September 18, 1998

Dear Senator:

In life, it is nice to get a second chance to do the right thing. That's what fate has given you on the issue of soaring bank fees and we are writing to urge you to take advantage of it.

On September 17, with lightning speed and little debate, the Senate overwhelmingly rejected the ATM surcharge amendment to the bankruptcy bill, which would have stamped out double charges. While the Senate missed a chance yesterday, there is still low-cost banking accounts: an issue tailor made to give the "little guy" the power to avoid huge bank fees.

Low cost basic banking accounts have lower initial deposit and minimum balance requirements and reasonable service fees in exchange for limits on consumer transactions. This provision won over the Republican controlled House. It also has support from big banks like NationsBank. Yet, the special interests from Wall Street succeeded in stripping it from the financial services modernization bill before it left the Senate Banking Committee. We think you should put it back and show your support for the consumer agenda and the people on Main Street.

Here are the facts:

Millions of Americans are literally trapped into a spiral of fees without end

• the financial services sector is enjoying record profits, and nearly one-third ($20 billion) of their earnings are attributable to bank fees - we call it "the great American bank fee heist";
  
• 48 million American households keep less than $1000 in their checking accounts and many simply can't avoid being zapped with extra fees by their bank because they don't meet the onerous minimum balance requirements;
  
• 12 million American households don't have any checking accounts - many because of the problem of excessive fees;
  
• The Federal Reserve's Annual Report to Congress (June 1998) shows a continuing pattern of rising bank fees.
  

Taxpayers' Money is on the Line to Benefit Banking Industry

• federal banking policy has direct benefits for the industry, including the "too big to fail policy" (which resulted in a multi-billion savings and loan bailout less than a decade ago), federal deposit insurance and access to cheaper funds through the Federal Reserve;
  
• the new financial modernization legislation grants banks even more benefits, demolishing the wall that used to separate banking from securities and insurance, setting up the industry to get access to greater sources of fees and, at the same time, exposing taxpayers to more risk.
  

We submit that an industry that is supported by the American taxpayer should meet the banking needs of all Americans, not just the wealthiest. At a time when banks are enjoying record profits, families - particularly those with limited resources, deserve a break from the billions in fees that are squeezed out of them for basic bank services. That's why we want you to support efforts to restore the basic banking provision to the financial modernization bill.

As bank powers are expanded and taxpayers exposed to more risk, Congress cannot forget about consumers just wanting basic, traditional bank accounts. No one is asking for a handout, just an alternative to stuffing cash under the mattress.

Stephen Brobeck, Consumer Federation of America
Mary Griffin, Frank Torres, Consumers Union
Ralph Nader
Ed Mierzwinski, U.S. Public Interest Research Group

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