Schumer to Fed: Consumers Need Clarity on New Checking Fees

Sen. Charles Schumer, D-New York.Some of the nation’s largest banks are about to start charging new checking account fees, and that has prompted Sen. Charles Schumer to ask Federal Reserve Chairman Ben Bernanke to make sure banking customers will get sufficient and clear notice.
The new trend is a response by the banking sector to anticipated major declines in revenue from debit card fee restrictions to take effect next week –  and other provisions already in place as part of sweeping new credit card reform.
Starting July 1, banks, credit unions, and other financial institutions will be prohibited from charging overdraft fees for ATM and one-time debit card transactions for new customers – unless a customer consents or “opts in” to a plan that includes overdraft fees.
For existing customers, the institutions have until August 15 to comply. Those who do not opt in will have their debit card purchases denied – thus avoiding fees.
New checking account fees are expected to start rolling out over the next several weeks.
“It is essential that the Federal Reserve make sure that financial institutions provide clear and transparent guidance to consumers as these additional fees are implemented, so that consumers are not penalized during this transition,” Schumer, D-New York, wrote to Fed Chairman Bernanke.
Schumer said that he is aware of many financial institutions that are about to  “subject customers to maintenance fees on their formerly free checking accounts,” unless they meet requirements, such as maintaining a specified minimum balance and making a certain number of deposits or transactions per month.
Wells Fargo is implementing such a checking account system for new clients starting July 1. The bank will offer a “value checking account” that comes with a $5 monthly maintenance fee. The fee can be waived if a customer maintains an average daily balance of $1,500 or sets up a monthly direct deposit of at least $250.
Other major banks are experimenting or considering making a similar shift away from free checking account services.
Bank of America is experimenting with different account fee options that will likely roll out later this year. A Sandler O’Neill & Partners report issued last month said Bank of America could be hit with revenues losses of up to $2.2 billion a year from the new overdraft rule.
“Given the current economy, it is imperative that the Federal Reserve work to prevent banks from imposing additional, hidden fees upon consumers who are struggling to pay their bills,” Schumer wrote in the letter to Bernanke.
Also See: Debit Card Issuers: 30% Likely to ‘Opt In’ for Overdraft Plans

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