The Pew Charitable Trusts has released another report evaluating the checking account disclosure practices of the nation’s largest banks. Despite finding that disclosure practices have improved, Pew again urges the Consumer Financial Protection Bureau to write new rules that adhere to Pew’s recommended “best practices.” We continue to be troubled by Pew’s approach to overdrafts.

As it did in its 2013 checking account study, Pew evaluated checking accounts by reviewing the implementation of three best practices, which it defines as disclosed terms that are most effective in:

  • Providing checking accountholders with clear and concise disclosure about costs and terms
  • Reducing the incidence of overdrafts and eliminating practices that maximize overdraft fees
  • Offering consumers a meaningful choice to resolve a problem with their bank rather than including mandatory binding arbitration clauses in checking account agreements 

In this study, Pew surveyed checking accounts offered by 44 of the 50 largest U.S. banks by deposit volume. (Its 2013 study evaluated 36 banks). It found universal improvement in disclosure practices, with more banks making their disclosures available online. Pew, however, found fault with numerous bank practices. Among its key findings:

  • Fifty percent of the banks Pew evaluated in 2014 engaged in “high-to-low” transaction reordering.
  • There was no improvement from the 2013 study in the number of banks allowing consumers to overdraw their accounts with debit cards at the cash register.
  • More of the banks evaluated in 2013 were now charging extended overdraft fees.
  • Seventy percent of the banks evaluated in 2014 had mandatory binding arbitration agreements.
  • More of the banks evaluated in 2013 now had a class action waiver in their arbitration agreements.

While the study did not contain any findings about the reasonableness of the amount of the overdraft fees charged by the banks it evaluated, Pew recommends that the CFPB require overdraft fees to be reasonable and proportional to the financial institution’s costs in providing an overdraft loan. Despite acknowledging that consumers are receiving improved disclosures on transaction posting order, Pew continues to push for a CFPB rule requiring banks to post transactions (including checks, ACH items, and card transactions) “in a neutral manner that does not maximize overdraft fees.”

In its 2013 study, Pew indicated that its overdraft best practices were intended to address consumer dissatisfaction with bank overdraft fees and policies. As we observed, however, Pew relied on an extremely narrow sampling of consumers (i.e., a survey only of consumers who had overdrawn their checking accounts) to support its claims of consumer unhappiness and misunderstanding. Additionally, it disregards informed consumer choice by continuing to push for the elimination of overdrafts on ATM and one-time point-of-sale transactions, even after consumers have received Regulation E disclosures specifically tailored to help accountholders decide whether such transactions are in their interest.

We are also troubled by Pew’s renewed recommendation that mandatory binding arbitration agreements be eliminated. Pew continues to ignore studies showing that consumers who actually go through arbitration prefer it to the courts as a way of resolving disputes with companies. (See our 2012 legal alert on checking account arbitration.)

In addition, Pew gives insufficient weight to the numerous consumer-friendly terms that are contained in most deposit account arbitration agreements in use today. Several of these terms were found in many of the arbitration agreements used by the banks it evaluated (e.g., arbitration opt-out, small claims exemption, no requirement to pay the bank’s costs and expenses). Moreover, Pew ignores that the U.S. Supreme Court has validated the use of arbitration provisions with class action waivers in consumer arbitration agreements, holding that such provisions further the national public policy of providing consumers with faster, cheaper, and more efficient ways to resolve disputes than through class or even individual actions in court.

Ballard Spahr's Consumer Financial Services Group pioneered the use of pre-dispute arbitration provisions in consumer financial services agreements. It is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance.

For more information, please contact Practice Leader Alan S. Kaplinsky at 215.864.8544 or, or Mark J. Levin at 215.864.8235 or

Copyright © 2014 by Ballard Spahr LLP.
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This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.







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