On June 2, the Center for Responsible Lending, a national nonprofit policy institute that advocates for fair banking practices, released the results of its latest research into overdraft fees. It found that U.S. banks with assets of $1 billion or more collected a total of $11.68 billion dollars in overdraft fees in 2019.
The bulk of the overdraft fees in 2019 – a whopping 84 percent – were paid by just 9 percent of account holders. Those customers, the Center for Responsible Lending study found, carried average bank balances of less than $350.
“The large majority of these fees are shouldered by banks’ most vulnerable customers, often driving them out of the banking system altogether,” the report states. “Bank overdraft fees cause particular harm to low-income consumers and communities of color, who are already disproportionately excluded from the banking mainstream.”
What are Bank Overdraft Fees
Overdraft fees are charged when a customer’s account lacks sufficient funds to cover a transaction, typically a debit card charge or a check, but the bank completes the transaction and covers the cost.
The standard overdraft fee is $35 per incident. In many cases, multiple fees can be assessed in a single day. If the account holder fails to bring the account back to a positive balance within a certain period of time, some banks will charge additional “extended” overdraft fees.
Overdraft Fee Policy Amid the Pandemic
Researchers conducting the review of overdraft fees in 2019 also looked at the overdraft practices of the 10 largest U.S. banks and how they are handling fees since the COVID-19 pandemic began. As of mid-May, none had publicly committed to setting aside the fees for a sustained period of time, the center’s report says.
Banks have been offering customers “unprecedented assistance” during the COVID-19 financial crisis, including fee waivers, though the assistance varies from bank to bank, Mike Townsend, a spokesman for the American Bankers Association told The New York Times.
“The trade group supplied a list of the banks, many of them regional, that have offered help, including with fee waivers,” the Times reported. “Some specifically said they were offering to stop overdraft fees for a particular time period, or on a case-by-case basis.
The Center for Responsible Lending is urging all banks to voluntarily stop charging overdraft fees during the pandemic, given the millions of workers forced into unemployment and the open-ended timeframe for economic recovery. It is also supporting a public policy proposal to officially ban the fees through regulation.
“Banks should not experience an unprecedented windfall as the direct result of their customers’ unprecedented distress,” Peter Smith, a researcher who co-wrote the report for the Center for Responsible Lending, told the Times.
Fees Hurt Least Fortunate, Experts Say
Customers who face repeated overdrafts must, by some banks’ policies, forfeit their bank accounts – meaning the banks will automatically close the accounts – and regaining access to banking services is often a challenge, the Center for Responsible Lending report says.
“It’s a problem that causes pain in minority communities even during normal times,” and the pandemic has only made it worse, José Quiñonez, CEO of the nonprofit Mission Asset Fund told Marketplace.com, the website of the Marketplace program on public radio.
“It really does call for a rethinking of that fee, putting a pause to that fee,” Quiñonez said. “We need to allow for creative solutions to come to the fore.”
Join a Free Bank Overdraft Fee Class Action Lawsuit Investigation
If you were charged overdraft fees or NSF fees by your bank or credit union that you believe are improper for any reason, the attorneys who work with Top Class Actions are ready to investigate these fees on your behalf. Learn more by filling out the form on this page.
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Join a Free Bank Overdraft Fee Class Action Lawsuit Investigation
If your bank and credit union has engaged in deceptive overdraft fee practices, you may have a legal claim. Fill out the form on this page now to find out if you qualify!
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