- Lawmakers debated whether or not the government should step in to curb the controversial banking practice of charging overdraft fees during a hearing by the House Financial Services Committee on Thursday.
- Lawmakers have split along partisan lines, with Democrats arguing that overdraft fees negatively impact low-income and minority families, and Republicans arguing the service is a valuable alternative to other more predatory forms. short-term loans.
- Committee Chair Maxine Waters, D-CA, unveiled a law Project requiring banks with assets of $10 billion or more to offer customers and potential customers accounts with no fees for overdrafts or declined transactions, among other stipulations.
Overview of the dive:
As some of the largest banks in the United States like Wells Fargo, Bank of America, Citi and Capital One institute sweeping changes to their overdraft policies, lawmakers and advocates are divided on whether the government should step in to curb the practice among industry holdouts.
“Overdraft fees are paid the most by those who can least afford them,” said Elyse Crawford-Hicks, consumer policy adviser at Progress Nonprofit Americans for Financial Reform.
“The banking industry should do some soul-searching and ask: ‘What should we think about the racial inequality and exclusion caused by overdraft fees?’ Imposing overdraft fees at the expense of the poorest people of color in places like the South Bronx flatly contradicts any notion of fairness and inclusion,” Rep. Ritchie Torres, D-NY, said during the interview. hearing.
The bill Waters released on Thursday would require all banks with assets of $10 billion or more to provide accounts with a number of features, including no-fee debit cards, lower minimum opening deposit at $25, no overdraft or insufficient funds. fees, free access to in-network ATMs and a $2.50 cap on fees for using an out-of-network ATM, free access to direct deposit and more.
In June, Rep. Carolyn Maloney, D-NY, reintroduced another bill– overdraft protection law– which would hamper the ability of banks to levy overdraft fees.
And more recently, the Consumer Financial Protection Bureau (CFPB) declared war on “junk fees”, overdraft included. Under director Rohit Chopra, the financial watchdog said it would focus on tackling an emerging “fee economy” that is preying on banking consumers.
Lawmakers across the aisle, however, argue that consumers benefit from access to overdraft services and that the government should not interfere with this practice.
“The actions of this committee, of financial regulators, are aimed at reducing the ability of consumers to access short-term liquidity financial products. I ask my colleagues, where are the 40% of American consumers supposed to go when they need a $40 loan? said Representative Blaine Luetkemeyer, R-MO, during the hearing.
Overdraft proponents have stressed the need to choose from a variety of short-term loan options, so consumers don’t have to turn to payday lenders.
“Consumers should be able to choose between revolving credit, installment loans, one-time payment loans and overdraft protection services,” the American Bankers Association said. in a report Thursday at the subcommittee.
“The market naturally, naturally takes care of the problem without government intervention. And we don’t need more rules from Washington,” Rep. Roger Williams, R-TX, said.