Democratic Senators Push Banks to Lower or Eliminate Overdraft Fees as House Financial Services Committee Holds Hearing on Them
Last week, Senators Raphael Warnock (D-Ga.), chair of the Banking Subcommittee on Financial Institutions and Consumer Protection, and Sherrod Brown (D-Ohio), chair of the Senate Committee on Banking, Housing, and Urban Affairs, wrote letters to major banks urging them to either lower or entirely eliminate overdraft fees.
“Financial institutions should do all they can to ensure working families keep their hard-earned money by significantly reforming their overdraft practices,” they wrote.
The Senators noted that overdraft policies leave many consumers unbanked and underbanked. Also, the CFPB found that roughly 80 percent of overdraft-related fees are charged to nine percent of accounts, which tend to hold low balances Thus, they assert, the fees are usually borne by those already living paycheck to paycheck.
“Overdraft fees harm many consumers so much that they either voluntarily opt out of the banking system or are driven out altogether by account closures,” the letter reads. “The CFPB has found that those who opt in to overdraft fees are more likely to have their accounts involuntarily closed than those who do not.”
The letters were sent to the Chief Executive Offices of JPMorgan Chase, PNC Financial Services Group, U.S. Bancorp, Wells Fargo, Charles Schwab, TD Group, and Truist Financial Corporation. Along with Reverend Warnock and Brown, they were signed by Senators Cory Booker (D-N.J.), Jack Reed (D-R.I.), and Chris Van Hollen (D-Md.).
Also, earlier this week the House Financial Services Committee’s Subcommittee on Consumer Protection and Financial Institutions held a hearing titled “The End of Overdraft Fees? Examining the Movement to Eliminate the Fees Costing Consumers Billions.”
“We have also not been shy in conducting megabank oversight, pressing their CEOs to reduce and eliminate these costly fees, many of whom are beginning to do just that,” Committee Chair Maxine Waters (D-Calif.) said in her opening statement. Waters also issued a discussion draft of legislation that would require banks with more than $10 billion in assets to offer accounts that do not charge fees for overdrafts.
Republicans on the committee were vocal in their opposition at the hearing.
“The actions of this committee, of financial regulators, aim to reduce consumers’ ability to access short-term liquidity financial products,” said Rep. Blaine Luetkemeyer (R-Mo). “I ask my colleagues, where are the 40 percent of American consumers supposed to go when they need a $40 loan?”