Transaction Account Fees: Do the Poor Really Pay More than the Rich?

Julie Andersen Hill

University of Alabama - School of Law; University of Alabama School of Law

September 27, 2012

University of Pennsylvania Journal of Business Law, Vol. 15, p. 65, 2012

During the Great Recession and its aftermath, customers have become increasingly concerned about the fees banks charge for checking (transaction) accounts. Some believe that banks’ fee structures are unfair. In particular, commentators often argue that high overdraft and other fees paid by poor consumers cross-subsidize free accounts for rich consumers or businesses. If true, this regressive cross-subsidization could be forcing some consumers to do without banking services or to use more costly fringe financial service providers. Moreover, if regressive cross-subsidization exists, it would provide a powerful argument for increased regulation of account fees.

In spite of frequent claims that poor accountholders crosssubsidize rich accountholders, there is little scholarship examining or establishing such claims. This Article examines both theoretical and empirical evidence of cross-subsidization among transaction accountholders. Contrary to the assumptions made in much of the account fee literature, this Article concludes there is little evidence that the poor cross-subsidize the rich.

What the Article, however, does find is contradictory account fee regulation. Some regulations encourages fee structures with high overdrafts while other regulations simultaneously discourage overdraft fees. This Article recommends that instead of focusing on crosssubsidization, policymakers should work to establish a coherent theory of transaction account fee regulation. A coherent theory of fee regulation could correct this inconsistency and provide clear direction for banks.

Number of Pages in PDF File: 66

Accepted Paper Series

Download This Paper

Date posted: September 27, 2012 ; Last revised: January 12, 2013

Suggested Citation

Hill, Julie Andersen, Transaction Account Fees: Do the Poor Really Pay More than the Rich? (September 27, 2012). University of Pennsylvania Journal of Business Law, Vol. 15, p. 65, 2012. Available at SSRN: http://ssrn.com/abstract=2153216

Contact Information

Julie Andersen Hill (Contact Author)
University of Alabama - School of Law ( email )
P.O. Box 870382
Tuscaloosa, AL 35487
United States
(205) 348-5973 (Phone)

University of Alabama School of Law ( email )
101 Paul W. Bryant Dr.
Box 870382
Tuscaloosa, AL 35487-0382
United States
(205) 348-5973 (Phone)
Feedback to SSRN

Paper statistics
Abstract Views: 358
Downloads: 127
Download Rank: 131,293

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo6 in 0.265 seconds