January 22, 2010/ Minneapolis, MN:  Bill Cooper, chairman and chief executive officer of the Midwest-based regional bank, announced Thursday the end of the bank's Totally Free Checking Product, citing new Federal rules that limit overdraft fees as the reason.

Cooper disclosed the change on the same day that TCF reported a 30% drop in fourth-quarter profits, a decline linked to real estate-related loans.  Although the bank recorded large increases in deposits and loan growth, Cooper felt the overdraft fee rules would further limit income potential.  TCF's more than 1 million totally free checking accounts will now carry a minimum balance requirement to avoid a monthly fee.  Cooper refused to disclose details regarding the new fee amount and the minimum balance requirement.

"It's the end of an era," Cooper said in an interview.  "We invented totally free checking and everyone copied it.  It was a wonderful product. But the regulatory apparatus, misinterpreting what everyone wants, has changed that." 

In July, new Federal Reserve regulations will limit how banks charge overdraft fees on ATM and debit card transactions unless customers "opt in" to overdraft protection.  For most banks,overdraft fees are a major source of revenue.   Many national banks announced plans last year regarding overdraft fees.   J.P. Morgan Chase, for example, quietly renamed its Chase Free Checking program Chase Checking, and added a $6 monthly fee. 

Many credit TCF with the introduction of free checking in 1986, turning it into a competitive advantage.  At the time, some banks charged as much as $20 a month for a checking account.   The new product brought a flood of depositors to TCF and other banks soon followed.

Cooper credits former TCF president Bob Evans with introducing the product and considers Free Checking a seminal point in the history of the bank,a key strategy that transformed TCF from a small savings and loan intoa major regional bank.  In 1986, TCF had just 35,000 checking accounts.Today, the bank has 1.7 million accounts.

"Everyone in the business world said we were nuts" when the product was introduced, Cooper said. "But we just went at it and marketed it hard, and it became very big."

Source:  Star Tribune