[Congressional Record Volume 146, Number 118 (Thursday, September 28, 2000)]
[Extensions of Remarks]
[Pages E1628-E1629]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                ANNUAL BANKING FEE SURVEY EXTENSION ACT

                                 ______
                                 

                          HON. JOHN J. LaFALCE

                              of new york

                    in the house of representatives

                      Thursday, September 28, 2000

  Mr. LaFALCE. Mr. Speaker, I am today introducing legislation to 
extend and expand provisions in current law that require the Federal 
Reserve Board to report annually to Congress on the cost and 
availability of retail banking services. These annual bank fee studies 
have been an invaluable source of information about banking costs and 
trends that have benefitted consumers and assisted the Banking 
Committee's oversight of financial activities. The Federal Reserve 
Board acted last year, under existing law, to terminate all future bank 
fee reporting. My legislation would amend current law to continue these 
reports and expand them to reflect broader market activity. The House 
has passed broader legislation reauthorizing a number of important 
consumer reports, including the bank fee report in its current form, 
but that bill is currently awaiting Senate action.
  In 1989, Congress directed the Federal Reserve Board, as part of the 
Financial Institutions Reform, Recovery and Enforcement Act (FIRREA), 
to study and report annually on discernible changes in the cost and 
availability of certain retail banking services. The purpose was to 
determine whether banks would pass on the expense of higher deposit 
insurance costs resulting from the savings and loan crisis to 
consumers. These annual studies were expanded, under the Riegle-Neal 
Interstate Banking and Branching Efficiency Act of 1994, to include 
more detailed state-by-state reporting on discernible changes in the 
cost and availability of retail banking services resulting from the 
lifting of bank interstate branching restrictions.
  Last year, the Federal Reserve Board determined that its annual 
banking fee surveys and reports were no longer needed. Responding to 
provisions of the 1995 Federal Reports Elimination and Sunset Act that 
permit federal agencies to eliminate outdated or unnecessary reports, 
the Board included the annual bank fees surveys among a number of 
Congressionally mandated reports that it proposed to eliminate. The 
Board's rationale was that the original intent of the reports, 
determining whether the added costs of deposit insurance were being 
passed on to consumers, was no longer relevant since banks are now 
paying minimal premiums for FDIC deposit insurance, and consumers now 
have broader access to bank fee information over the Internet.
  While concerns with higher banking costs arising from the S&L crisis 
have certainly subsided, the annual service fee reports have taken on 
increased importance in recent years with the passage of interstate 
branching and increased consolidation within the banking industry. 
Passage of the landmark Financial Service Modernization Act last year 
also creates a continuing imperative to understand how increased 
integration and cross marketing of services among banks, investment 
firms and insurance companies will affect the cost and availability of 
basic financial services. Consumer groups have raised very credible 
arguments that the annual bank fee reports are more necessary now than 
at any time in the past to determine what effect more rapid 
consolidation among financial services providers is having on 
consumers--whether the costs of mergers and acquisition are being 
passed on to consumers and whether consumers realize any of the 
promised cost benefits of financial modernization.
  I have also found the Federal Reserve's annual fee reports to be the 
only official source of information documenting several extremely 
important changes within the retail banking sector. In recent years, 
non-interest income from fees and services has replaced interest income 
as the major contributor to the record levels of bank profits. In the 
past three years alone, bank non-interest income has increased on 
average by 18 percent, with interest income growing by roughly 4 
percent annually. Non-interest income has quickly replaced traditional 
interest charges as the major contributor to bank earnings. As a 
result, banks of all sizes have sought out new sources of fee income to 
maintain earnings as greater competition among lenders has shrunk bank 
lending margins.
  These changes have prompted banks and thrift institutions to 
institute a pay-for-service approach to basic banking and a ``penalty 
pricing'' approach to credit cards and ATMs that have generated 
significant new revenue for banks while antagonizing increasing numbers 
of consumers. The Federal Reserve Board's annual reports have 
documented these changes, showing significant and steady growth in over 
20 categories of banking service fees. The report has also shown 
substantially higher average growth in fees among larger multi-state 
banks and thrifts than among smaller local institutions. This has 
provided important comparison shopping information for consumers and 
may help explain why many of the nation's largest banking institutions 
support the Board's decision to eliminate these reports.
  Given the changing financial marketplace and the marked changes in 
retail banking services, the information provided in the bank fee 
reports is more important now than at any time in the past decade. It 
should be Congress, not the Federal Reserve Board, that determines when 
the information provided in these annual reports is no longer needed by 
Congress or relevant to consumers.
  My legislation, the ``Annual Banking Fee Survey Extension Act,'' 
proposes two changes in current law to assure that the Federal Reserve 
Board continues reporting annually to Congress on the cost and 
availability of retail banking services until such time that Congress 
determines it is no longer relevant or necessary. First, it amends the 
Federal Reports Elimination and Sunset Act of 19956 to exempt the 
annual bank fee reports from the discretionary authority provided the 
Federal Reserve Board to discontinue outdated or unnecessary reporting 
requirements. Second, it amends the 1994 Riegle-Neal Interstate 
Branching Act to repeal a provision that would sunset aspects of the 
fee study requirement in late 2001.
  In addition, the bill expands the mandate for annual fee reporting to 
include the fees for retail services charged by credit unions. Past 
surveys and reports have included only the fees charged by bank and 
thrift institutions. A large and growing segment of our population 
currently obtains checking and other financial services from credit 
unions. Inclusion of credit

[[Page E1629]]

union fees would make the annual reports more broadly representative of 
the broader consumer marketplace. It would also document differences in 
costs between banks, thrifts and credit unions that will enhance 
competition and benefit consumers.
  My legislation also expands the focus of the annual fee studies to 
include various fees and charges associated with credit cards. Past fee 
reports have included data only on basic checking and savings account 
services and only those additional fees specifically requested by 
statute, such as fees associated with ATM transactions. Institutions 
that offer credit cards now impose a large and growing array of charges 
and penalties, such as late payment fees, annual fees, over-the-limit 
fees, cash advance fees, convenience check fees, foreign currency 
conversion fees, and many more. I have received more complaints from my 
constituents about credit card fees than all other banking fees 
combined. Credit cards, in general, are one of the foremost concerns 
among consumers in my district and, I believe, among consumers in all 
parts of the country. The fees and penalties charged in connection with 
credit cards clearly should be incorporated in any future study of 
retail banking costs.
  Mr. Speaker, the financial marketplace has changed dramatically over 
the past half decade and will continue to change in response to the 
landmark financial modernization legislation we enacted last year. It 
is imperative that Congress have all the information necessary to 
assess whether these changes will enhance the services available to 
consumers or only benefits financial institutions at the expense of 
consumers. My legislation merely extends Congress' prior request for 
annual reporting on banking fees and costs. This is reasonable and 
responsible legislation that Congress should enact before adjournment 
this year.

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