One of America’s biggest banks has issued a stark warning about impending charges on checking accounts.
The CEO of JPMorgan Chase’s consumer and community banking division has revealed plans to pass on the costs of increased regulation to customers.
Marianne Lake warned that the Consumer Financial Protection Bureau’s caps on overdrafts and late fees will make everyday banking transactions significantly more expensive for Americans.
He said if the rule becomes law, Chase will have to start charging its 86 million customers for services such as checking accounts that are currently free.
“The changes will be far-reaching, comprehensive and significant,” she said. The Wall Street Journal. “The people who will be most affected are those who can least afford it, and they’re going to have a much harder time getting credit.”
The Consumer Financial Protection Bureau is proposing an $8 cap on late credit card fees and a $3 cap on overdraft fees.
It also is considering limits on debit card fees and how much banks can charge companies like Venmo and CashApp for accessing and using customer data.
Lake believes big US banks will follow Chase’s lead and pass on the costs to customers.
She argued that basic services people have become accustomed to, such as checking accounts, credit score trackers and planning tools, probably will no longer be free.
“If we can’t draw profits from these profit pools, it’s not feasible to make many services free,” she said.
But Dennis Kelleher, executive director of economic think tank Better Markets, said: “Banks are saying they have no choice but to pass on the costs to customers – that’s not true.”
“Once again, banks are disguising their attempt to maximise their own profits under the pretext of what is good or bad for their customers.”
Banks are appealing and suing to block the changes, primarily in the Northern District of Texas.
The rule capping late fees on credit cards was passed by the Consumer Financial Protection Bureau in March, but a coalition of banks sued to block it from becoming law. It’s currently being appealed in court.
The average late fee for American banks is $32 per statement. Capturing this penalty at a quarter of that amount would save 45 million credit card customers an average of $220 per year.
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The agency said that over the past decade, banks have increased late fees “under the pretext of inflation” to create “attractive revenue streams”.
The rule would most benefit the poorest Americans, who are unable to pay off their credit card balances quickly and end up paying more in fees as a result.
Although the cap has not yet become law, some companies are prepared to pass on the costs to customers.
But Dan Goerich, a partner at PricewaterhouseCoopers, doesn’t think the fees will be easy to pass on.
“Today, most customers have easy and seamless access to retail banking,” he said.
“While it may be disadvantageous to keep the service free, banks may be cornered by other competitors offering lower-cost services to customers.”
