06/18/2012 11:19 am ET Updated Aug 18, 2012

Checking Account Fine Print Gets A Makeover

By Mitch Lipka

June 18 (Reuters) - Comparison shopping for a bank or credit union checking account often ends up turning into a major research project. With disclosure forms that contain the nuts and bolts of the accounts averaging 69 pages of tiny, legalese-filled print, the most important details can be difficult, if not impossible, to extract.

But that longstanding banking tradition is in the process of change, as some of the biggest banks and credit unions in the country are siding with a non-profit's efforts to make checking account terms easier to compare.

The Pew Charitable Trusts, which has been studying the issue of checking account disclosures and advocating for their simplification, says there is now some serious momentum. JPMorgan Chase adopted a simplified checking account disclosure form in December at the same time two of the three largest credit unions, North Carolina State Employees' Credit Union and Pentagon Federal Credit Union. In April, TD Bank also joined.

Bank of America now says it will join them before the year is out. "We support Pew's proposal on transparency of account information," BofA spokeswoman Betty Riess said, "and plan on implementing a simplified disclosure based on their model in the second half of this year."

While even the shortened disclosures are not Pew's ideal - it would like a single-page government-mandated document akin the nutrition labels on food - those in use so far do boil things down. The longest of the simplified disclosures is three pages, compared with 153 for the longest disclosure forms, according to a Pew study released last week.

The shortened forms slice away much of the lawyer speak to explain how much it takes to open an account, whether there's a monthly fee (and what you have to do to avoid it), how much will be charged if a check bounces and the bank's policy on when deposits are credited.

In addition to those details, here are some other items you'll find on the new disclosure forms:

* ATM fees (charges when using one of the bank's own machines, a different bank's machine or if you use one outside the U.S.)

* Various fees, from stopping payment to ordering new checks

* How withdrawals and deposits work

* Other miscellaneous charges, including wiring funds and getting a copy of a statement.

Pew developed a model form that both Chase and TD adapted to include additional details, distilling information from their far longer checking account disclosures into three-page documents. Chase spokesman Patrick Linehan says, "The reaction from customers and consumer advocates has been very positive."

Susan Weinstock, who is heading Pew's efforts on the issue, says she hears from a couple of banks each month asking about adopting a version of the simplified form and estimates about eight are in the process of making the change.

Some banks say the process takes months because of legal reviews. But the North Carolina Employees' Credit Union, Weinstock says, turned its around in a day.


Resistance is not the issue. The banking industry, while acknowledging some concerns, would prefer, as Pew' does, a uniform disclosure.

"In general, the banking industry supports the concept of a simplified checking account disclosure," says Carol Kaplan, a spokeswoman for the American Bankers Association. "We recognize that there are many obstacles to achieving that, and we look forward to working with all banks and the agencies to find something that's acceptable, but we have many concerns about the legal ramifications of leaving out important information that is currently required."

TD Bank Senior Vice President Ryan Bailey says the process of shrinking its 40-page document to three pages made sense because it provides "transparency" to consumers. But for the reasons Kaplan expressed, the bank retains and still distributes the larger document to cover its legal bases.

In addition to just allowing for comparison shopping, the simplified forms can be educational, Weinstock says. That's particularly the case for those who might not realize that many banks change the order in which checks are processed - paying not the first to arrive, but the largest amount, something that would result in more penalties if there are not sufficient funds to cover the checks. She says consumers could get some clarity on the continuing confusion about opting in or out of overdraft protection - an issue in which many misunderstand that opting in is what could subject them to steep overdraft penalties.

"We'd like to see this box (the disclosure form) in bank branches and online," Weinstock says. "The more banks that do it, the better off we'll all be. Consumers can pick the one that works best for them."