Can America's banks be coaxed into adopting more consumer-friendly practices - and pushed if they don't change voluntarily? That's the hope of researchers at the Pew Charitable Trusts, who helped bring changes to the credit-card industry several years ago and have now turned attention to checking accounts.
In a report issued Thursday, Pew's Safe Checking project measured 36 of the 50 largest U.S. banks against a set of 18 "best and good practices" that Pew developed from its research on consumers' financial risks. The 14 others were excluded because Pew could not obtain their policies.
None of the 36 banks fully measured up. The top scorer, Ally Bank, met six of seven best-practice standards and nine of 11 good practices. Ranked 36th was First Niagara Bank, which met none of the best-practice goals but five of the good practices.
Since banks' policies may have changed since Pew collected them in late 2012, the study should be viewed as "a snapshot," said Susan Weinstock, the project's director. "What's really important to take away from this is that all the banks showed room for improvement."
Pew's standards centered on three areas that have long been hot buttons for consumer advocates and have also drawn attention from regulators, including the Consumer Financial Protection Bureau: transparency, overdrafts, and dispute resolution.
For example, in 2011 Pew proposed a disclosure box for checking accounts patterned on disclosures for nutritional information or credit-card terms. Pew says eight banks have so far met the standard, including JPMorgan Chase, Bank of America, Citibank, Wells Fargo, and TD Bank.
First Niagara, which has about 60 branches in the Philadelphia area, is among those that haven't. But that's not because the bank objects, said senior vice president Scott Fisher.
"We're 100 percent behind the Pew simple-disclosure form," Fisher said. "We're actively working to implement it. It's not a matter of if; it's a matter of when."
Fisher said one complication was dealing with pricing that doesn't match the format, such as how to state the fee for using another bank's ATM when First Niagara sometimes reimburses those charges.
Weinstock said the exact format "is not an issue for us, except that we want it to be concise and easy to understand." But she said Pew's ultimate goal was for the CFPB to set a standard for disclosing key checking terms, to make it simple to compare among banks and also among different accounts at the same bank.
"On a nutrition label, your eyes know exactly where to look if you're worried about sodium or you're worried about calories," she said. "We'd like it to be that easy with checking accounts."
Eight of Pew's target practices center on how banks deal with overdrafts, especially those generated when a bank authorizes an ATM withdrawal or debit-card purchase even though a customer's account is in the red.
In 2010, the Federal Reserve required banks to quit approving such transactions unless a customer had agreed to them beforehand. In a report last year, Pew said the "opt-in" requirement left widespread "misunderstanding and unhappiness," partly because combinations of practices can generate hundreds of dollars of fees from a single mistake. Pew said three-quarters of consumers who overdrafted would have preferred that a transaction be declined rather than face a median $35 fee.
Pew's best practices would eliminate three policies it considers most problematic: allowing ATM overdrafts, permitting debit-card purchases with insufficient funds, and clearing overdrafts from largest to smallest. Pew says six banks have done all three, including Ally, Charles Schwab Bank, and Citibank.
Others are likely to resist, unless regulators step in and make the rule mandatory.
"No one will ever be charged an overdraft fee unless they opt in," said TD Bank spokesman Gabe Weissman, who said balance alerts can help customers avoid overdrawing. "It really is about offering consumers choices."
Weissman said Pew erred in one respect, by not including TD Bank in a list of more than 20 banks that set a minimum threshold for overdrafts - one of Pew's five "good practices" for overdrafts. He said going less than $5 in the red won't generate a fee at the bank.
TD Bank, in other words, has guarded against the surprise $38 cup of coffee - a laudable thing. But would anyone really choose the $40 hoagie?