As the Consumer Financial Protection Bureau continues to squander tens of millions of dollars on the monument it’s building to itself, the people the CFPB is most supposed to protect, unsophisticated consumers, keep getting the shaft thanks to the increased bank regulation that the CFPB exemplifies. Latest example: the decline of free checking. From yesterday’s Wall Street Journal:
More lenders are introducing fees on checking accounts just as consumers and businesses are pouring record amounts into the most basic of banking services. After regulators made it harder for banks to collect debit-card fees and new laws led to higher compliance costs, banks have been looking for different sources of income. Recent evidence suggests that one of them is the humble checking account, an entry-level services offered to most customers. Twelve years ago, the Journal reports, just a third of U.S. financial institution didn’t offer free checking. Now fully 41% don’t. The monthly maintenance fees banks have taken to charging aren’t cheap, either: they’re around $7 per month at several large banks. People like you and me can avoid these fees without much trouble. Banks tend to waive them for customers who have direct deposit or maintain a minimum balance. So the more well-off you are, the less likely you are to pay a monthly fee on your checking account. Instead, these fees (nearly $90 per year!) are being borne by the people who can least afford to pay them. Thanks again, Dodd-Frank! As the Journal points out, monthly service fees are making a comeback because banks are looking under every rock they can find for incremental revenues to pay for the higher compliance costs Dodd-Frank mandates and foregone revenues from things like the Durbin amendment. (Fed-promulgated ultra-low interest rates are curbing checking profitability, as well.) But banks’ efforts to scare up new checking revenues are only having so much success. Even though the industry has cut back on free checking and is boosting service charges and minimum-deposit requirements, industry consultant StrategyCorps estimates that 43% of checking accounts are unprofitable. Sensible financial regulation isn’t supposed to work this way. In a sane world, consumers would get the protection they need via well-thought-out, non-intrusive rules,and would also have access to the credit they want at a reasonable price. The recent financial “reforms” Congress has enacted do neither of these. For more affluent consumers, that’s not much of a problem. Instead, it’s less-sophisticated, lower-income consumers who are paying the price. What do you think? Let me know!