April 27, 2011:   According to a new analysis released today from the Pew Health Group’s Safe Checking in the Electronic Age Project, many checking accounts contain hidden risks that can potentially harm account holders.

In October 2010, Pew began a study of checking account terms and conditions to examine both the state of the marketplace and the effect of current regulations covering checking accounts. This research analyzed more than 250 types of checking accounts offered online by the ten largest banks in the United States, which hold nearly 60 percent of all deposit volume nationwide. From this analysis, Pew identified patterns that impose unnecessary and potentially dangerous risks on consumers.

Key findings include:

• Nine in ten households have a checking account and, as such, the number of checking accounts issued make this service more important to American households than a mortgage or a credit card.

• The median length of checking account disclosures is 111 pages.  Banks do not provide important policies and fee information in a concise and easy-to-understand format that allows customers to compare account terms and conditions among banks.

• Banks reserve the right to re-order transactions in a manner that will maximize overdraft fees.

• Account holders are not provided full information about the respective costs of overdraft options when considering opting-in to overdraft coverage.

• Bank overdraft penalty fees are disproportionate to the size of the median overdraft amount.

• More than 80% of accounts examined contain either binding mandatory arbitration agreements or fee-sharing provisions that require the account holder to pay the bank’s “loss, costs, and expenses” in a legal dispute regardless of the outcome to the case.

The study includes the following graphic to illustrate the issue that face consumers regarding checking accounts today:

The full report, which includes policy recommendations, may be viewed at: “Hidden Risks: The Case for Safe and Transparent Checking Accounts.”

Source: Pew Health