Senate Banking Subcommittee Holds Hearing on Overdraft Fees
Today, the Senate Banking Committee’s Subcommittee on Financial Institutions and Consumer Protection met for a hearing entitled “Examining Overdraft Fees and Their Effects on Working Families.” The hearing was the latest activity in the ongoing push to get banks to reduce, or eliminate altogether, the fees incurred when there isn’t enough money in an account to cover a transaction or withdrawal.
Several banks have already taken action to revise their overdraft policies in response to public pressure, most notably Citibank, Capital One, Bank of America, Wells Fargo, and Discover.
The witnesses appearing before the committee at the hearing were Aaron Klein, Senior Fellow in Economic Studies at the Brookings Institution, Jason Wilk, Founder and Chief Executive Officer at Dave, a mobile banking app taking direct aim at overdraft fees, and David Pommerehn, Senior Vice President and General Counsel at the Consumer Bankers Association.
During the hearing, Sen. Raphael Warnock (D-Ga.)—who chairs the Subcommittee—recognized the institutions that have already taken action on overdraft fees but noted that the practices are still rampant across the industry.
“In response to the uncertainty brought on our nation by the pandemic, many banks moved to waive fees charged to their customers like overdraft fees and fees for non-sufficient funds,” Warnock said in his opening statement. “This is in stark contrast to how the financial industry responded after the 2008 financial crisis and I applaud those banks for making the right choice to help communities. Some of these same banks have now voluntarily made these changes permanent and every month we hear of more following their peers in doing the same.”
“I believe Congress, and this Subcommittee, in particular, have an important role to play to ensure that the financial institutions that support our communities, small businesses, and working families have the resources, tools, and support to continue their important work,” Warnock continued. “But at the same time, we must hold financial institutions accountable when they juice their profits off the backs of struggling Americans. And ensure that they are not looking at these customers as easy marks to be taken advantage of with onerous or opaque fees.”
As American Banker reported, Senator Thom Tillis (R-N.C.), the Subcommittee’s Ranking Member, was the only Republican to speak during the hearing.
Tillis “generally defended banks’ use of overdraft fees on the grounds that some customers knowingly rely on them as a form of short-term credit that they may not be able to access elsewhere,” American Banker wrote.