Banks Are Going Unregulated

According to NBC News tonight, the “typical” checking account now has 36 NEW FEES! (Was it 36? or 30? Either way, that’s a lot.) Many of the fees are exotic and/or ridiculous. They are all disclosed in the Checking Account Agreement. The typical checking account “disclosure agreement” is now 69 pages long – many are longer. (Periodically you’ll be mailed the changes in the disclosure terms of your checking account.) Sixty-nine pages! This is what the recent financial reform law was supposed to stop. The law made unlawful many lurid practices by banks on their customers, like overdraft protection fees which could be gamed to maximize the number times the fee was triggered. But to replace the revenues generated by those fees, the banks invented new fees that aren’t covered by the new regulations passed by congress in a law reforming Wall Street and enacting consumer banking protection. While technically not covered by the law, the new fees are not in the spirit of that law.
Congress realized their law would not be able to prevent unfair new fees. To address this, it created the new Consumer Advocate’s office. This office would spring into action and stop a bank from imposing a ridiculous new fee. This regulatory hero has apparently not yet sprung into action. The NBC story did not mention the Consumer Advocate or why she or he has not taken action against complicated checking account fees. The story just lamented all the new fees and asked the banks why all the new fees and the bank rep said “because of the law that was passed to stop new fees.” According to President Obama, the Consumer Advocate is able to take all necessary action. Why this has not yet happened I don’t know. Has the Advocate been nominated? Has Congress held up the appointment? Does the Advocate have the authority to act? What’s the holdup?
A simple, easy-to-understand checking account will never run afoul of a regulator. Such checking accounts exist. They can be found at small local banks or credit unions. Even if a credit union is also getting in on the fee action (some credit unions are copycats), they typically charge lower fees than than the big banks when they do. So, all consumers have to do is close out that big bank checking account and open a new account at a credit union, right?
From what I hear, that’s easier said than done, depending. Many big bank customers’ checking accounts are tied to an outstanding loan, so until that loan is paid off, they have to stay. For some reason, many people are staying at these banks, using these checking accounts with fees that break the spirit of the law passed by Congress.

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