On Wednesday, Bank of America Corporation (BAC - Free Report) said that it will offer customers a new, easy-to-read two-page statement with complete information about fees, terms and primary features for checking accounts. This move follows similar steps taken by other major U.S. financial institutions.
Banking giants such as J.P. Morgan Chase & Co. (JPM - Free Report) , Citigroup, Inc. (C - Free Report) , Capital One Financial Corp. (COF - Free Report) and Fifth Third Bancorp (FITB - Free Report) have already decided to include easier disclosures. Constant pressures from Pew’s consumer banking policy wing and Democrats on Capitol Hill forced these banks to opt for such disclosures.
Non-profit organization Pew Charitable Trust’s consumer-banking policy arm was repeatedly asking the abovementioned financial organizations to permanently accept its single-page model disclosure form, which abbreviates the checking-account terms and costs. According to Pew, generally the disclosure forms of banks contain a number of pages on legal terms and provide inconspicuous details or conditions, making it difficult for costumers to look for primary checking-account guidelines.
In 2011, Pew’s Safe Checking in the Electronic Age Project surveyed and concluded that although 90% of the U.S. population has checking accounts, banks do not provide summarized information on terms and fees that can be easily identified by the consumers, to assess the costs of the services.
Further, the research found that the average bank disclosures for key checking accounts contained 111 pages, which was cumbersome for customers. Pew argued that checking-account policies should be patterned like credit cards disclosures, enabling the customers to understand it easily.
Pew has also been constantly advising the Consumer Financial Protection Bureau, which was created during the 2008 financial crisis, for monitoring financial products to make it mandatory for all financial organizations to use more rationalized disclosure forms, make the terms of overdraft fees easier to comprehend and to put a limit on the maximum overdraft penalty fees that can be charged by banks.
Pew believes that the measures taken by BofA will encourage other banks to follow the same, which in turn will be beneficial for the consumers.
Management at BofA believes that these measures will enable the consumers to effortlessly get information about their accounts.
Bank of America currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. Considering the fundamentals, we maintain our long-term Neutral recommendation on the stock.