Banking Fees

Headlines from recent “inside” reports to banks by Siefer Consultants have been finding their way into your pockets. “Twenty Five Ways to Increase Fee Income from Transaction Cards,” or “Ten Fee Income Growth Trends” illustrate the booming business in advising banks how to charge you for just about everything but the wear and tear on their rugs from your presence as a customer.

A favorite tactic is “unbundling” which means breaking down services into their component parts and then charging for each part to a total greater than the original umbrella charge.

“Repricing strategies such as changing to tiered fees and converting from average to minimum monthly balance requirements”, advises one fee income report, can increase the opportunity for increased fee income, along with unlinking fees from savings accounts, CD balances and checking accounts.

Another nifty innovation by one bank is touted as a solution to pushing customers into accepting the bank’s desire not to send you your cancelled checks in the monthly statement. Many banks now do it by announcing “check safekeeping” unless you object and say you want to keep receiving your cancelled checks.

But an emerging trend is to charge you $2 per month for what banks have been doing for ages — sending you your cancelled checks — and then offering to drop the charge when you agree to let them keep your checks. Of course, once you take the latter option and need a cancelled check, the bank will charge you another fee to retrieve it from their computerized files.

The big profit center, though, is the charge for bounced checks and the fast growing charge policy for innocent victims of bounced checks. Consider this amazing statistic: banks took in nearly $4.5 billion in revenues from bounced check fees in 1993. According to the American Bankers Association, small banks charge customers a $15 fee for each check that bounces; medium-sized banks charge $17.50 and, large banks, $20.00.

Now consider what it costs the banks to see what enormous profits they are making here. Even by their own figures, which consumer critics think are inflated, banks incur administrative costs of $1.32 per check to process bounced checks and check fraud losses average $1.36 per bounced check for a total of $2.68. (Fraud losses average only a penny a check when allocated to all checks processed in U.S. banks).

More than 65 percent of banks charge “deposit-item-returned” fees in addition to bounced check fees. That means the innocent recipients who deposit a check that bounces can find their accounts charges $3 per check at small banks, to $4 at medium-sized banks, to $9 at the largest banks.

Next month, consumer groups will write to the Chairs of the House and Senate Banking Committee recommending the introduction of legislation to reduce the length of time allowed for banks to clear checks, since the profits from these charges are so enormous.

The Congressional committees should also investigate the spreading practice whereby customers give up their rights to sue for fraud or unconscionable overcharges whey they sign their depositors agreement upon opening an account. The fine print commits the customers of Bank of America, for example, to compulsory arbitration which cannot be appealed to the courts.

The balance of power between customers and banks is so pronounced that only the establishment of financial consumer associations, with full-time consumer advocates to negotiate with the banks, can redress this imbalance.

For more information on these proposed associations, write to John Richard, P. 0. Box 19367, Washington, DC 20036.

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