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What initially appeared to be a listening session by a key federal regulator about access to checking accounts has sparked concerns that the agency may be seeking to go much further in dictating how and when banks open accounts for consumers.
October 27 -
The Consumer Financial Protection Bureau is weighing whether to place further restrictions on overdraft programs after a study released Thursday revealed consumers who opted in for such services are paying significantly more in fees.
July 31
Many of the checking accounts offered on U.S. military bases come under criticism in a new report from the Pew Charitable Trusts.
The report, issued Tuesday, targets fees banks and credit unions charge to service members, the disclosures that financial institutions make to customers, and practices such as the high-to-low reordering of transactions. It argues that consumer protections are especially important for members of the military, many of whom are selecting a checking account for the first time.
The report, which looked at more than 100 institutions that operate on military bases, adds to the drumbeat from consumer groups calling for stronger protections for customers with checking accounts. Recent remarks by Richard Cordray, director of the Consumer Financial Protection Bureau,
"Slightly less than half of the banks in the Pew study disclosed that they did at least some high-to-low reordering of transactions, a practice that tends to generate more overdraft fees."
Disclosure practices varied. Of the banks Pew studied, 100% disclosed their overdraft penalty fees. But only 58% posted their fee schedule, account agreement, or both, online.
"The current state of affairs means that members of the military with accounts at institutions on military installations are not receiving the level of information that they, and all consumers, deserve," the report concludes.
But it is not clear if there are significant aggregate differences in terms of features offered to service members versus other account holders. The Pew report does not compare checking accounts offered on military bases with those offered to the general public.
For example, banks that operate on military bases and were studied by Pew charged a median overdraft penalty fee of $35. By comparison, the industrywide median overdraft fee is $34, according to
In its report, Pew recommends that the CFPB require overdraft fees to be proportional to the cost of providing the service. It also calls on the consumer agency to ban the high-to-low reordering of transactions and to ensure that consumers receive concise disclosures from their banks.
Susan Weinstock, the director of Pew's consumer banking initiative, said that any new CFPB rules should apply broadly, not just on military bases. She noted that many active-duty service members open accounts online, or at a branch located outside their base, or they continue to use accounts they opened before joining the military.
"In any case, no matter what, they should be protected," she said.
