A growing number of banks and credit unions are creating short, easy-to-read summaries of their checking account fees, instead of forcing customers to wade through scores of pages of legal disclosures to find the charge for bouncing a check.
Citigroup is expected to announce this month that it will join more than a half-dozen financial institutions, including JP Morgan Chase and TD Bank, that have already adopted a version of a one-page disclosure form created last year by the Pew Charitable Trusts, a nonprofit based in Philadelphia. Bank of America, the largest bank in Massachusetts, confirmed it plans to introduce a similar summary later this year.
The changes come in response to complaints about rising fees and a tendency of banks to bury them in long, complex documents filled with hard-to-understand legal terms. Many customers learn of the fees, for everything from closing an account to getting a paper statement, only when they get hit with them.
A Pew study last month found half the checking account disclosures for the 10 largest US banks ran 97 pages or longer, making it difficult for consumers to determine how one bank compares with another. Pew also found last year that the banks used seven different names for overdraft penalties.
“There is no reason you should need a Ph.D. in finance to find out how much it is going to cost you to have a checking account,” said Barbara Anthony, undersecretary of the Massachusetts Office of Consumer Affairs and Business Regulation. “Simplified disclosures will only benefit consumers as long as the representations are accurate and easy to understand.”
Pew developed its disclosure form as a model for banks after concluding that the typical forms used by banks were too long and complicated, said Susan Weinstock, who follows checking account practices for the nonprofit. The form, which it tested with focus groups, covers on a single page most of the basic terms for checking accounts, including the amount of money needed to open an account, monthly maintenance fees, requirements to avoid the monthly fees, interest rates, ATM fees, and overdraft policies.
Pew has worked with several banks to help them develop their own versions of the form. But it has also asked the Consumer Financial Protection Bureau, the regulatory agency created by the Dodd-Frank financial reform law, to require all banks and credit unions to use a standardized summary of checking account fees — similar to the way food makers are required to display nutritional information.
But the American Bankers Association, a trade group in Washington, said a one-size-fits-all approach will not work since many banks combine checking accounts with other products, such as savings accounts and certificates of deposits.
“We think there needs to be flexibility,” said Nessa Feddis, an attorney with the bankers association.
The Consumer Financial Protection Bureau declined to comment on whether it supports a standard summary for all checking account fees.
Martha Gibbs, a customer and retired teacher from Cambridge, said she was impressed with TD Bank’s new summary of checking fees when a reporter showed her a copy at a bank branch in Harvard Square. She said she never bothered to read through the thicket of disclosures she received when she opened her account a couple years ago.
“It makes a difference,” Gibbs said, “Make it simple.”
TD Bank, the fourth-largest retail bank in Massachusetts with 153 branches, became the first major bank in the state to introduce the simplified disclosure form in April after working with Pew to create the summary.
The three-page summary, available only online for now, contains nearly all the key fees and conditions that customers otherwise might have to find by sifting through a 45-page account agreement, 16-page overview of account options, plus a half dozen shorter documents.
Bank of America is also working with Pew on its own summary of checking fees. Bank spokeswoman Anne Pace noted the bank had already created a one-page disclosures of key information about its home loans and credit cards.
“We support transparency,” Pace said.
Sovereign Bank, the third-largest retail bank in Massachusetts, said it was reviewing the Pew model. The state’s second-largest bank, Citizens Bank, declined to say whether it planned to create a simpler summary for its checking fees. Eastern Bank, the state’s fifth-largest retail bank, said it had no immediate plans to do so.
The Massachusetts consumer affairs office recently conducted a survey of bank fees, finding that seven of the state’s 14 largest banks offered free basic checking accounts with no regular monthly fee. But even those accounts typically charge other fees, such as fees for checks or using another bank’s ATM.