At Hearing, Senator Warren Blasts Big Banks’ Predatory Overdraft Fees, Applauds Continued CFPB Oversight
Warren: “The big banks have proven over and over that they will abuse their power to no end in their endless pursuit of profits. The CFPB has shown that it will stop them in their tracks - and we need to keep it that way.”
Washington, D.C. — At a hearing of the Senate Banking, Housing, and Urban Affairs (BHUA) Committee Subcommittee on Financial Institutions and Consumer Protection, U.S. Senator Elizabeth Warren (D-Mass.) blasted the big banks’ use of predatory overdraft fees and called on the CFPB to continue its oversight of these giant banks.
Pennsylvania Attorney General Michelle Henry agreed with Senator Warren that big banks like Bank of America cannot be trusted to act in the best interest of consumers without rigorous oversight and that they should eliminate the use of overdraft fees that overwhelmingly hurt low-income families.
Transcript: Taking Account of Fees and Tactics Impacting Americans’ Wallets
U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection
Wednesday, July 26, 2023
Senator Elizabeth Warren: Thank you very much, Mr. Chairman, and thank you for holding this hearing today.
Earlier this month, the Consumer Financial Protection Bureau ordered Bank of America to pay $100 million to its customers for illegally charging fees, withholding credit card rewards, and opening fake bank accounts. Now I know what you’re thinking: “Fake accounts? Illegal fees? Fraudulent credit card practices? I’ve seen this movie before – is this deja vu all over again?”
Name your favorite Big Bank – Bank of America, Wells Fargo, JPMorgan Chase – and chances are that the CFPB has caught them red-handed engaging in any one of these tricks at least once, and sometimes, all at the same time.
Consider overdraft. Overdraft fees – the charge you get if you spend more money than you have in your bank account – squeezes as much as tens of billions of dollars out of consumers’ pockets each year. The banks claim these fees help consumers by allowing banks to offer overdraft protection to those who want it.
Attorney General Henry, you’ve spent years prosecuting consumer protection violations. You’re someone who has seen up close the junk fee tricks that financial intuitions use to nickel and dime consumers for their last buck. So let me ask you, are these fees good for consumers, like the banks claim?
Ms. Michelle A. Henry, Attorney General, Commonwealth of Pennsylvania: Thank you for the question. No, they’re definitely not good for the consumers. In fact, in April 2022, we urged the biggest banks to follow Citi and Capital One to eliminate harmful junk fees, overdraft fees, non sufficient funds fees, and you know, the truth is they hit families of color harder and often result in account closures leaving them unbanked. 90% of these fees are paid by a small subset and they generally pay three or more a year, while earning less than $50,000. And the truth is, the costs of the bank to cover unfunded transactions is far lower than the fee that –
Senator Warren: So as I understand it, the fee to the consumer could be as high as $37, and you’re saying the actual cost to the bank –
Attorney General Henry: Much less.
Senator Warren: Much less than that. For Bank of America, hitting consumers with a single $35 overdraft fee wasn’t enough. They were caught double-dipping, charging multiple fees for the same transaction, earning them hundreds of millions of dollars over a three-and-a-half year period.
Banks know that these fees are junk. That’s why many of these banks recently announced changes to their overdraft policies. At the same time that Bank of America was breaking the law, it made a big splashy announcement early last year that it would lower its overdraft fees and reduce its overdraft-related revenue by 90%.
But the fact of the matter is, Bank of America still took in nearly $400 million in overdraft fees from families last year. And altogether, big banks raked in more $7.7 billion in these fees.
Attorney General Henry, now that we know that $7.7 billion isn’t a ton of money to a big bank like Bank of America – it’s just icing on the cake for them. But that is a lot of money to low-income families that are forced to fork it over. Do you believe the big banks like Bank of America should eliminate overdraft fees?
Attorney General Henry: Yes.
Senator Warren: That was very direct. Good, I’ll take that.
Despite continuing to rake in billions in revenue from predatory overdraft fees, and continuing to get caught charging these fees illegally, the bank lobby holds up the changes they’ve made to their overdraft policies as evidence that these giant banks can be trusted to do the right thing on their own and that they don’t need stronger rules that would protect consumers from predatory overdraft fees. And let’s not forget, these are the same banks that are bankrolling the attacks on the CFPB.
Attorney General Henry, given their propensity for repeated law-breaking, do you think the giant banks can be trusted to act in the best interest of consumers without stronger rules and vigorous enforcement?
Attorney General Henry: Well, if history is any lesson, we know that they can’t be trusted to act in the best interest of consumers on their own. Look, they’re in the business of making money for their shareholders and we need robust consumer protection rules and enforcement to ensure that.
Senator Warren: I have no problem with the banks making a profit, but not like this. The big banks have proven over and over that they will abuse their power to no end in their endless pursuit of profits. The CFPB has shown that it will stop them in their tracks – and we need to keep it that way. Over the past 12 years, the CFPB has returned $17 billion to American families cheated by financial institutions – money that would have otherwise stayed in the pockets of Wall Street executives.
I’m proud of the work that the CFPB has achieved and I look forward to working with my colleagues to support their work into the future.
Thank you, Mr. Chairman.
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