By: Nancy Steadman
Millions of consumers revolted against big banks in recent months and switched to smaller, consumer-friendly banks and credit unions to escape rising fees and deceptive practices. While the effects of Dodd-Frank have placed financial strain on financial institutions, the nation's largest banks have relied more heavily on service fee income than other institutions, and transferred their financial burden onto their customers. As a result, many individuals have sought out smaller institutions that offer more affordable products and personalized service.
However, megabanks have also made the switch to community banks and credit unions financially challenging for Americans by imposing sizable fees to make the transfer.
A report released by Consumers Union shows the nation's top 10 banks - including JP Morgan Chase, Bank of America, Citibank and Wells Fargo - charge high fees for closing accounts and wire transfers or certified checks. In addition, some customers may face penalty fees or find their accounts re-opened without permission after they have transferred to a new bank. Fees for certified checks range from $7 to $10, while those for wire transfers may cost between $24 and $30.
Because it may take between four to six weeks to have direct deposits and automatic payments re-routed to new banks, some larger institutions, such as Bank of America and Chase, also re-open accounts if the bank receives a deposit. In cases of these "zombie accounts, some consumers may face severe penalties or monthly maintenance fees after the bank re-opens their account without their permission.
Lastly, in a recurring trend for some megabanks, the group found that the top 10 banks did not clearly disclose the actions they would take during the process of closing accounts.
"Consumers may be fed up with their bank but they can encounter roadblocks that make moving their money a real headache," said Suzanne Martindale, staff attorney for Consumers Union. "Some bank policies are designed to make it challenging for customers to walk away. That creates customer inertia and stifles competition, making banks less responsive to what consumers need."