Hidden fees and excessive charges, not to mention aggravating runarounds when you ask about those items on your monthly statement, might motivate you to drop your bank for a different institution. Unfortunately, switching banks isn't easy. In fact, many Americans stick with their bank no matter how much they dislike it because they believe that switching is a hassle.
That perception is often a reailty. If you try to close a bank account, you might face serious obstacles and delays, not to mention even more fees.
In our May 2012 report "Trapped at the Bank" (PDF), we highlighted how some banks lock in customers by encouraging them to use automatic payments and direct deposits to avoid monthly charges.
Moving these payments and deposits to a new account can take several weeks and leave you vulnerable to penalties. The needlessly complicated, confusing process can drag on for months. The way that many banks set up the account-closing process puts the burden on you to ensure a smooth transfer, while the banks control the means to make it happen.
Consumers Union, the policy and advocacy arm of Consumer Reports, thinks that’s unfair. That’s why we’ve been pushing Congress and financial regulators to make it simpler for frustrated bank customers to take their business elsewhere.
We’re pleased to report that there’s a brand-new bill in Congress, the Freedom and Mobility in Consumer Banking Act. The sponsors of the bill specifically cited Consumers Union's findings when they introduced the bill this month.
The bill would direct regulators to set new rules to:
- Give you the right to close an account, regardless of the remaining balance, without a fee, and a choice of how to receive funds on closing your accounts, including a check or electronic transfer.
- Protect you from having old accounts reopened without your consent, and from being charged any account fees after requesting to close the account.
- Require banks to provide clear account closing procedures.
- Force banks to provide a list of all the automated transactions, such as direct deposit and bill payments, that go in and out of your existing accounts to help you reroute those transactions to a new account.
We think this bill, sponsored by Sen. Tom Harkin (D-Iowa), and Rep. Jan Schakowsky (D-Ill.), is a commonsense solution to problems that have dogged consumers for too long.
For practical advice on how to avoid the hassles of switching banks, check our DefendYourDollars.org website.