Consumers Union Calls for Reforms to Make It Easier to Move Your Money
WASHINGTON, Oct. 31, 2012 /PRNewswire-USNewswire/ -- As the one year anniversary of Bank Transfer Day approaches, Consumers Union, the public policy and advocacy arm of Consumer Reports, renewed its call for Congress and the Consumer Financial Protection Bureau to enact reforms that would make it easier for consumers to move their money to a new financial institution.
"Consumer frustration has only grown over the past year as bank fees have continued to rise," said Suzanne Martindale, staff attorney for Consumer Union. "But many frustrated consumers end up staying with their bank because switching to a new financial institution can turn into a big hassle. It's time to make it easier for consumers to move their money so they have a real choice when it comes to where to bank."
Bank Transfer Day took place on November 5, 2011, and was a grassroots protest of unfair bank practices, including Bank of America's planned $5 debit card fee. While Bank Transfer Day helped mobilize dissatisfied consumers to switch banks, many have stayed with their bank even though checking account fees have continued to climb.
A 2012 Bankrate survey found that only 39 percent of banks offered a checking account without requiring customers to maintain a minimum balance or pay a monthly fee.
That's down from 76 percent of banks who offered free checking in 2009. The average minimum balance required to avoid a monthly fee is $723.02, up 23 percent from 2011. A Consumer Reports investigation earlier this year found that, on average, the biggest banks charge higher fees to consumers compared to credit unions and smaller community banks.
According to the Bankrate survey, 72 percent of consumers reported that they would consider switching banks if checking account fees went up. But consumers who are fed up with rising bank fees can encounter roadblocks that make moving their money that prevent them from following through. In July, a Consumer Reports national public opinion poll found that nearly one fifth of consumers had considered switching to a new financial institution in the previous 12 months, but the challenge of transferring automatic payments and other factors kept half of them from making the switch.
Consumers Union's Trapped at the Bank report highlighted the many obstacles consumers can face if they decide to switch banks. Banks lock in customers by encouraging them to use certain services like automatic payments and direct deposits in order to avoid monthly fees. Re-routing automatic payments and deposits into a new account can take four to six weeks and can be a very intimidating and complicated process for some consumers. Research shows that customers who utilize automatic deposits and payments are far less likely to switch accounts.
Having enough money to maintain two accounts during the switching process also can pose a significant barrier. Because switching accounts can take up to six weeks, the only safe bet is to have enough money in both accounts to cover any potential automatic debits. Consumers may be confronted with fees to close accounts or to transfer money into new accounts.
Figuring out how to make the switch can be a confusing process for many consumers. None of the top ten largest banks reviewed by Consumers Union provided customers with clear instructions for closing accounts on their web sites or in written account disclosures.
"Obstacles to switching banks can trip up even the most determined consumer," said Pamela Banks, senior policy counsel at Consumers Union. "All of these hurdles create customer inertia and stifle the kind of competition we need to make banks more responsive to consumers."
Consumers Union has called on Congress and the Consumer Financial Protection Bureau to consider a number of policy changes to enhance consumer choice and bank competition:
• Banks should be required to bear the responsibility for transferring a customer's automatic payments and deposits from the old account to the new account within 14 days
• Banks should provide same-day electronic fund transfers at no cost to consumers
• Check hold times should be reduced so consumers can quickly access deposits in new accounts
• Banks should be prohibited from assessing unfair fees for closing accounts
• Banks should be prohibited from reopening accounts after consumers close them
• Banks should be required to provide clear and accessible account closing procedures
• Bank regulators should examine the feasibility of portable bank account numbers to facilitate easier bank switching.
For tips for consumers who are unhappy with their bank, see Consumer Reports' More Bank Fees Are Coming: How to Fight Back or Flee
SOURCE Consumers Union