The nation's biggest banks are doing a better job of clearly disclosing key terms and fees on checking accounts, but more rules are needed to protect consumers from "gotcha" overdraft fees and from signing away rights for settling disputes, according to a new study by The Pew Charitable Trusts.
Pew said many banks had improved practices since its previous analysis one year ago. "Yet we still find the need for action from the Consumer Financial Protection Bureau to ensure banks offer the highest level of consumer protection."
The review ranked 44 of the 50 largest banks in three areas: account disclosures, overdraft policies and dispute resolution policies. Ally Bank, which operates primarily as an online bank, was the only institution to receive a perfect score.
Susan Weinstock, director of Pew's safe checking project, called the review "a mixed bag for consumers."
"The good news is: We've seen some improvements. But we have also seen some worsening of practices," she said.
On the negative side, more banks have been adding class-action and jury-trial waivers, along with mandatory binding arbitration clauses, to their account agreements, all of which limit a consumer's options during a dispute, according to the report.
Pew called on the financial protection bureau to prohibit
mandatory binding arbitration clauses, which block customers from using the courts and "potentially allow harmful practices to spread unchallenged by legal or public scrutiny."
As for overdraft policies, the report showed that more banks were charging customers an "extended" overdraft fee, which is an extra charge that kicks in when an account remains in the red for a certain number of days. The fee comes on top of the typical per-item overdraft fee of $35.
Pew also gave best-practice points to banks that did not engage in re-sequencing customers' debit card transactions, checks or other withdrawals from high dollar amount to low, and instead processed them in the actual order they came in. Reordering from high-to-low tends to drain an account more quickly and trigger the most overdraft fees.
The study found roughly half the banks never reordered transactions from high-to-low.
PNC Bank, which the report said uses the practice on a "limited" basis, said as a rule it processes all transactions in the order they come in. "Only if no date and time are available and no sequence number is available ... will items be processed from largest-to-smallest dollar amount," a spokeswoman said in an email after the report's release.
Pew said on the plus side, more big banks were providing customers with short, simplified disclosure boxes summarizing key terms and fees "so that consumers understand the intricacies of their checking accounts."
Overall, 19 of the 44 banks studied adopted a disclosure box that met Pew's criteria. Another nine institutions got credit for providing a disclosure box that didn't fully meet Pew's standards.
Nine in 10 Americans have checking accounts, the Pew study stated.