CU endorses legislation to make it simpler for consumers to switch banks
September 19, 2013
Consumers Union endorses legislation to make it simpler for consumers to switch banks
Consumers Union report “Trapped at the Bank” highlights problems consumers face when they try to close bank accounts, move money to another institution
WASHINGTON, D.C. — Consumers Union, the advocacy arm of Consumer Reports, today endorsed legislation introduced in Congress by U.S. Sen. Tom Harkin (IA) and U.S. Rep. Jan Schakowsky (IL) to make it simpler for consumers to close a bank account and move to another institution.
The Freedom and Mobility in Consumer Banking Act aims to provide consumers with the ability to easily move their money without getting hit by unfair fees and other obstacles. Consumers Union said the bill would improve competition and consumer choice.
A 2012 report by Consumers Union, “Trapped at the Bank,” highlighted the problems that consumers often face if they decide to switch banks. Some banks lock in customers by encouraging them to use services like automatic payments and direct deposits in order to avoid monthly fees. Moving these payments and deposits to a new account can take several weeks, the process can be complicated and confusing, and the entire transition to a new institution can drag on for months.
Pamela Banks, senior policy counsel for Consumers Union, said, “As frustrated as some people are with their banks, people tend to stay put because it can be a huge hassle to switch. This bill would remove some of the barriers that make it hard for bank customers to take their business elsewhere. This is a common-sense solution that gives consumers more choices and options, and it makes the banking system more competitive and accountable.”
Suzanne Martindale, staff attorney for Consumers Union and co-author of “Trapped at the Bank,” said, “Moving money takes time and money. If you’re fed up with your bank and want to get a better deal somewhere else, you may run into delays and uncertainty, especially with automatic payments and deposits. You could wind up being stung by extra fees and other tricks and traps. The way that many banks currently structure the account-closing process puts the burden on the consumer to ensure a smooth transfer, while the banks control the means to make it happen.”
The bill would direct the Consumer Financial Protection Bureau to issue rules to:
· Give consumers the right to close an account, regardless of the remaining balance, without a fee;
· Give consumers a choice of how to receive their funds upon closing their accounts, including a check or electronic transfer;
· Protect consumers from having old accounts reopened without their consent;
· Protect consumers from being charged any account fees after requesting to close the account;
· Require banks to provide clear account closing procedures; and
· Require banks to provide a list of all the automated transactions, such as direct deposit and bill payments, that go in and out of a consumer’s existing account to help consumers reroute those transactions to a new account.
For more information from Consumers Union about bank switching and the challenges that consumers face, visitDefendYourDollars.org.