Banks Face Greater Pressure on Fee Transparency

(MoneyWatch)  As if the tension between banks and consumers weren't already so thick you could cut it with the sharp drop in home values, banks may be taking another turn on the hot seat when it comes to their fees.

In a recent blog post, the Wall Street Journal's personal finance reporter Jane J. Kim points out that banks fees are not only on the rise, but that "actually obtaining information on what fees banks are charging is notoriously difficult." While some banks like Citibank and Bank of America publish fees on their web site, consumer groups are up in arms about the lack of transparency in most other bank fees charged to customers.

A study from the Consumer Federation of America found that at least three of the nation's 10 largest banks make it difficult for customers to obtain fee schedules or account agreements (PDF link). And U.S. banks are getting pressure from above, as well as below, on this front: The GAO also published a report (PDF link) on bank fees earlier this year, which reiterated the difficulty encountered in trying to get access to fee information.

Many banks, under pressure to increase revenue on the deposit side of the house in response to growing troubles on the lending side, are also hiking fees or creating new fees. Banking customers are paying more than ever for their checking account services, according to a study Bankrate.com released in October. Citibank last week started charging some of its customers a $10 overdraft protection fee when they transfer money from a savings account or line of credit to a checking account. And Chase Bank and Wells Fargo have increased the ATM fees they charge users who are not their customers to as much as $3 per transaction.

Even if banks must raise fees to remain competitive, consumers, regulators, and industry observers will continue to demand transparency -- especially with the (presumably pro-consumer) Obama administration taking office in January. Long before the credit crunch and the string of bank failures this year, the banking industry was already losing ground to payday lenders and other non-bank institutions. These non-banks aren't necessarily winning over consumers because they charge lower fees -- it's just that they're unabashedly clear about what they charge.

If banks want to stem the growing tide of consumers flowing out to these rivals, they need to embrace the same kind of transparency in their own pricing.