May 10, 2010

Scott Powell
CEO, Consumer Banking
J.P. Morgan Chase Bank
270 Park Avenue, Floor 32
New York, New York 10017

Dear Mr. Powell:

We appreciate the upcoming opportunity to speak with you and the other representatives from Chase about our concerns regarding the letter (posted by the NY Times on February 22, 2010) that Chase has been using to solicit its existing customers to opt-in for fee based debit overdraft coverage. In March of this year, we expressed our concerns to the federal banking regulators, and would like to provide you with a summary of these concerns, before the scheduled meeting on May 12, 2010.

We believe the solicitation letter is deceptive, alarmist, and in our view contrary to the Federal Reserve Regulation E rule on debit overdraft fees. We strongly urge you to reconsider this approach to communicating with your customers.

Chase should exclude misleading references to its funds availability policy in an effort to solicit consumers to sign up for debit overdraft coverage.

The Chase letter creates the impression that the bank is offering an intraday float on deposits made by customers who opt-in to debit overdraft coverage and not for those who refuse the coverage. If this is in fact Chase’s policy, it is in direct violation of the Fed’s rule which requires banks to provide consumers who do not opt in with the same account terms, conditions and features as provided to consumers who do opt in. If this is not Chase’s policy then the solicitation letter is substantially deceptive, because it gives the impression that consumers who sign up for the debit overdraft coverage get a better funds availability policy.

Chase should remove the misleading statement that implies consumers must opt-out if they do not want debit overdraft coverage.

In the “Helpful Answers to Your Questions” section of the letter, Chase advises the consumer about what to do if he or she does not want the debit overdraft service. Chase says to call a banker who can remove the service from the account, if the consumer is sure he or she does not want it. The truth of the matter is that after August 15, 2010, this service will automatically be cancelled from consumers’ accounts if they do nothing. By inferring that a consumer must take an additional step to cancel this service, the Chase solicitation is unnecessarily confusing. If Chase wants to offer consumers the ability to cancel the service before August 15th, then they should make that clear in a manner that does not imply that all customers who do not desire overdraft debit must contact Chase.

Chase should remove the alarmist statements that a customer’s debit card may not work anymore, especially in emergency situations.

Research has shown that the average transaction paid through an overdraft loan is $27. It is clear that these debit overdraft programs are not being used to cover large dollar emergencies. The typical consumer overdraft is often smaller than the fee assessed. Therefore it is alarmist to repeatedly mention unexpected emergencies, like a highway tow, which would cost well above the $27 average debit overdraft.

In addition, big bold statements such as “YOUR DEBIT CARD MAY NOT WORK THE SAME WAY ANYMORE EVEN IF YOU JUST MADE A DEPOSIT,” appear designed to strike fear and confusion in consumers and overshadow all the other disclosures required by the Fed in its Model Form for overdraft disclosures. The letter emphasizes in bold that consumers must call or stop by Chase to deal with this situation by March 29, 2010, yet the bank will not stop covering these transactions until August 15, 2010. It is unclear what the March date is referring to, and why there is such urgency. The general tone is inappropriate and contrary to allowing consumers to make an informed choice about whether they want to sign up for debit overdraft coverage.

Chase should eliminate its high cost fee-based debit overdraft program.

Consumers overwhelmingly do not want to pay a $35 fee for a small debit overdraft. In 2009, the Consumer Reports National Research Center polled consumers and found that two-thirds thought banks should deny ATM and debit overdrafts rather than cover them for a fee. The Center for Responsible Lending also did a consumer study and found that respondents overwhelmingly wanted their debit card transactions denied if the account was overdrawn.

Not all major financial institutions provide this type of high cost debit overdraft protection to their customers. Citibank and recently Bank of America announced that they will not be soliciting their customers to opt-in to $35 fees. Instead they offer consumers overdraft protection at a much lower cost, by linking a checking account to either a savings account or a line of credit. Chase should follow suit and eliminate its expensive program in favor of more consumer friendly options.

We appreciate your time and look forward to speaking with you more on May 12, 2010.

Thank you,

Lauren Bowne
Staff Attorney
Consumers Union

Jean Ann Fox
Director of Financial Services
Consumer Federation of America

Linda Sherry
Director, National Priorities
Consumer Action

Ira Rheingold
Executive Director
National Association of Consumer Advocates

Download the document: http://www.defendyourdollars.org/OverdraftSolicitation.SP.pdf