In an extensive study last year, the Pew Charitable Trusts found out what many Americans who’ve been zapped by overdraft fees or frustrated trying to understand fine print already knew: Big banks make it difficult for their customers to figure out exactly when and how much they’ll be charged in fees.
Now, in a follow-up report that included credit unions as well, Pew doesn’t have great news: Some fees — especially pertaining to overdrafts — are on the rise. Disclosures are a muddied mess, so many customers still don’t know exactly when they’ll get hit with these fees, and some banks seem to go out of their way to stack the deck against their own customers.
Last year, Pew found that the median length of checking account disclosure documents was a whopping 111 pages. That number has ticked down to 69 pages, but that’s not really worth breaking out the party hats over, and it’s a little misleading, the report says. Some of the accounts saddled with the longest disclosures are no longer offered, and banks have taken to printing those disclosures in six-point font, literally making the fine print even finer.
In looking at the websites of the 12 biggest retail banks and 12 biggest credit unions in the United States — institutions that collectively hold nearly half of all Americans’ deposits — researchers found that disclosures about common fees could be in a number of different places on a site, and sometimes took clicking through multiple screens or attachments to find.
Another issue is that different banks call the same fees by different names, adding to customer confusion. “Varying fee names and disclosure designs make it very difficult to compare options and can create substantial obstacles for consumers,” the report says.
When it comes to overdrafts, the study says some banks use language that’s deliberately misleading, calling overdraft penalty fees “overdraft protection” and referring to this option as standard, even though recent legislation made banks get permission from customers before letting them overdraw on debit purchases.
This isn’t a coincidence, Pew says. All 12 banks studied either say they reserve the right to order withdrawls from highest to lowest, which increases the number of overdrafts that can be incurred.
While the median overdraft fee at banks has held steady since last year at $35 ($25 at credit unions), the median overdraft transfer fee has crept up by 20% in just a year, from $10 to $12. This is the fee that kicks in if a person overdraws their account and an automatic transfer from a linked savings account or line of credit makes up for the shortfall. An even more dramatic increase took place in the average extended overdraft penalty fee, which banks assess if an account stays in the red for several days. The median amount of this fee rose 32%, up to $33.
Although Pew points out that banks say they’re delivering services customers want and are trying to use high fees as a deterrent, the number of fees, the magnitude and the actions of banks — such as making disclosures hard to decipher and processing transactions in a way that can pile on the fees — make this assertion dubious. Researchers suggest that the Consumer Financial Protection Bureau could use the Credit CARD Act as a model to rein in the bank practices that are costing people so much.