These fees include overdraft fees, increases in credit card interest rates with no apparent explanation, ATM fees, and fees associated with changes to account status.
By law, fee schedules are supposed to be "clearly and conspicuously posted" at every bank. Those that don't are in violation of the 1991 Truth in Savings Act and Federal Reserve Regulation DD. Yet in 22% of the visits that GAO surveyors made to banks across the country, they were unable to find the fee schedules. One-third of banks had no information at all on overdraft fees and policies. More than half had no fee information on their Web sites.
One would imagine that being in violation of a federal law should yield some fairly stiff penalties. But not surprisingly, the consequences suffered by banks has been minimal. In fact, there have been just two times when regulators took formal enforcement actions. And consumers have no recourse except to file a complaint with regulators - which are generally ignored.
Meanwhile, bank fees are up 11% since 2000. The GAO study reported that last year banks grabbed $36 million out of depositors' accounts in fees, accounting for 27% of banks "non-interest income." Lack of fee information hinders consumers who try to comparison shop between banks.
While some attribute the fees to poor banking by consumers, the truth is that banks collect far more than just overdraft fees. And policies regarding when banks post deposits vs. when they deduct charges has impacted thousands of banking customers.
"The due date on my Bank of America credit card was on a Sunday. I paid the balance in full on the preceeding Friday in the 4:00 hour at BOA. BOA charged me a $40 late fee ... for paying two days early. Apparently, in the world of banking reality, anything paid after 4:00 counts on the next business day, which in my case was Monday. If I hadn't have been paying attention, taken the time from my schedule to go to the bank and complain, BOA would have stolen $40 from me. And the really sad part was that the bank stood by their practice. I told the bank manager that if BOA wanted the bill paid by 4:00 Friday, then put BY 4:00 FRIDAY on the bill. Then, he had the gall to ask me if I wanted to open an account with them. All I could do was walk off." (Texas consumer)
"What concerns me about banks the most, is their practice of re-organizing transaction amounts from greatest to least (AKA posting highest to lowest). This practice maximizes the instances of overdraft fees. How is it legal for banks to post transactions outside of the order they are authorized? A ledger showing one instance deserving a $35 overdraft fee results in a bank statement boasting $300 in overdraft fees made possible by this method of organzing posts. I am very committed to bringing federal attention to this unethical banking practice." (Vanessa, South Carolina)
Then there is the issue of "holds." Using your debit card can screw you up even if you do keep a detailed register of your account. One example: gas stations can place a hold on funds when you use your card at the pump. Some hold $1 just to make sure its a valid account, some hold $50 or more and release the hold when they process the actual amount you spent. These holds may cause your bank account to go into the red, even if there is money in the account.
Other fees include changes imposed on long-standing accounts without disclosure to the consumer:
"Years prior, I had set up two IRA bank CD accounts with MBNA whereby there were no fees, just like a non-IRA CD account. However, after the merge with Bank of America, suddenly an annual $30 maintenance fee is applied to each account. I called BofA to complain and found that I am now stuck with these fees. I cannot transfer these IRAs to another bank (without penalty) until the CDs mature." (KW in Las Vegas)
"I signed up for a free checking account at my local bank a number of years ago. After I refinanced my home and took out $50K in equity, I deposited this into my free checking account, I then began to spend this equity on home improvements to my house. Without my knowledge the bank changed my account type to one that provided free checking for accounts with balances in excess of $20K. As soon as my account balance went below the $20K amount, they started taking $20.00 a month as the fee for this account. Shame on me that I didn't catch it
until the end of the year, which was 10 months and $200.00 later. I went down to the bank and had the account switched back. The bank played stupid, wouldn't refund the money and wouldn't even pretend to investigate who had changed the account." (Bob, Massachusetts)
"Just last week my bank sent me a notice advising me that my interest rate on my bank credit card has risen from 20% to 25% with no justification what so ever. My credit is outstanding, my accounts are on point and I have never been late on a payment or switched any of my previous accounts." (Anonymous)
To all the people who just say 'don't overdraft your account and you won't get fees' - it's not that simple. Most banks have a policy of posting withdrawals before posting deposits - meaning if you deposit a check in the morning and write a check in the afternoon - at midnight when the bank posts the transactions, they will post the withdrawal first, even though the money should have been there.
Banks are for profit entities, and their primary existence is to maximize profits for their share holders. Credit unions are not-for-profits whose primary mission is to offer the lowest loan rates and fess and the highest savings rates to its member owners. If you are frustrated or overwhelmed by the fees charged by national banks, you may want to investigate switching to a local bank or credit union.
