A top JPMorgan Chase executive warned the banks 86 million customers that their currently free checking accounts may soon carry a fee, according to a report.
Marianne Lake, CEO of consumer and community banking at JPMorgan Chase, pinned blame for potentially the added burden on Washington regulators — who have pushed an $8 cap on credit-card late payment fees and a $3 cap for over-drafting bank accounts.
The Consumer Financial Protection Bureau passed the new caps in March, but it is being appealed by a coalition of bank industry groups who sued to stop it before it could becomes law.
The changes will be broad, sweeping and significant, Lake told the Wall Street Journal. The people who will be most impacted are the ones who can least afford to be, and access to credit will be harder to get.
Lake said she expects other banks to pursue similar actions to make up for lost revenues if the new law is implemented.
Some critics arent buying it.
The banks say that their only option is to pass on their costs to customers, but thats not true, Dennis Kelleher, president of Better Markets, an economics think tank that is in favor of the proposed bank regulations, told the Wall Street Journal. Yet again, banks are dressing up their attempts to maximize their own profit under the guise of whats good or bad for customers.
However, banks say that the new rules, in combination with new capital requirements, requiring banks to hold more reserves, might hit their bottom lines. Some have begun appeals, with many in the North District of Texas.
Big banks will generally be able to manage the dent in profits, more so than smaller banks, Dan Goerlich, a consulting partner at Pricewaterhouse Coopers who advises bank clients, told the Wall Street Journal.
“Any change in regulations that would cap fees will create opportunities for institutions that are highly efficient, Goerlich told the Wall Street Journal.
Big banks can make up for a dent in consumer banking revenues with profit from their wealth management and investment banking arms. Smaller and regional banks will struggle to make up for that.
In 2010, many banks proposed similar changes when they faced regulatory scrutiny after the 2008 financial crisis but ended up not passing the cost on to consumers.
The highly competitive industry, where many accounts and services are offered for free, also means that banks may have their hands tied when it comes to raising prices.
Most customers can access retail banking easily and seamlessly today, Goerlich told the Wall Street Journal. It might be disadvantageous to keep services at zero cost, but banks hands could be forced by other competitors who will offer customers low-cost services.