A bank where I have a deposit account recently sent me a booklet called “Deposit Agreement and Disclosures”. This booklet sets out the terms of the contract I have with my bank governing my account – and it is 47 pages long!
By keeping my account in the bank, I accept these conditions. If I don’t like the terms, my recourse is to close the account and open an account elsewhere.
For now, at least, I have no complaints with my bank, and I have no plans to close my account and look for another bank, where I risk meeting the same (or more onerous) terms. But, when I received this booklet, I wondered: why would it take 47 pages to outline the terms of a regular deposit account? The answer to that question, I think, goes like this.
The relationship between a bank and its customer deposit account is indeed very complicated. At work, many federal and state laws are necessarily part of the bank / customer contract. Then, within this framework, the banks have some leeway to customize the conditions, which forces them to make choices and establish clearly stated rules, to the extent that they are authorized to do so.
On the mandatory law part of this scenario, we have, at the federal level, the Law on the Availability of Accelerated Funds, the Law on Electronic Funds Transfers, the Law on Lending Truth, the Law on Truth in matters of savings, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, the Fair Debt Collection Practices Act, the Patriot Act and the Internal Revenue Code, to name a few. At the state level, we have the Uniform Commercial Code, which provides the basic rules for how checks and wire transfers move money through the banking system, and a host of consumer protection laws. Many of these laws require disclosures that banks must provide to their customers and come with complex regulations, which fill in the loopholes left by the statutes.
Areas in which banks have some discretion in setting contract terms include dispute resolution, such as mandatory arbitration provisions, and time limits, such as the time a customer has to report errors. or fraud appearing on a bank statement before the bank has an obligation to correct the error or respond to the fraud is diminished. Banks also have the ability to customize overdraft policies, decide the order in which checks and debit card purchases are paid to an account, set fees for various services, regulate the use of powers of attorney and safes, reserve certain types of deposits and determine how international transactions will be handled.
With all of this complexity, it is virtually impossible to perform diligent comparisons for deposit account services. (and likely to put you in a bad mood). Your best bet is to focus on product pricing, convenience (including electronic banking tools) and customer service (“Please listen carefully as our menu options have changed …”). Additionally, if you regularly conduct international banking transactions, you should look for a bank that has the experience and expertise to meet your needs. In this regard, at least, not all banks are created equal.