Protections for Checking Customers Vary Widely Among States: Pew

Checking-account customers who live in the Northeast and Southwest are more likely to enjoy consumer-friendly services than their counterparts in the Midwest and some Western states, according to a new analysis from Pew Charitable Trusts.

The analysis, released Tuesday, provides a state-by-state breakdown of how 36 of the 50 largest U.S. banks performed in three areas as of October 2012: disclosures, overdrafts and dispute resolution. The geographic data is an extension of a broader Pew study released in May.

Nationwide, 56% of banks included in the survey provide disclosure boxes that clearly summarize the fees, terms and conditions associated with their most basic checking account. While just 3% prohibit overdraft fees at ATMs, 17% prohibit overdrafts at the point of sale and 20% do not reorder transactions from highest to lowest cost in order to maximize fees. Forty percent do not require customers to sign a class-action waiver, and 74% do not require customers to pay banks' costs if they have an account-related dispute. Thirty-nine percent of banks do not require mandatory binding arbitration, in which customers waive their right to sue.

Overall, banks across the country have a best practice adoption rate of 40%, according to Pew.

But consumers' experiences may vary widely depending on their home state. Banks in New York, for example, scored a best practice adoption rate of 46% — six percentage points higher than the national average. Nearby states including Maine, Vermont, New Hampshire, Massachusetts, Connecticut, New Jersey and Rhode Island all posted scores between 41% and 60%, as did California, Texas, Arizona, New Mexico, Kansas, Oklahoma, Arkansas and Louisiana.

By contrast, many states in the Pacific Northwest, Midwest, Southeast and Appalachian region posted a best practice adoption rate between 21% and 40%.

Pew urged the Consumer Financial Protection Bureau to standardize banks' overdraft, disclosure and dispute resolution policies for consumers across all geographic regions on Tuesday.

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