Should Bank Account Numbers Be Portable?

Consumer activists are pushing bank regulators to allow people to take their account numbers with them when they switch banks. The change would make bank accounts like cellphone numbers, which wireless carriers must allow consumers to keep when they switch to another carrier.

The idea of account portability has been discussed in other countries, among them the U.K., Australia, and Hungary, as a way to encourage financial institutions to treat their customers better because it would make it easier for them to leave if they are unhappy. Bankers are vehemently opposed to the idea, arguing that it would be prohibitively expensive and create security risks for their customers.

Nonetheless, Norma Garcia of the Consumers Union argues that account portability is an idea worth exploring, especially in light of the torrent of negative publicity surrounding Bank of America's (BAC) controversial $5 fee that, until Tuesday, it had planned to levy on ATM purchases.

"What we are seeing is the whole discussion around account portability being kick-started," says Garcia, director of Consumers Union's financial services program, in an interview, adding that account portability is "an interesting idea." "Consumers should be able to vote with their feet" though technology is preventing that from happening.

Garcia, who says that the level of consumer outrage over the Bank of America fee is unprecedented, wants the new Consumer Financial Protection Bureau to take up the idea. A CFPB spokeswoman declined to comment. The bureau's mandate includes competition issues.

The Downsides of Account Number Portability

The American Bankers Association, not surprisingly, sees things differently. Doug Johnson, vice president and senior advisor on risk management policy, tells DailyFinance that allowing account portability is infeasible in the U.S. given the thousands of financial institutions nationwide. It would require a massive database, and there would also be security issues because it would make tracing cases of fraud more difficult, since determining the origins of an account would become harder.

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Finally, there is the principle. Bankers reject the notion that it's difficult to close an account or that financial institutions need incentives to treat customers right, according to Johnson.

"The vast majority of banks are nice to their customers or they wouldn't be around," he said.

Critics of the industry would beg to differ.

"We know that there is a number portability system up in running in Sweden," says Garcia, who points out that the Swedish system may not be practical in the U.S. "People are taking a look at how it may work in the U.S."

Potential Backing in Washington

Rep. Brad Miller (D-N.C.), a member of the House Financial Services Committee, recently introduced legislation to make bank switching easier. He is receptive to the idea of account number portability.

Miller's bill, the Freedom and Mobility in Consumer Banking Act, would make it easier for consumers to close accounts by allowing them to have direct deposits automatically transferred into their new accounts free of charge for 30 days after closing an account. Terms for accounts would have to be spelled out in plain English.

The ABA argues that Miller's bill is an unnecessary government intrusion, which would drive up costs for consumers.

"Account portability concept has come to the Congressman's attention as a result of all of the attention his Freedom and Mobility in Consumer Banking Act generated," according to a spokeswoman for the North Carolina Democrat. "He would possibly consider working on some language to include it if the chance to amend the bill comes up in committee."

Motley Fool contributing writer Jonathan Berr owns none of the companies mentioned in this article. The Motley Fool owns shares of Bank of America.

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