Banks accused of gouging with bounced-check fees.

WASHINGTON - The Consumer Federation of America charged Wednesday that banks are "gouging" their customers with excessive fees for bounced checks.

The consumer advocacy group released a study showing that the industry received $4.35 billion in fees for bounced checks last year, six times more than the $685 million in direct costs.

"It's a good example of outright price-gouging," said Chris Lewis, the association's director of banking and housing. "Bounced check fees are a raw grab for profits."

|Like a Stickup'

Edward Alwood, a spokesman for the American Bankers Association, defended the fees, saying that banks were trying not only to recoup their costs but also to deter check bouncing.

But Mr. Lewis maintained that banks charge too much. "I think everyone would agree that 900% markups are unfair," he said.

"To those who would argue that it's a deterrent, I'd say it looks more to us like a stickup."

The study found that processing bad checks cost banks $581 million last year, while losses from uncollected checks added another $104 million in expenses.

The fees charged by banks expenses the direct charges by $3.67 billions - an amount equal to 11 % of the industry's record $32.2 billion in earnings last year.

But that comparison is not exact because the study could not take into account all of the industry's costs.

The issue could become a hot one for the industry if it catches Congress' attention the way high interest rates on credit cards did in 1992.

Large banks, those with more than $1 billion of assets, made the most from fees for bounced checks last year, the study found.

These banks charged customers 971% more than the cost of their bad checks.

Midsize banks, those with $300 million to $1 billion in assets, marked up bounced-check costs 469%, while smaller banks marked up their costs 315%.

|Vastly Outstrip Inflation'

The association also noted that a Federal Deposit Insurance Corp. study concluded that bank service charges overall jumped 35% to $14 million in 1992 from $10.3 billion in 1989.

"These bank fee increases vastly outstrip inflation and increases in bank costs many times over," the study said.

The study was done by Mr. Lewis and Janice C. Shields, an accounting professor at Bloomsburg University in Pennsylvania.

Cost Estimate Questioned

The association used data collected and published by the ABA and the Bank Administration Institute.

Fritz Elmendorf a spokesman for the Consumer Bankers Association, questioned the institute's conclusion that it costs on average $1.32 to process a bounced check. He thinks the figure is higher, but said his group has not conducted research on it.

"I think a lot of banks don't know what the full costs of handling a bounced check are," Mr. Elmendorf said.

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