AKAMAI MONEY
It's up to you to read the small print on bank's fees
By Deborah Adamson
Advertiser Staff Writer
Q: Why don't banks make it clear to customers up front what kinds of fees they charge? When I opened an equity loan account (home equity line of credit), the bank charged me $100 and later $153 with interest. Also, to close the account without making a loan within three years, they told me the charge would be $500. The advertising for the account doesn't mention any fees. — Norman Shimabukuro, Hawai'i Kai
A: Under the federal Truth in Lending Act, the lender is required to disclose the terms and conditions of home equity plans. They cannot charge a fee until after the customer gets this information, said Gerry Keir, a spokesman at First Hawaiian Bank, the state's largest bank.
Don't depend on the glossy marketing brochure for all the details. Full disclosure generally is found in a separate document, usually along with the application form. Pay special attention to the section entitled "Fees and Charges."
"They do have to read agreements they sign. Even if the seller doesn't present it as being important, the customer still has to look at it," said Ron Wall, author of You & Your Money and an extension specialist in family economics at the University of Hawai'i at Manoa.
If you're caught in a high-pressure sales situation, don't feel obliged to sign up right away. Take the fine print home and read it. If for some reason you're not allowed to take it with you, don't sign it, he said.
After you find out what the fees are, check around other banks, thrifts and credit unions to see which will offer you a better deal, Wall said.
"People just aren't aware that credit unions almost always have lower fees than banks," he said.
For instance, Bank of Hawaii's "Home EquityLine" charges a documentation fee of $125 to open the line of credit. If the property is in a trust, there's a trust review fee of $75. If it's a leasehold property, there's a $60 fee. If the bank has to obtain condominium documents, the fee is $60. If you close the account or repay the loan within three years, there is a $350 charge. There's also a $50 annual fee. In addition, third-party fees can range from $200 to $1,300.
American Savings Bank's "Equity PowerLine" charges a $500 fee to close or reduce the line of credit within three years. The exception: if your house is sold or the thrift refinances the loan. If the property is held in a trust, trust review and documentation fees of $100 to $250 may apply. Additional third-party fees range from $10 to $500.
First Hawaiian Bank's "Equity FirstLine" may charge an appraisal fee of $100 or $550 and a $50 annual fee. The fee is waived if you have a Level 3 Priority Banking Plan Checking Account or you keep an average outstanding balance of $5,000 in your Equity FirstLine account. There's also a modification processing fee of $250 for changes. Third-party fees may range from $336 to $772, but these may be waived under certain conditions. If the account is closed within three years, there is a $350 fee.
In contrast, Media Hawaii Federal Credit Union's home equity line of credit charges no fees if you keep the account for at least a year. If you close the account within a year, you pay third-party fees of $300 to $1,000.
As for the variable rate charged on home equity lines of credit, Bank of Hawaii's is 6 percent to 9 percent annual percentage rate (APR), First Hawaiian Bank's is 7.38 percent for owner occupants, American Savings Bank's is 7 percent while Media Hawaii FCU's is 5.99 percent.
"Credit unions are not-for-profit — they don't look at generating profit for stockholders," said Dennis Tanimoto, president of the Hawaii Credit Union League.
But Peter Biggs, executive vice president of consumer products at Bank of Hawaii, said the bank offers a wider array of products than credit unions, provides an extensive ATM network and a 24-hour call center. Also, the "vast majority" of the bank's fees haven't increased in more than five years, he said.
Still, financial institutions make a lot of money from fees.
In 2004, Bank of Hawaii collected nearly $55 million in fees from ATMs, merchant activity and other loan fees and charges, up 6.4 percent from 2002.
In 2004, American Savings Bank earned $57.2 million in other income — which includes fees from deposits, debit and credit cards and financial products and services, up 8 percent from 2002.
First Hawaiian Bank's noninterest income, which includes fees, was $145.6 million last year, up 17 percent from 2002.
Consumer advocates are concerned that fees are an increasingly important profit source for banks.
"More and more, they are finding a lucrative market in fees," said Ed Mierzwinski, a consumer advocate at the U.S. Public Interest Research Group in Washington, D.C. "The consumer is nickle and dimed."
Got a personal finance or consumer question? Contact Deborah Adamson at dadamson@honoluluadvertiser.com or 525-8088.
