Durbin turns his ire to checking fees

The lawmaker who led the charge against hefty new bank debit-card fees is turning his attention to checking accounts.

Illinois Sen. Richard J. Durbin, the second-ranking Democrat in the Senate, is pushing for more transparency in consumer checking accounts, closing what critics say is a loophole in the controversial “swipe-fee” rule that limits the amount banks can charge retailers each time a customer pays with a debit card.

“It’s about time we had more disclosure,” he told reporters late last week. “We’re starting with checking accounts, but the bottom-line goal is to make sure people know what they’re being charged and can determine whether it’s fair.”

He and Sen. Jack Reed, Rhode Island Democrat, are petitioning the new Consumer Financial Protection Bureau to require banks to post consumer-friendly disclosures about checking accounts. This would include information such as the minimum deposit needed to open an account, monthly fees, requirements on fee waivers, overdraft fees and account-closing fees, among other things.

The Pew Charitable Trusts has designed a simple disclosure model that they are endorsing.

“This disclosure form lays out comprehensive information on fees and terms in a simple, easy-to-read format, and the form can easily be adopted by financial institutions nationwide,” they wrote in a letter to the CFPB.

Some banks already have taken this to heart. The Pentagon Federal Credit Union and North Carolina State Employees Credit Union both have agreed to post Pew’s new disclosure form for checking accounts. The industry seems open to it.

“CBA and our member banks support clear and easy-to-understand disclosures which are meaningful for our customers,” said Richard Hunt, president of the Consumer Bankers Association. “To that end, we have been working with the CFPB on improving mortgage disclosures. We will continue to work with the CFPB on streamlining and simplifying disclosures to benefit consumers.”

This comes as Mr. Durbin celebrates his “swipe fee” victory from this summer. The rule went into effect Oct. 1, and caps “swipe fees” at 21 cents, a sharp cut from the average 44 cents banks had been charging merchants.

But it was a lose-lose situation for consumers stuck in the middle of a battle between merchants and bankers. Merchants said high swipe fees forced them to raise retail prices, but many have yet to lower prices and pass on the savings to consumers. Meanwhile, banks warned that they would create new fees to make up for the lost revenue.

The new debit card fees have been wildly unpopular with bank customers. They revolted, and within a matter of months, all the major banks that had charged anywhere from $3 to $5 a month to have a debit card had backpedaled. Bank of America, JPMorgan Chase & Co., Wells Fargo & Co., SunTrust Banks and Regions Financial all waved the white flag on these fees.

“It was consumers who reacted,” Mr. Reed said. “You didn’t need a law, you didn’t need a regulation, you just need people standing up and saying, ’I’m not going to do that. I’m going elsewhere.’ “

Bank of America sparked the high-profile controversy a month ago by announcing plans to charge for debit cards, starting in January. Several major banks quickly followed suit, acting in response to federal regulations.

SunTrust, which began charging $5 a month for debit cards in June, promised to cancel the fee and return all the money it has collected from customers. Regions Financial backed down the same day.

Chase tested out a $3 monthly fee in Wisconsin and Georgia, but it said the program will end this month and not be expanded to the rest of the country. Wells Fargo ended a short-lived, five-state test of charging $3 monthly fees starting Oct. 14.

But the fight over hidden fees isn’t over. Banks, instead, said they would turn their attention to checking accounts.

“Unfortunately, we have to look at all sources of revenue to recoup the fees,” Mr. Hunt said. “We’re trying to satisfy the customer and at the same time remain solvent. It’s a tricky situation.”

So Mr. Durbin and Mr. Reed this week stepped up to fight for consumers. They’re asking for more transparency from banks.

“The key is an informed consumer,” Mr. Reed said. “It’s really about giving the consumer the information that he or she needs to make thoughtful decisions.”

Susan Weinstock, director of the Pew Health Group’s Safe Checking in the Electronic Age Project, said their disclosure template would do just that.

“I think we can all agree that disclosures are critical for consumers to make informed decisions,” she said. “But the information needs to be presented in a format that is clear and understandable.”

“These documents are not user-friendly, with highly technical and dense texts,” she added. “Unfortunately, with the lengthy disclosures that go with these accounts, comparison shopping for the right one is next to impossible.”