Banks that play hide-the-fee, and those that don't

Joe Raedle / Getty Images file

Consumers have a wide variety of financial institutions to choose from. Some banks fare better than others in terms of disclosure.

By Samuel Weigley, 24/7 Wall St.

As new regulations have eaten into their profits, banks have looked for new ways to get more revenue from their customers. Many banks tried, unsuccessfully, to implement debit card fees. More successful for banks was the practice of raising checking account fees. And although the practice is quite pricey, some banks have even upped fees for overdrafts. In fact, banks collected $29.5 billion in overdraft fees in 2011 alone.

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The general assumption is that customers should know what they are getting themselves into when they agree to these fees. But according to the Safe Checking Project at Pew Charitable Trusts, customers are often unaware of the fees associated with their checking accounts because many financial institutions are not upfront about them. Furthermore, bank customers are overwhelmed?with very long disclosures ? 69 pages on average, according to Pew.

?The problem is that these disclosures are hard to read,? Susan Weinstock, director of the project, told 24/7 Wall St. ?Nobody reads these things. They are not meant to be read. They are complex.?

Some banks fare better than others in terms of disclosure. Certain banks have all of their information online, a format considered most easily accessible to customers. Others have some information available only at local branches, which is less accessible, but at least is available. And a few banks do not disclose important information to customers at all.

24/7 Wall St. compiled a list of the top and bottom three banks in terms of their transparency with customers regarding checking account fees. Pew measured how 12 different banks disclosed nine different pieces of information regarding checking account fees:

• Minimum deposit needed to open an account
• Monthly fee
• Requirements to waive monthly fee
• Nonsufficient funds fee
• Overdraft transfer fee
• Overdraft penalty fee
• Maximum number of overdraft fees per day
• Extended overdraft penalty fee
• Posting order

Pew then categorized banks on each piece of information based on how readily accessible the information was to consumers. Based on this information, 24/7 Wall St. compiled the following list of the top and bottom three banks.

Banks that do not hide fees

1. Bank of America

• Online disclosures: nine of nine
• Information available on account Web page: five of nine
• Information unavailable online or at branch: zero of nine
• Revenue: $115.37 billion

Bank of America infuriated many customers last fall when it attempted to implement a $5 fee for using a debit card. It comes as a surprise, then, that the bank is the most transparent one out of the 12 banks surveyed. All the disclosure information Pew looked for is available online. In fact, Bank of America spelled out the extended overdraft penalty fee directly on the account Web page. It was the only institution to do so. Although Bank of America has not adopted the same schedule as Chase Bank, Weinstock said it has been receptive to Pew?s recommendations.

Bank of America has been considered the worst-run of the large banks. Its buyout of Merrill Lynch in late 2008 cost the bank billions of dollars in losses. It still uses the Merrill brand for much of its brokerage and personal financial operations. Bank of America also bought mortgage lending giant Countrywide Credit in early 2008. Losses from Countrywide?s large prime-prime mortgage portfolio further damaged Bank of America?s balance sheet.

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2. JP Morgan Chase Bank

• Online disclosures: nine of nine
• Information available on account Web page: three of nine
• Information unavailable online or at branch: zero of nine
• Revenue: $110.84 billion

Large banks often get a bad rap for not being upfront with customers about checking accounts. But Chase, the largest U.S. bank in terms of assets, has all of the disclosures available online, a few of them even available directly on the account holder?s Web page. In March, the company also became one of only a few banks to adopt Pew?s disclosure box, which places all the information in an easy-to-read schedule.

JP Morgan (NYSE: JPM) has been considered the best-run bank in the United States since the credit crash of 2008. CEO Jamie Dimon was able to steer the firm?s activity away from many of the derivative credit instruments that so badly damaged Bank of America (NYSE: BAC) and Citigroup (NYSE: C). JP Morgan?s management tarnished its reputation recently when it was forced to announce that it had lost at least $2 billion in trades done in its London office. Those losses are expected to rise.

3. U.S. Bank

• Online disclosures: nine of nine
• Information available on account Web page: three of nine
• Information unavailable online or at branch: zero of nine
• Revenue: $21.4 billion

Minneapolis-based U.S. Bancorp (NYSE: USB) is among the top three banks when it comes to disclosure transparency. All of the disclosures are available online. The bank places its minimum deposit to open an account and monthly fee information right on the account Web page, and it was one of only a handful of banks to place its information regarding the extended overdraft penalty fee online. Unlike many of the larger money-center banks on this list, U.S. Bank operates in only 25 states. The firm does not have the massive investment banking, M&A and trading operations that larger banks have. U.S. Bank has $341 billion in assets and is the fifth-largest commercial bank in America. The bank has substantial mortgage and credit card operations.

Banks hiding the most fees

1. HSBC USA

• Online disclosures: three of nine
• Information available on account Web page: two of nine
• Data unavailable online or at branch: four of nine
• Revenue: $94.80 billion (Entire HSBC)

Getting checking account information from HSBC (NYSE: HBC) is incredibly difficult. While all other banks have most or all of the information available online or at a branch, four of the nine disclosures are not available for customers at HSBC. Even the minimum amount required to open an account is nowhere to be found. ?We don?t know if that means (the bank) doesn?t charge these fees or not,? Weinstock said. ?But if they are free, let?s put that out there.? Two of the remaining five disclosures require a trip to a local branch, which is problematic because the London-based bank cut back on the number of branches in the United States last year.

HSBC?s U.S. operations are only a modest part of the parent corporation. Its largest divisions are in Mexico, Hong Kong and Europe. The company?s corporate financial operations do business with large global companies and governments. HSBC has among the largest bond and equity trading operations in the world.

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2. BB&T

• Online disclosures: three of nine
• Information available on account Web page: three of nine
• Information unavailable online or at branch: zero of nine
• Revenue: $10 billion

Branch Banking and Trust, or BB&T as it is known to the public, stays true to its name ? at least to the branch part. While all the disclosures measured are available somewhere, six would require a visit to a brick-and-mortar location ? more than any other bank measured. In fact, none of the disclosures involving overdrafts are available online. The North Carolina-based bank is also one of only three banks ? with PNC (NYSE: PNC) and SunTrust (NYSE: STI) ? that does not have its posting order placed online.

BB&T (NYSE: BBT) specializes in wealth management, retirement planning, mortgages and insurance. Its business and corporate banking operations are only of modest size compared to those of the large money center banks like Wells Fargo (NYSE: WFC) and Citigroup. The firm does most of its business through approximately 1,800 financial centers in North Carolina and South Carolina, Virginia, West Virginia, Kentucky, Georgia, Tennessee, Maryland, Florida, Alabama, Indiana, Texas and Washington, D.C.

3. Capital One

• Online disclosures: five of nine
• Information available on account Web page: three of nine
• Information unavailable online or at branch: one of nine
• Revenue: $18.53 billion

Information about monthly fees and minimum deposits at Capital One (NYSE: COF) is readily accessible on an account holder?s Web page. But if customers want to find out about fees for nonsufficient funds, overdrafts and overdraft transfers, they will have to take a trip to the local branch. ?The problem is it?s very hard to comparison shop between bank branches,? Weinstock said. Worse yet, information about the existence or the amount of the extended overdraft penalty fee is not available online or at a branch.

Capital One specializes in a number of retail banking businesses, particularly mortgages, credit cards and auto loans. Capital One significantly expanded its online banking business when it bought ING DIRECT, USA from a large Dutch financial-services firm in February. The buyout cost Capital One $9 billion and added approximately $80 billion to its deposit base.

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