According to a report, a top JPMorgan Chase executive warned the bank’s 86 million customers that their currently free checking accounts could soon incur fees.
Marianne Lake, CEO of consumer and community banking at JPMorgan Chase, blamed Washington regulators, who imposed an $8 cap on late fees for credit cards and a $3 cap on overdraft fees on bank accounts.
The Consumer Financial Protection Bureau adopted the new caps in March, but a coalition of banking industry groups has appealed the decision, filing a lawsuit to block the new caps before they take effect.
“The changes are going to be broad, sweeping and significant,” Lake told the Wall Street Journal. “The people who are going to be hurt the most are the people who can least afford to be, and access to credit is going to be harder to come by.”
Lake expects other banks will take similar measures to offset the loss of revenue if the new law is implemented.
Some critics don’t believe it.
“The banks say their only option is to pass their costs on to customers, but that’s not true,” Dennis Kelleher, president of Better Markets, an economics think tank that supports the proposed banking regulations, told the Wall Street Journal. “Once again, banks are disguising their efforts to maximize their own profits under the guise of what’s good or bad for customers.”
But banks say the new rules, combined with new capital requirements that require banks to hold more reserves, could hit their profit margins. Some have appealed, notably in the Northern District of Texas.
Large banks are generally better able to withstand the drop in profits than smaller banks, Dan Goerlich, a consulting partner at Pricewaterhouse Coopers who advises banking clients, told the Wall Street Journal.
“Any regulatory change that would put a cap on costs is going to create opportunities for institutions that are very efficient,” Goerlich told the Wall Street Journal.
“Large banks can make up for a dent in consumer banking revenues with profits from their asset management and investment banking units. Smaller and regional banks will struggle to make up for that.”
In 2010, many banks proposed similar changes when they came under regulatory scrutiny following the 2008 financial crisis, but ultimately they did not pass the costs on to consumers.
The highly competitive sector, where many accounts and services are offered for free, also means that banks may find it difficult to raise their prices.
“Most customers today have easy and seamless access to retail banking,” Goerlich told the Wall Street Journal. “It may be detrimental to keep services at zero cost, but banks could be forced out by other competitors who offer customers low-cost services.”