- Some growth in fee revenues is happening because customer accounts are growing, but banks have been pushing up what they charge for fees for years.
- Two of the most typical are overdraft fees and ATM fees.
- Is there any limit to how high these can go? Believe it or not, there doesn't appear to be.
Banks have been reporting earnings, and one item not getting enough attention is a rapidly growing line item called "noninterest income," which is a boring term for fees that banks charge their customers, both businesses and consumers. It's a business that's growing like mad: for some large regional banks, it's already close to 40 percent of their income!
Some growth in fee revenues is happening because customer accounts are growing, but banks have been pushing up what they charge for fees for years.
These fees come in all shapes and sizes, but consumers are familiar with most of them: Withdrawal fees for ATMs. Deposit fees. Transaction fees. Insufficient funds fees. Annual fees. Inactivity fees. Checking account fees. Mortgage fees. Credit card fees. Fees for deposit slips even. It's endless!
Let's just look at two of the most typical fees:
1) Overdraft fees
Bankrate.com says the average overdraft fee for a checking account was $33.04 in 2016, down 0.1 percent from 2015, but prior to that it had increased for 17 straight years.
That adds up to big profits for the banks. According to the Federal Financial Institutions Examination Council, JPMorgan made $1.9 billion from overdraft charges last year, Wells Fargo made $1.8 billion, and Bank of America made $1.7 billion. Together, consumer paid $17 billion in overdraft and NSF fees in 2015, according to the Center for Responsible Lending (about $53 for every American). This, despite the fact that by law bank customers must choose to opt into ATM overdrafts.
For some banks, overdraft revenues are a significant part of their income. In the first three quarters of 2016, among banks with more than $1 billion in assets, overdraft fee revenue accounted for an average of 8.1 percent of banks' net income, according to the Public Interest Research Group.
2) ATM fees
This really makes me nuts, particularly if you are taking money out of a bank that's not your own or out of your network. Bernie Sanders made an issue of it during the presidential election. He said ATM fees should be limited to a maximum of $2. That went nowhere.
Bankrate.com found that in 2016 the average withdrawal fee for a non-customer bank was $2.90, a record for the 12th straight year. Your own bank charged an average of $1.67 more, a 2-percent increase from 2015. Add it up, and the total average fee for withdrawing from a non-customer bank was $4.57, a record high for the 10th consecutive year
Of course, not everyone pays these fees. Many accounts don't charge for out-of-network withdrawals, and many banks will raise the customer bank fee if you maintain a high enough balance.
Is there any limit to how high these can go? Believe it or not, there doesn't appear to be. The Consumer Finance Protection Board (CFPB) was established in 2011 in the wake of the financial crisis to provide consumer protection in the financial sector, but there is no regulatory limit on what banks can charge for service fees on deposit accounts.
I'll repeat that: there is no regulatory limit on what banks can charge for service fees on deposit accounts. That means that if a bank wants to charge you a $20 fee to withdraw $20 from their ATM, they can do it.
Under the Credit CARD Act of 2009, there are limits on certain fees that can be charged for credit cards. For example, card companies can't charge you a fee if you go over the limit on your card unless you give them permission to authorize purchases above your limit. Penalty fees are supposed to be reasonable and in proportion to the violation. Unlike for a bank account, you can't be charged an inactivity fee.
But for bank deposit accounts, the sky is the limit on fees. What to do? Shop around, to begin with. Bankrate.com found that 38 percent of banks offer non-interest bearing checking accounts with no monthly fees or balance requirements.
Ed Mierzwinski, who has spent more than 20 years as a consumer advocate at the Public Interest Research Group, has two suggestions: First, many banks will waive certain fees if you keep open multiple accounts. He also recommends having direct deposit of your paycheck, which will often result in a waiver of a balance requirement.
His final suggestion: If you're really want to keep fees to a minimum, consider joining a credit union. "That's what I do," he said, noting that many are now full-service companies that that offer mortgages, car loans, etc.
One final point: The banking industry has been actively involved in rolling back what they view as excessive regulations imposed on them since the financial crisis. There has been a particularly strong effort to defang the consumer banking watchdog, the CFPB. A bill, HR 10, the Financial Choice Act, has passed the House of Representatives and is awaiting action in the Senate. It would take away the CFPB's independent funding, make its director fireable at will by eliminating its independent agency status, and take away most of its tools to enforce the laws, including the authority to sue companies for unfair and deceptive practices.
—CNBC's Kirsten Chang contributed to this report