JPMorgan executive Marianne Lake has issued a warning that its clients may soon need to pay for banking services that were previously free.
JPMorgan (JPM.US) executive Marianne Lake has issued a warning that its clients may soon need to pay for banking services that were previously free. Lake pointed out that the bank is planning to charge for some services that were originally free, in response to new regulations restricting overdrafts and late fees, and said this will significantly increase the cost of daily banking services.
As one of the largest consumer banks and credit card issuers in the United States, JPMorgan serves over 82 million consumers and 6 million small businesses, and now plans to pass on the cost of stricter regulation to its customers.
Lake warned that currently free services, such as checking accounts and wealth management tools, may soon no longer be free. She stressed that these changes will be widespread, thorough, and significant, and particularly noted that the group who are least able to bear additional costs will be most affected.
It is understood that earlier this year, the U.S. Consumer Financial Protection Bureau established a rule to reduce typical late fees charged by credit card issuers from $32 to $8. However, in May, a regional U.S. court temporarily blocked the rule's implementation, as a result of pushback from the banking industry group.
In addition, federal agencies are pushing for more rules to limit the fees that customers pay, including further restricting debit card fees, setting limits on fintech companies' access to and use of banking customer data, and planning to limit fees charged by software companies such as Venmo and CashApp for accessing customer data.
At the same time, new capital rules may make it more difficult for banks to lend, requiring them to hold more reserves for mortgage and credit card loans. Consumer advocates are concerned that this is similar to the situation in the post-financial crisis era, where banks threatened to charge fees at the regulatory limit but ultimately gave up due to strong opposition from consumers.
However, banks now claim that the scope of the new regulations may force them to implement these fees. Lake anticipates that if these rules are enforced, a range of free services, such as credit score trackers and financial planning tools, may no longer be free. She noted that previous rules on debit card swipe fees had increased consumer costs, and expected similar results from the new regulations.
A consulting partner at PwC stated in an interview that large banks may absorb these impacts through their wealth management and investment banking departments, but smaller banks may struggle. He also warned that the competitive environment for retail deposits may force banks to maintain free services to retain customers.