The Best and Worst Banks for Consumer Protections

The good news is banks have improved their consumer-protection policies in recent years.

The bad news is that’s not saying much, according to the results of the Pew Charitable Trusts’ third annual “Checks and Balances” report.

The national nonprofit states in the report:

The formal disclosure documents outlining account fees, terms, and conditions are often long, unintelligible and opaque. Overdraft and transaction processing practices can result in surprise fees and arbitration terms can limit a customer’s legal rights in the event of a dispute.

For the report, Pew analyzed the consumer-protection policies of the 50 largest retail banks based on how many best practices and good practices the banks have adopted:

Pew defines “best practices” as clearly disclosed terms that most thoroughly:

• Provide checking account customers with clear and concise disclosure about fees and terms.
• Reduce the incidence of overdrafts and eliminate practices that maximize overdraft fees.
• Allow consumers to choose the method by which they resolve a problem with their bank, rather than requiring pre-dispute binding arbitration

There was one best practice — disclosing the amount of overdraft penalty fees — that has been adopted by 100 percent of the banks Pew evaluated.

On the other hand, just 53 percent of banks have a policy not to reorder transactions.

In reordering, a bank “reorders” the customer’s bank-card purchases from largest to smallest. This leaves more small transactions that are potentially subject to an overdraft charge.

Susan Weinstock, the director of Pew’s consumer banking project, tells CBS MoneyWatch:

“The practice of reordering from high to low should be prohibited… There are still a lot of banks that are using that method to maximize overdraft fees.”

The best-rated banks in the Pew’s analysis are:

1. Ally Bank (seven out of seven best practices, 11 out of 11 good practices)
2. HSBC Bank (six best practices, 10 good practices)
3. First Republic Bank (six best practices, eight good practices)
4. Frost Bank (five best practices, 10 good practices)
5. USAA Bank (five best practices, nine good practices)

The worst-rated banks are:

1. Scottrade Bank (two best practices, four good practices)
2. Regions Bank (one best practice, seven good practices)
3. Bank of the West (one best practice, six good practices)
4. FirstMerit Bank (one best practice, six good practices)
5. E*Trade Bank (one best practice, five good practices)

Five banks were omitted from the rankings because they did not respond to Pew:

• East West Bank
• First Citizens Bank
• New York Community Bank
• Signature Bank
• Synovus Bank