Burying the ‘lede’ is considered a high crime in journalism. The lede is what newspaper writers of old called the practice of putting the most important item at the beginning of a story. Readers trusted the writer to tell them what’s important right away, not to put the meat of the story in the bottom. Banks bury the lede all the time, especially when it comes to fees. To customers, the fees are the story — they shouldn’t be hidden away in the fine print.
TD Bank (NYSE: TD) Tuesday agreed to stop burying the lede and instead adopt Pew’s simple disclosure form for checking accounts. Chase is the only other large bank in the United States to agree to the practice. And it’s worth mentioning here that TD Bank is headquartered in Canada.
For those keeping score at home, that means that just one major U.S.-based bank has adopted Pew’s recommended fee disclosure form. Meaning, presumably, that the form presents undue burdens?
Not exactly. The model disclosure form was borne out of research relating to Pew’s Safe Checking in the Electronic Age program. Pew discovered that banks generally did little to make their schedule of fees clear to consumers, especially ones relating to overdrafts.
So Pew Charitable Trusts created a model fee disclosure form with large print, broke the fees and terms out into categories, and stripped out the obfuscating legalese that typically clouds these documents: Account Opening and Usage, Overdraft Options for Consumers with Debit Cards, Processing Policies, Dispute Resolution, and the like.
It’s a simple, elegant solution that brings all relevant information together for customers, instead of forcing them to scan through irrelevant text in 9 point font for certain details.
“We want our account holders to be able to see the common fees and features associated with their account,” said Ryan Bailey, Head of Deposit Products and Pricing at TD Bank, in prepared remarks. “Our new simple account guide is another step on the path that leads to America’s Most Convenient Bank.”
It shouldn’t be a revolutionary idea to stop burying pertinent information in pages of tiny jargon.
The dilemma banks face, however, is very difficult. For years, banks offered free checking accounts to lure consumers in the door, which they funded with debit card interchange fees and overdraft fees, largely levied on the poor (or disorganized.) Essentially, free checking was propped up by fees — typically hidden ones.
The Dodd-Frank Act, passed in 2010, seriously diminished two sources of these fees: debit interchange and overdraft. Just as the banking industry is dealing with its biggest crisis of trust in ages, it also had to reveal to America that free checking was never really free, but actually kept afloat by exorbitant fees charged to retailers and poorer customers. The Pew disclosure form, though elegant, is also a painful confession for banks.
Three smaller institutions also adopted the fee-disclosure forms, according to to the press release: Inland Bank, University of Illinois Employees Credit Union and Eastman Credit Union.