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Published: June 2010

Chase should revisit consumer marketing materials on overdraft fees

Coalition: Financial Services

Consumer Action, along with other groups, sent a letter to J.P. Morgan Chase Bank, following a meeting with the bank's CEO of Consumer Banking, Scott Powell. The letter asks Chase to consider problems with marketing materials describing how consumers opt-in to overdraft fees.

Below is the full text of the letter:

We appreciated the opportunity to talk with you and the other representatives from Chase last week about our concerns on Chase’ marketing materials for overdraft opt-in. Thanks for providing the most recent Chase marketing piece that is now being sent to customers. Below are our comments on issues raised during the call and from reviewing the Chase updated marketing letter and requests for further information.

1. The actual overdraft fee charged is omitted from the first page of the mailer.

In the box under “how much does it cost?” this question goes unanswered. Instead, the consumer must flip through to the Helpful Answers page and go about a third of the way down to learn that the fee is $34 per incident, and up to three of these fees can be charged per day. The Federal Reserve determined that it was very important to note the fee and the number of times the fee could be charged in a very clear manner, which is why these two elements are clearly disclosed on its model form. To talk about cost and then fail to disclose the fee is disingenuous at best. Incidentally, the original opt-in letter which we complained about to the OCC did contain the fee and the number of times it could be charged on the front page of the letter. We cannot imagine that this is an oversight and are disappointed that Chase has chosen to obscure the cost of the decision consumers are asked to make.

By disclosing on the first page the $10 transfer fee to cover overdrafts with real Overdraft Protection while failing to note the $34 fee for Chase to pay debit purchases on insufficient funds, a casual reader could mistakenly conclude that real Overdraft Protection is the more expensive option. The Important Notice cover letter also states that there is “No fee to keep Chase Debit Card Overdraft Coverage on your account.” Coupled with the failure to clearly disclose that customers can be charged up to $102 per day for three small debit card overdrafts, this failure to clearly quote the price consumers are agreeing to pay is objectionable.

2. Discussion around available funds and the potential of a differing (positive) impact afforded to customers who opt-in.

As demonstrated by our conversation on this, the intraday float topic is a complex one, even if everyone in the room is relatively expert on the topic of overdraft. At a minimum, this “benefit” should not be a main feature highlighted in opt-in marketing. The second version of the Chase letter provided last week, highlights this “feature” even more prominently. If intraday float is mentioned at all, perhaps it should be relegated to a question in the FAQ materials.

3. Debit card overdraft reforms generally.

Many of the large banks have taken their reforms related to debit card overdrafts farther than Chase, such as Bank of America/Citi who decline debit card purchases which result in an overdraft and U.S. Bank which will still cover debit card transactions for those who opt-in but at a reduced rate of $10 per incident (max three per day) for purchases of $20 or less. Thus, the max fee a person can be charged at U.S. Bank for the average debit card transaction triggering an overdraft is $30 for three overdrafts ---still less than a single overdraft at Chase. We urge you to revisit whether it is appropriate for J.P. Morgan Chase Bank to provide this expensive urge you to revisit whether it is appropriate for J.P. Morgan Chase Bank to provide this expensive debit card coverage at all and, if so, whether the fees should be reduced to be more proportional to the credit extended.

Chase is also charging a $15 sustained overdraft fee when the account remains overdrawn for consecutive business days. For a single $5.01 overdraft, a consumer can be charged $49. How does Chase justify such a disproportional fee?

4. Impact on Young Accountholders.

In the “helpful answers” pages on the new solicitation, one of the questions is “How do I prevent my child’s account from being charged overdraft fees?” Chase responds that high school checking accounts do not carry debit card overdraft coverage. This should be extended to any college student checking accounts that Chase offers. This is the same low-balance type of population which makes lots of small debit card purchases and is burdened by steep overdraft fees.

Lead Organization

Center for Responsible Lending

Other Organizations

Consumer Federation of America | Consumers Union | National Association of Consumer Advocates | Center for Responsible Lending

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