Senators Call On Banks To Simplify Disclosures

Senators Call On Banks To Simplify Disclosures

As two U.S. Senators have asserted, simpler is better when it comes to bank disclosures.

After many banks proposed controversial monthly debit card fees, Sens. Dick Durbin (D-Ill.) and Jack Reed (D-R.I.) called on banks to limit their financial disclosures to one page. This call comes at a time when the Occupy Wall Street movement has thrown a spotlight on banks’ perceived abuses against consumers and lack of clarity with fee disclosures.

The controversy began in large part in September, when a group of banks proposed monthly fees for customers who use debit cards. The banks said this fee was necessary to make up for revenue lost after the Dodd-Frank financial legislation limited the amount they can charge merchants who accept debit cards. The fee was met with widespread criticism and customer discontentment, which grew more intense when Bank of America reported a quarterly profit of $6.2 billion at the same time it claimed the fee was needed.

These fees have proven costly to consumers. A 2009 study found that households pay a median of $43 to financial institutions in monthly fees, which include overdraft fees, checking account fees and interest on credit cards. Banks have even felt the sting of fees considered onerous to consumers. A federal judge recently required Bank of America to pay $410 million to customers who were charged overdraft fees when the bank changed the order of their transactions to place the most expensive first.

The fight over fees has taken its toll on bank customers. A Harris Interactive survey found that 9 percent of Bank of America customers said they planned to leave the bank, and 40 percent said the bank’s customer service was fair or poor. Many have also left large banks for smaller credit unions instead, many of which do not charge fees. Since September more than 650,000 customers have joined credit unions, the Credit Union National Association reported. The backlash also led some like Bank of America and JPMorgan Chase to drop the debit card fee.

Still, critics assert, more must be done. A study from USA Today found that many banks fail to disclose certain out-of-network ATM or withdrawal fees on their web sites. Another study from the non-profit  Pew Charitable Trusts found the median length of checking account disclosures at the nation’s major banks is 111 pages. Pew lent its voice to the movement, suggesting that banks adopt something like what Sen. Charles Schumer (D-N.Y.) created for credit cards. He required these companies to place the most pertinent information, like interest rates and other terms, in an easy-to-read box that became known as “Schumer’s Box.” The Consumer Financial Protection Bureau, which was created by the Dodd-Frank financial bill to crack down on banks, also said it would take action to make sure banks are transparent with consumers. Other resources have arisen to help consumers find information on banks, like the site BankRatings.net, which allows them to search a database of banks with fees and checking account perks displayed clearly.