JPMorgan Chase, checking account fees

The head of America’s largest retail bank warned his 86 million customers to “get ready to pay off your bank accounts.”

Marianne Lake runs JPMorgan Chase Bank, the nation’s largest consumer bank and the nation’s largest issuer of credit cards. Lake warns that new rules capping overdrafts and late fees will make everyday banking significantly more expensive for all Americans.

If the rules become law in their current form, Mr. Lake said Chase plans to pass on the costs of increased regulation to customers and start charging for many of the services that are now free, such as checking accounts and money-management tools. He expects other banking peers to follow suit.

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“The changes are going to be broad, comprehensive and significant,” Lake said. “The people who will be most affected are those who are least able to afford it, and they’re going to have a much harder time getting credit.”

This isn’t the first time banks have said they would pass on higher costs to consumers when regulators try to cap fees. In 2010, after an overhaul of banking regulations following the financial crisis, financial institutions threatened to charge fees on debit cards because some card fees were capped, but few actually did so as consumers threatened to switch providers. Some consumer advocates say this time will be no different.

“Banks are saying they have no choice but to pass on the costs to customers, but that’s not true,” said Dennis Kelleher, president of Better Markets, an economic think tank that supports the proposed bank restrictions. “Once again, banks are disguising their attempt to maximize their own profits under the guise of what’s good or bad for customers.”

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Banks say things could be different this time because of the sheer scale of new financial regulations coming out of Washington. Agencies such as the Consumer Financial Protection Bureau have proposed capping credit card late fees at $8 and bank account overdrafts at $3. They also plan to further restrict debit card fees and the amount that software companies such as Venmo and CashApp can charge to access and use customer data. Plus, new bank capital rules would require banks to set aside reserves on mortgage and credit card loans, making it harder for them to lend.

U.S. President Joe Biden (right) and Republican presidential candidate and former U.S. President Donald Trump participate in the CNN presidential debate at CNN Studios in Atlanta, Georgia, on June 27, 2024. President Biden and former President Trump (Photo by Justin Sullivan/Getty Images/Getty Images)

Some rules may be relaxed or not signed into law if Donald Trump takes the White House in November, but as things stand, Lake said many of the basic services Chase customers have grown accustomed to, like free checking accounts, credit score tracking and financial planning tools, probably will no longer be free.

JPMorgan Chase CEO Jamie Dimon testifies during the Senate Banking, Housing and Urban Affairs Committee hearing “Annual Oversight of Wall Street Firms,” ​​Wednesday, Dec. 6, 2023, in Hartville. (Tom Williams/CQ-Roll Call, Inc via Getty Images/Getty Images)

Lake, long considered the leading candidate to succeed Jamie Dimon as CEO after his retirement, has worked in various divisions at JPMorgan Chase, including as chief financial officer from 2013 to 2019 and investment banking controller from 2007 to 2009.

She said she has seen debit card fee restrictions make some banking services more expensive for customers, and she expects that to happen again.

“It’s just not feasible to offer many of our services for free if we can’t draw profits from these profit pools,” Lake said.

Banks have filed a flurry of appeals and lawsuits against the government in an attempt to block the upcoming set of regulations, with most of the lawsuits filed in the Northern District of Texas, a favored district for agencies trying to block rules and regulations issued by the Biden administration.

The rule capping credit card late fees was passed by the CFPB in March, but a coalition of banking trade groups subsequently sued to block it before it became law. The law is awaiting appeal in court. Trade groups representing major banks also sued to block changes to the Community Reinvestment Act that would require banks to serve low-income and historically disadvantaged neighborhoods.

Although caps on credit card late fees have yet to be enacted into law, some credit card companies are prepared to pass on the costs to customers. Chase has outlined plans to raise interest rates and take a more conservative approach to underwriting credit card loans, according to an investor presentation.

In the long run, big banks like Chase may actually be the winners if the Washington rules pass.

“Regulatory changes that cap fees will create opportunities for more efficient financial institutions,” said Dan Goreich, a consulting partner at PricewaterhouseCoopers, who advises bank clients. “Large banks will be able to offset declining consumer banking revenues with profits from their asset management and investment banking divisions. Smaller and regional banks will have a harder time making up for that.”

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But he warned it may not be so easy for banks to pass on the costs.

A competitive environment for retail deposits means banks may be forced to keep their services free, regardless of what the final rules turn out to be.

“Most customers today have easy and seamless access to retail banking,” Goreich said. “While it may be disadvantageous to keep the service free, banks could be pushed out by other competitors who offer lower-cost services to their customers.”

Write to Alexander Saeedy at alexander.saeedy@wsj.com.