Dodd-Frank, here is thy sting.
The 2010 legislation that limited banks’ ability to charge some fees left lenders with a choice: Take a profit hit or dream up new fees that aren’t on regulators’ radar.
Many banks are likely to choose the latter, experts say. Bank of America’s since-abandoned plan to charge users a monthly $5 debit-card fee, which set off widespread public outrage late last year, was just the beginning of the onslaught, experts say.
“Banks are going to raise existing fees and institute new ones,” predicts Alex Matjanec, co-founder of MyBankTracker, a consumer-education website. “It’s all part of this push to get back lost income.”
Already, banks have introduced new fees for wire transfers, certified checks and banking through tellers. Others have raised monthly maintenance charges on checking accounts. Next month, TD Ameritrade Holding’s TD Bank unit will start charging noncustomers a $5 fee to cash checks at any of its branches.
Hoping to find a better deal? Look before you leave. PNC Financial Services’ PNC Bank now charges $25 to close some accounts, and it isn’t the only bank that charges its customers on their way out.
The fee rollout is happening as banks try to navigate a changing regulatory landscape. The Dodd-Frank financial-overhaul law, which took effect last year, severely curtailed the “swipe fees” banks charge merchants for processing debit-card transactions. That alone is expected to siphon billions of dollars a year in revenue from banks’ balance sheets.
Bank of America, the second-largest U.S. bank by deposits, estimates interchange-fee regulations will cost it at least $2 billion a year.
Lenders also have taken a hit from stricter overdraft rules, which now require customers to opt in before they can be charged fees for overdrawing their checking accounts.
“Given that the government reduced the income banks get from interchange, banks have no choice but to find another source of income to cover their costs,” says Nessa Feddis, vice president and senior counsel at the American Bankers Association, an industry group representing some of the nation’s largest banks.
Customers are bracing for banks to introduce new fees and raise existing ones—and questions about fees for wire transfers, stop-check orders and other banking services are flooding into consumer-focused websites. About 900 have been posted so far this month on the CreditCardForum site, up from about 200 last January, according to Michael Dolen, who runs the site.
Consumers should expect banks to raise maintenance fees on checking accounts, while simultaneously upping the minimum deposit requirements, says Greg McBride, a senior financial analyst at Bankrate.com.
Customers at Citizens Bank, a unit of Royal Bank of Scotland Group, for example, now have to pay $50 a month if they fall below minimum account balances on some money-market accounts. Meanwhile, Bank of America charges some of its banking customers a $25 fee if they dip below minimums on premium-checking accounts. Continue reading