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As things stand now, the average account-holder has to wade through an eyebrow-high sludge pool of legalese to understand the bargain struck when he asks an institution to keep his money on deposit. Earlier research by Pew revealed that disclosure documents for 250 checking accounts offered by the ten largest U.S. banks run an average of 111 pages. Nobody is going to read all that blather. Worse yet, banks vary the labeling of different services and fees and spread the information among several documents. Unless a consumer has time to collect and study all this stuff and create a spreadsheet to map it out, s/he has no hope of comparing one account to another to find the best one. As an example, here's a disclosure about posting order of credits and debits from Bank of America:
We do not process and post credits, debits and holds to your account in the order in which they occur or we receive them. Often, they are not posted to your account on the same day that they occur. As an example, when you write a check or pay a merchant, the merchant may not present the check to us for payment until several days later. Sometimes we temporarily post credits, debits or holds to your account during the day. When we do this, we may change their posting order at the end of the day. We may treat credits, debits and holds to your account which we receive on a day as if we received all of them at the end of the day and post them in the order we determine.If you're anything like me, you lost interest somewhere after the second sentence and started wondering what you're going to eat for lunch. My loose translation: when it comes to posting credits and debits, we at Bank of America pretty much do what we want.
Keeping terms, conditions and fees under wraps helps banks squeeze tons of money out of consumers who have no clear idea what they signed up for. Pew projects that Americans will spend $38 billion in overdraft fees alone in 2011. And the average fee -- $35 -- is totally out of proportion to the average offense -- a $36 overdraft. Does it really cost a bank that much to process a bounced debit? I doubt it.
In the new Pew study, 75 percent of Americans with checking accounts (nine out of ten people) said that they want them to be more transparent. Overwhelming majorities of those surveyed endorsed greater regulation: 83 percent said they would like a clear description of the different kinds of overdraft protection offered and what they cost; 70 percent said they would like banks to process checks and debits in the order in which they were received, not by the biggest first, possibly sending the account into multiple overdrafts when a later batch of small checks come in. (Recently, a federal judge in California ordered Wells Fargo to change what he called "unfair and deceptive business practices" that led customers into paying multiple overdraft fees, and to pay $203 million back to customers who were charged hundreds in overdraft fees because the order in which the purchases were cleared by the bank depended on the amounts -- biggest first.) Another 69 percent want banks to limit overdraft fees to an amount that's based on actual cost. Finally, 78 percent endorsed a one-page disclosure for checking accounts that Pew devised, and I have to say it would really do the job, much the same way that the Schumer box allows consumers to see in one gander what a credit card costs.
What's really interesting, which you can see in the chart below, is that overwhelming majorities, regardless of political leaning, want the government to mandate the one-page disclosure.