh at 951-368-9559 or
lh****@PE.com
