Regulatory Interventions Involving Depository Accounts: Pressing on the Balloon

The checking account—aka demand depository account or current account—is one of the most common financial services products. In developed countries almost every household has one of these. Banks provide a plethora of services through these accounts, which enable people to manage their household finances including paying for the sundries of life, managing their weekly pay check, and saving some money.

The checking account is also a frequent subject of regulation by competition authorities, consumer protection regulators, banking regulators, and legislatures.

Just think about interventions in the last five years around the world. The US and UK have both gone after overdraft fees that banks assess when people don’t have enough money in their accounts to meet a payment and the bank advances the money. The European Commission has imposed limitations on the fees that banks can assess on receivers of funds for direct debits – with much more to come. Many countries have imposed limitations on the fees that banks can receive from merchants that are paid by the debit cards they issue to their depository customers. Implementing Congressional legislation, the US Federal Reserve halved those fees in October 2011 while other countries such as Australia have reduced them much more. Of course, there’s been the PPI debacle in the UK. Beyond this, some countries such as France impose a variety of regulations on the fees that banks can charge for checkin