LEX 
You don’t know what you’ve got ’til it’s gone. US banks’ credit card fees already face new restrictions. Now Congress is expected to move ahead with proposals that could require banks to ask customers whether they want overdraft services. These allow transactions when accounts are in the red but have been criticised for charges as high as $40 per transaction, even for a $5 overdraft. They also fall disproportionately on low-balance accounts. This has proved controversial elsewhere – although in countries such as the UK, where the Office of Fair Trading has bashed fees since 2006, banks are further ahead in responding.
The fees US banks earn from accounts with “insufficient funds” totalled $34bn in 2007, estimates Oliver Wyman, with almost 70 per cent paid by just 5 per cent of accounts. Before the financial crisis, such fees provided almost a seventh of the industry’s pre-tax net operating income. Globally, banks say such fees cover the costs of branch networks and help provide free chequeing for all. But, under pressure, Australian and UK banks, notably Royal Bank of Scotland, have slashed such fees by some 80 per cent. US banks, so far, have been more stingy.
Smaller competitors, however, are already courting deposits. ING Direct’s Electric Orange, for example, offers online-only banking without penalty charges for an overdraft facility. BancVue’s Kasasa, meanwhile, is a free banking product for community banks, which lowers overall costs by tying rewards to debit card use and electronic banking. Yet the response from large, diversified US banks has been slow. They could bundle insurance, discounts and other perks, as in the UK, to induce customers to pay annual account fees. They could also charge for additional services, such as budgeting or personal finance products. If the business of steep overdraft fees is going, and free current accounts with it, banks will need to woo customers so they are willing to pay.
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