April 12, 2011 at 7:50 PM ET
There's only one way to get the best price on a service: Shop around. And there's only one way to shop around: Compare prices. But banking consumers who try to engage in this pillar of free market economic activity often simply can't, according to a study released Tuesday by a consumer group.
At nearly one in four banks, consumers can't learn the price of doing business because fee schedules are unavailable before they sign up, according to the Public Interest Research Group (PIRG), which conducted the study. Those banks are breaking the Truth in Savings Act, which requires such up-front fee disclosures, it said.
The results are all the more concerning because they mirror results from a similar study conducted by Congress' Government Accountability Office three year ago, which spurred government regulators to reiterate banks' obligation to offer fee disclosures in 2010.
PIRG conducted an extensive "secret shopper" study to craft the report, "Big Banks, Bigger Fees: A National Survey of Bank Fees." PIRG sent staff members to 392 banks and credit union branches in 21 states and reviewed online fees at banks over the past six months.
Only 38 percent of banks produced fee schedules after the first request, PIRG found. After three requests, compliance jumped to 55 percent. Still, about one-quarter of banks provided incorrect information and 23 percent never produced fee information at all, it said.
"Shopping for banks is harder when they don't obey the law and provide up-front information about the fees they charge," said Jon Bartholomew, consumer advocate at PIRG's Oregon office. "Local community banks and credit unions are more likely than national banks to provide fee schedules."
Virtually no banks made the query easy: fee brochures were nowhere to be found on brochure racks near the doorway, and tellers often couldn't produce the information. In many cases, consumers were referred to banks sales staff sitting behind loan desks, who often tried to act as "closers" at car dealerships, according to the report, aggressively pushing consumers to sign up for accounts. Even then, the undercover PIRG staffers received "a variety of versions of 'no,' such as 'look online,' or 'you need to open an account.'"
Other anecdotes provided by researchers offer more insight into frustration consumers might feel when shopping around.
In one Massachusetts bank: "They said they didn't have any pamphlets on fees, that there were no overdraft fees because you can't overdraft with them, and when I asked for a pamphlet on fees they said the only option was to sit down and discuss my 'personal situation.'"
In Florida: "They didn't give me the info until I listened to their whole spiel about different accounts."
In New York: "We don't USUALLY give these out."
Even when banks offered answers, the quality of those answers was inconsistent.
"Many banks had no information. Some banks had incomplete information," the report said. "Wells Fargo had detailed fee schedules, but its affiliated bank, Wachovia, instead merely included suggestions to consumers to 'call this number for detailed fees.' Other banks said, 'see fee schedule,' but had no links to one. Other web pages urged consumers to 'visit a branch' for details."
As banks engage in a massive round of fee increases -- and as free checking accounts begin to fade into the sunset -- fee disclosures will become more important than ever. Consumers struggling to find cheaper accounts might become discouraged and perceive that the so-called "switching costs" are too high. That could make them victims of banking inertia - paying too much to stay at their current bank.
"Avoiding higher bank fees by shopping for a bank account is not easy," the report concluded. "The lack of enforcement has even extended to the laws requiring simple disclosures, so consumers cannot shop around."