by Jeff Sovern
The report is here. The study identifed "best" and "good practices" and then looked to see if 36 of the largest 50 banks employed those practices (the practices of the other 14 could not be obtained without physically visting the banks). From the Overview:
Pew defines best practices as those that are the most effective in
Providing checking accountholders with clear and concise disclosure about costs and terms.
Reducing the incidence of overdrafts and eliminating practices that maximizeoverdraft fees.
Offering consumers a meaningful choice to resolve a problem with their bank rather than including mandatory binding arbitration clauses in checking account agreements.
Good practices are those that provide some protection to consumers in these areas but are not as expansive or effective as best practices. Depending on the practices and policies of each bank, it could be deemed to engage in both best and good practices in any of the three areas under review.
In examining the disclosures provided by the banks, Pew’s top-line finding sare as follows:No bank provided all best practices or even good practices in every category
Ninety-seven percent of the studied banks achieved at least one best practice.
But even among the highest-performing banks, virtually none performed well in every studied category
The 14 banks in the top 50 that could not be included in the study failed to provide the opportunity for consumers to review all of the relevant disclosures for checking accounts without visiting a branch
Two of the nation’s largest financial institutions—Citibank and Bank of America—are among the five highest-performing banks in Pew’s analysis. The top five scores include those earned by Ally Bank, Charles Schwab Bank, First Republic Bank, Citibank, and Bank of America.
.The leading bank in the study is Internet banking service Ally Bank. While Ally Bank achieved the highest number of best practices, it still failed to provide optimal policies across all three studied categories.
The findings demonstrate the need for the Consumer Financial Protection Bureau to write new rules to ensure that the features of these fundamentally important accounts are fair and transparent.
(Sorry about the formatting issues). Pew is right to examine the transparency of the disclosures. But this report should not obscure the fact that transparent disclosures that consumers ignore are no better than unreadable disclosures. It remains my view that the real question is to what extent are consumers using the disclosures, and if they are not using them, what can be done to protect consumers? Obviously, transparent disclosures alone would not be enough in that case.