Banks Are Hiding What??

A June study by Pew Charitable Trusts shows that 12 major U.S. banks have made little progress towards becoming transparent during the last 18 months.

According to the report, banks, including Bank of America (NYSE:BAC), Citigroup’s (NYSE:C) subsidiary Citibank, and SunTrust (NYSE:STI), mislead consumers about their checking-account fees and charged for the most basic of functions. JPMorgan Chase (NYSE:JPM) stood out as having a model disclosure, according to Pew.

After examining bank and credit union disclosures, Pew found that the median length of documentation was 69 pages for banks and 31 pages for credit unions. It is within these numerous pages that the banks’ complex system of fees are situated.

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Researchers noted that while the average length for banks’ documentation has dropped from 111 pages last year, “the difference may be an artifact of a change in methodology rather than a trend across the industry.”

Furthermore, while many banks offer their terms and conditions on the institution’s checking homepage, in many instances, details are not disclosed online and require customers to visit bank branches or request the documents by mail.

The complexities of banking fees emerged last fall; federal regulators capped the amount banks could charge merchants for debit-card transactions. This change has caused banks to see revenues from debit card purchases decline. In the first quarter of this year, Wells Fargo (NYSE:WFC), saw revenues drop by 32 percent in that area. But that is not the only regulation to affect the financial sector. The cost of keeping deposits has increased due to higher premiums paid to the Federal Deposit Insurance Corporation.

Banks have found that fees, especially those for overdraft protection and ATM withdrawal, have filled the gap.

While banks have protested that the fees are reasonable, the study indicated that such claims are doubtful. The study recommends that the Consumer Financial Protection Board or Congress should require depository institutions to provide easy to read disclosures, to charge reasonable overdraft fees, and to post deposits and withdrawals in a fully disclosed and objective manner.

Pew summarized its findings in this manner: “An efficient market requires informed consumers who can make choices based on the product that best meets their needs. This is particularly important for an item as fundamental and significant as a checking account.”

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