Alterations to rubber check forgiveness and free checking are just some of the ways new banking regulations may impact consumers, as the federal government works to curb bank fees.
“I think it’s going to take some time to see how all of that unfolds,” said Pat Dee, president and chief executive officer of First Community Bank “It’s likely that most customers will see some change.”
First Community is the third largest bank in New Mexico with branches in Clovis and Portales.
In July, the federal government passed regulations requiring banks to get customer permission to use its overdraft protection — a fee-based service offered by banks for customers who overdraft their checking account — citing exorbitant fees involved with such services.
The Federal Reserve has also proposed a cap on charges banks can charge on merchants for card transactions, which could cut income for banks by as much as 70 percent, or $14 billion a year. The Fed is still accepting comments, but a cap on the fees is expected to go into effect by summer.
Some of the nation’s biggest banks have already announced created or increased fees in other areas to offset the hit to profits.
Dee said consumers may find perks such as free checking could go away, and minimum balance requirements could increase.
“Banks have seen a huge increase in regulations and there are a lot more to come out of some of the recent legislation that’s passed. It’s cumbersome and expensive… It restricts the freedom of our customers — There are definitely some costs associated with it,” Dee said.
Already, some consumers have felt the impact of the summer’s regulatory changes at the checkout.
Dee said those customers who have not elected to have overdraft privileges which they probably had by default previously, have been surprised when their purchases are declined.
“Some of (the customers) don’t understand why we had to make those changes,” he said. “Most of those changes were required; they weren’t optional for banks (and) banks argued against implementation of those.”
Dee said after the regulation went into place, many opted into the bank’s overdraft protection. About 80 percent of customers don’t overdraft their accounts, Dee said, but the other 20 percent overdraft regularly, and pay those fees in exchange for having their transactions honored by the bank.
First Community Bank charges between $31 and $38 for checks that overdraft accounts, and a daily overdraft fee of $4.
“(The government) apparently felt like people weren’t able to, at the end of the month, take a look at their bank statement and adjust their spending and budget,” he said. “They took this decision out of the hands of the consumer.”
Clovis financial and debt management counselor Tina Zamora said the changes are good for consumers.
The fixed fees banks charge for overdrafts — feasibly more than $30 for even a $1 overage — can financially cripple someone who isn’t staying in control of their money, she said.
“I think it has been a good thing for them,” she said. “They can’t just go out and spend like they used to. It’s making them more aware of what they have and how far they can go.”
But people with chronic debt problems likely aren’t the ones using overdraft protections and won’t benefit from regulations, she said.
In recent years, banks have tightened up, branding customers with a history of overdraft as risks. Those customers lose their checking accounts, she said, and rely on pre-paid credit cards and check cashing services.
When they’re short on money, instead of floating checks or using overdraft protections, they turn to credit cards and local loan companies.
“Unfortunately, the credit cards are not doing that. If you’re over the limit, they’re still charging,” she said. “If the credit cards would start charging like the banks, we probably wouldn see as many (people with debt) as we do.”