Major banks still process checks in a way that can result in more bounced checks and additional overdraft fees, and they make account holders agree to arbitration to settle disputes.
The devil really is in the details.
Even after recent class action suits that accused major banks of processing customer checks in a way that can maximize overdraft fees, the practice is still in place across the country. That’s according to a Pew Research study.
Pew says that overdraft fees, once an afterthought or considered minor inconvenience for most bank customers, have climbed steadily in recent years, averaging $35 per NSF check.
To add insult to injury, clients who decide to fight their bank over the matter are often forced to have the matter arbitrated, and there are clauses in their account contracts forcing the customer to pay for arbitration process, no matter who wins.
It pays to read the fine print.
No one likes reading through account agreements and similar information, so organizations like Pew do it for us.
The report by Pew’s “safe checking” project looked at checking accounts offered by the country’s 24 largest banks and credit unions and compared them with a similar study from two years ago.
Disclosure documents are slightly smaller than Pew found during the last go-around, but still ran to nearly 70 pages, on average. No one ever expects bank documents to be light on words…but 70 pages? For a checking account?
Two other major points from the Pew study:
- Banks make it tough to shop around. Disclosures are not clear and concise enough for consumers to easily compare checking account options and fees, either within a bank, or against what’s offered elsewhere.
- Banks, as mentioned before, continue to process transactions in a way that increases the likelihood consumers with limited funds will incur multiple overdraft charges.
For its part, the American Bankers Association claims numerous studies show consumers want to know that large transactions – like mortgage payments, and tuition and car payments – are given first priority to clear the account.
Pew wants Congress to require banks to explain terms and fees in a way that will let clients compare expenses more easily. It also says that banks should process checks in a way that doesn’t benefit or punish either party, probably by taking them in the order they come in.
What to Do
Congress and the various state legislatures have yet to move on any of Pew’s recommendations, and maybe they never will. So what should you do?
The common sense rules apply.
First, don’t bounce checks. There’s almost always a better way. Delay a payment, send partial payments, or negotiate a different arrangement with the party you need to pay.
Second, if NSF checks happen more than once or twice a year, you need to get a better handle on your cash flow. Take a look at the account activity during the period when the overdraft occurred and search for unexpected expenditures, unauthorized or unrecorded payments, or missing deposits.
Finally, if you find that your company is consistently in a cash crunch because you’re waiting for payment of outstanding receivables, consider an invoice factoring program. A factoring program established with MP Star Financial can provide cash you need to meet payroll, tax, administrative, and other operating needs.
The MP Star Financial factoring process is easy to set up, the fees are reasonable and clearly spelled-out, and you can usually be paid on your invoices the same business day – and all that’s way better than fighting with a bank.
Don’t wait 45 or 60 days to be paid on your invoices! MP Star Financial’s invoice factoring services can help you get paid faster! Call for more information. (800) 833-3765, extension 150.