Why your checking account may no longer be free
Chase Bank boss Marianne Lake warns that the pain of making up lost profits may be passed on to consumers if regulations go through.
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- Chase Bank's boss warned that new federal fee caps could make everyday banking more expensive.
- Marianne Lake said the bank is planning to pass the pain of their lost profits on to customers.
- Some new costs may be placed on now-free services like checking accounts and financial tools.
Everyday banking might be about to get more expensive for consumers.
Marianne Lake, the CEO of consumer and community banking at Chase Bank, said federal regulations to cap overdraft and late fees would take a bite out of the company's bottom line.
And she warned that making up that loss would be passed on to consumers, according to a report from The Wall Street Journal.
Lake said the changes would be "broad, sweeping, and significant," the report said.
Some of those costs would be tacked onto services that have been free so far, like checking accounts and financial planning tools, the report said.
Business Insider reviewed a Chase presentation that covered the expected impact of proposed regulations. The presentation estimated that two out of three consumers would have to pay a fee for checking accounts if the cap went through.
Lake also said those impacted will be the ones "who can least afford to be" and credit access will also be more challenging.
Some of the regulations include a proposed $8 cap on late credit card payment fees and a $3 cap for overdrafting bank accounts. The limit is part of President Joe Biden's crackdown on hidden fees.
The Consumer Financial Protection Bureau estimated that about 45 million people are charged credit card late fees annually, and the change could save those people up to $220 a year.
Other changes include limiting debit-card fees and how much banks can charge apps like Venmo and CashApp for accessing customer data, the report said.
New regulations would also make it more difficult for banks to lend money by requiring banks to set aside more money as reserves. That could make it more complicated for borrowers to qualify for loans in the future.
Chase is the biggest bank in the US and it's also one of the largest issuers of credit cards in the country. But other banks are expected to follow the same path — and several have already issues warnings.
According to the Merchants Payments Coalition, Mastercard announced in April it was planning to increase certain credit-card fees.
Citi's chief financial officer, Mark Mason, said in a January earnings call that the bank planned to make up lost revenue with "offsets and mitigants" that he didn't specify.
Capital One CEO Rich Fairbank also said in January that the new regulation would impact its profits and it would implement "mitigating actions" to counteract it.
Analysts at UBS wrote in a note to investors in April that capping credit-card late fees and swipe fees in addition to lowering debit-card swipe fees, would push companies like JPMorgan Chase and American Express looking to make up the revenue elsewhere.
It's not the first time banks have threatened to take out the cost of new regulations on consumers.
After the financial crisis in 2008, banks threatened to put caps on card charges if Congress approved rules limiting swipe fees. However, the threats were a bluff; few institutions followed through after customers themselves said they'd just switch banks.
But now, with Biden's crackdown on credit card companies, banks may keep to their word — especially if the banks all decide to add new costs for consumers, giving them no place to turn.