Banks Put Check, Card Fees Out in the Open

By | January 27, 2012

(Source Mark Williams The Columbus Dispatch, Ohio) – Figuring out the fine print in those impossible-to-understand applications for credit cards and checking accounts might start to get easier.

JPMorgan Chase and Co. is among the banks that have introduced new checking accounts that are accompanied by summaries that use plain language and explain key features upfront, instead of burying them in fine print.

“It’s time to empower consumers,” said Susan Weinstock, director of Pew Health Group’s project that has studied checking accounts and came up with the model that Chase has embraced. “One of the ways is to provide information to them that is clear, precise and understandable.”

Pew introduced its sample form for checking accounts a few weeks after the Consumer Financial Protection Bureau, a new federal agency, announced its project to simplify credit-card applications.

Pew reviewed 250 checking accounts offered online by the nation’s 10 biggest banks. It found that the average length of all the disclosure documents totaled 111 pages.

The Consumer Financial Protection Bureau, citing a J.D. Power survey, says two-thirds of credit-cardholders don’t understand how their cards work or the long, complicated agreements that accompany them.

“People just don’t bother reading them because they’re so difficult to understand,” said Bill Hardekopf, CEO of Lowcards.com and an advocate for simpler forms.

The result of the confusing, hard-to-understand language can be costly for consumers, who run the risk of getting dinged with charges for not fully grasping the language used in the contracts. It also makes it hard for consumers to compare the costs and demands of similar accounts with various banks to see which works best for them.

“Hidden fees really do drive people out of the banking system,” Weinstock said.

Pew’s model disclosure box is meant to accompany the traditional application.

The one-page form covers the basics of any checking account: Monthly fees, minimum balances, ATM costs, overdraft costs; overdraft options for consumers with debit cards; and information about when money becomes available after a deposit.

The sample credit-card agreement that the bureau is testing has come up with a prototype that runs about 1,100 words, compared with 5,000 for the average credit-card application. It uses plain language to outline the costs, risks and features of a credit card. The prototype is being tested with the Pentagon Federal Credit Union, which has more than 1 million members, including 350,000 cardholders.

So far, Chase and two large credit unions have adopted the checking account format.

Chase, the largest private employer in central Ohio, has posted a three-page, simple-to-understand summary that outlines its charges for its checking account on its website.

Huntington Bancshares was ahead of Pew when it introduced what it called asterisk-free checking last spring that comes without any conditions, such as a minimum balance, that other banks impose to keep accounts fee-free. The bank started the accounts not long after it began to allow customers 24 hours to cover an overdraft before a fee is imposed.

Terms of Huntington’s checking account are presented in easy-to-understand language on the bank’s website.

Huntington has said the accounts have been a success, driving a 10 percent increase in consumer checking accounts in 2011. Existing customers are deepening their relationship with the bank by adding other accounts on top of their checking accounts, Stephen Steinour, Huntington’s CEO, chairman and president, told analysts last week when the company released its full-year earnings report.

“It’s proving to be the right strategy,” he said.

mawilliams@dispatch.com
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©2012 The Columbus Dispatch (Columbus, Ohio)

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Source Mark Williams The Columbus Dispatch, Ohio

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