Bank overdraft fees are only good for big companies: AG Shapiro |
Harrisburg, Pennsylvania — Critics of overdraft fees, including consumer advocates and regulators, have long spoken out to end the practice. This week, Attorney General Josh Shapiro, along with a multi-state coalition of attorneys general, joined the conversation, calling on the CEOs of JPMorgan Chase, Bank of America, US Bank and Wells Fargo to eliminate all charges for overdraft in consumers’ bank accounts.
Overdraft fees are charged to customers who withdraw more from their accounts than they have in the account. The average overdraft fee is $35, according to Experian.
Banks continue to rely heavily on overdraft and insufficient funds (NSF) revenue, which reached an estimated $15.47 billion in 2019, according to research by the Consumer Financial Protection Bureau (CFPB). According to the CFPB, three institutions alone reported 44% of total overdraft and similar fees in 2019, the same three targeted in the letter from the AG.
“Rather than competing with quality service and attractive interest rates, many banks have become addicted to overdraft fees to fuel their profit model,” CFPB Director Rohit Chopra said.
The AG urges JPMorgan Chase, Bank of America, US Bank and Wells Fargo to eliminate these fees starting this summer to create a more fair and inclusive financial system for consumers.
“We’ve seen how these fees hit families and communities of color harder than others,” Shapiro said. “This starts a vicious circle that pushes them deeper and deeper into debt. Eliminating these fees helps create a system that works for everyone. »
According to a press release from the Office of the Attorney General, studies have shown that the vast majority of overdraft fees fall on low-income consumers who earn less than $50,000 a year and communities of color. The consequences of these fees, he said, can be devastating to the financial health of consumers.
The elimination of overdraft fees by these four institutions would significantly improve the financial health of millions of consumers across the county.
Earlier this year, Citi Bank announced it would eliminate overdraft fees, which followed a similar announcement late last year by Capital One.
“This latest enhancement is an important milestone for Citi as a leader in the banking industry offering the most consumer-friendly overdraft practices,” said Gonzalo Luchetti, CEO of US Personal Banking at Citi. “We are constantly looking for ways to use our advanced capabilities to make the financial system simpler and fairer for communities that have little or no financial flexibility.”
Lauren Saunders, associate director of the National Consumer Law Center, called Capital One’s announcement to eliminate overdraft fees a “historic moment for American families. This move by Capital One will have huge benefits for the most It is essential that we continue to work to make the banking system more inclusive and fair for all,” she said.
Joining Attorney General Shapiro in sending the letter are the attorneys general of California, Connecticut, District of Columbia, Delaware, Illinois, Iowa, Maryland, Massachusetts, Michigan, Minnesota , New Jersey, New York, North Carolina (all except Bank of America), Oregon and Washington.