July 31, 1997

U.S. PIRG's Banking Report and Its Conclusions

Statement by Rob Schneider
Senior Staff Attorney
Consumers Union Southwest Regional Office

"Consumers Union and our flagship publication -- Consumer Reports -- have a long history of urging consumers to shop with caution for banking and other financial services.

Just last year, our magazine's March cover story on banks identified at least 100 separate fees that banks now impose on consumers. According to our report, the size of those charges has been rising at more than twice the rate of inflation -- jumping more than 50 percent on checking and savings accounts since 1990.

Just as important, escalating fees and the closing of full-service bank branches -- particularly in low-income and minority communities -- are locking many Texans and Americans in general out of basic financial services entirely. Almost 20 percent of all families in the U.S. have no bank account.

A report released by the Southwest Regional Office of Consumers Union in 1995 found that families shut out of mainstream banking often turn to check cashing services that charge fees as much as five times higher than those charged by banks. In Texas, a low-income family may spend $150 to over $350 per year in check-cashing fees.

Earlier this month, we released a report showing that finance companies and pawn shops are continuing their march into low-income and minority neighborhoods in Texas. Our maps of the Houston, Dallas and Austin areas showed in vivid colors the location of these fringe lenders with their exorbitant rates vis-à-vis the low-income and minority population in the cities' neighborhoods. What makes the trend more disturbing is that the mainstream banking institutions who often flee these neighborhoods are often affiliates of these lenders.

We also have worked long and hard on the issue of ATM fees in the Texas Legislature, and concur with PIRG's recommendation that consumers not be charged twice every time they use their ATMs. Last summer, we published a survey of 93 Texas banks that showed Texans pay more for ATM services that consumers in much of the country -- particularly because of the "non-customer surcharge" that we found eight out of the Top 10 Texas banks charge.

Clearly, lawmakers in Washington, Austin, and elsewhere must grapple very soon with a problem that has become out of hand. But in the meantime, the old caveat of "buyer beware" applies. Most consumers never take the trouble to analyze their monthly statements to see just what their account is costing them. To those lucky enough to have choices, we say: try it, and you'll be surprised.

To those whose options are limited and must rely on alternative lenders, we say: ask questions, read the fine print, learn your rights, seek alternatives wherever possible, and call your legislators and members of Congress to get something done to end this disparity."