WASHINGTON—Service members in the military need more information about their financial accounts, especially the terms and conditions around checking accounts and overdraft programs, from both banks and credit unions that operate on military installations, according to a new report from The Pew Charitable Trusts.
Basing its findings on checking accounts offered by the Association of Military Banks of America on-installation member banks and on-installation credit unions that belong to the Defense Credit Union Council, The Pew Charitable Trusts said it attempted to collect the account agreements from each of these financial institutions through their websites and was able to do so for banks and credit unions operating on 71% of all domestic Department of Defense installations.
It said it found that 13 of 31 banks (42%) and 23 of 134 credit unions (17%) “do not provide any disclosure information online, making it difficult for deployed service members to access critical information about the terms and conditions governing their accounts.”
Pew said it found some areas where banks and credit unions with an on-installation presence excel but also found areas that need improvement.
“For example, the DCUC-member credit unions are more likely to provide at least some of their disclosures online, while the AMBA-member banks provide clearer and more thorough disclosures overall,” said Pew. “Additionally, the banks have more complex overdraft programs than the credit unions, often charging customers more for an overdraft but also disclosing additional ways to avoid those charges. Finally, credit unions are significantly less likely than banks to limit access to legal recourse by requiring their customers to undergo arbitration in the event of a dispute.”
The Pew Charitable Trusts said institutions were evaluated on how well their disclosure, overdraft, and dispute resolution practices align with Pew’s policy recommendations, which are as follows:
- Summarize key information about terms and fees in a concise, uniform format.
- Provide account holders with clear, comprehensive terms and pricing information for all available overdraft options.
- Make overdraft penalty fees reasonable and proportional to the financial institution’s costs in providing the overdraft loan.
- Post deposits and withdrawals in a fully disclosed, objective, and neutral manner that does not maximize overdraft fees.
- Prohibit pre-dispute mandatory binding arbitration clauses in checking account agreements, which prevent account holders from accessing courts to challenge unfair and deceptive practices or other legal violations.
In its report, Pew Charitable Trusts called on the Consumer Financial Protection Bureau to “write rules addressing the issues noted in this report to create a more transparent and competitive marketplace for such an essential financial product.”
The Pew Charitable Trusts analysis also includes a review of how banks and credit unions compare on dispute resolution options, POS transactions, and more. A copy of the Pew Charitable Trusts report is now in CUToday.info’s “The Vault” section.
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