Senator Elizabeth
Warren Makes Overdraft Noise
Nation’s biggest banks criticized for overdraft fee practices during
pandemic
In a May 2021 Senate Banking
Committee hearing, Massachusetts Senator Elizabeth Warren accused the nation’s
biggest banks of prioritizing profits over struggling Americans. CEOs from Citigroup,
Bank of America, JPMorgan Chase and Wells Fargo were in attendance, and the
exchanges were tense. Using the Federal
Reserve COVID-19 guidance as the basis of her criticism, Senator Warren
asked why overdraft fees had been charged during the pandemic. JPMorgan CEO
Jamie Dimon answered, “We
waived the fees every time a customer asked because of COVID.” When asked whether he would refund the total of $1.5 billion
in Overdraft Fees assessed in 2020, Dimon said “no.”
Senator Warren has often
criticized big bank leaders for charging overdraft fees on consumer accounts.
All four of these national banks provide undisclosed overdraft services. As
such, consumers receive no communication about the overdraft limit or
any of the bank’s overdraft policies. Bank employees do not provide
transparency about why items are paid with OD fees assessed. Consumers are
often surprised that items are paid since the bank provides no details about
when they will or will not pay. The big banks also charge the highest Overdraft
Fees in the industry ($34, $35 and up).
Does Senator Warren’s outlook of
“no overdraft fees” reflect the perspective of all Washington legislators? It
does not appear so. Last year’s effort to create a no-fee regulation by
Senators Sherrod Brown and Cory Booker died in committee. It is very likely
that while Warren’s challenges can make the nightly news, the histrionics are
more for show than for real legislative change. According to the Wall Street
Journal, overdraft revenue fell in 2020 for the first time in six years, which
can be attributed to the COVID-19 quarantine, reduced consumer spending, and
the government stimulus checks.
For community banks and credit
unions, overdraft fee income is part of the revenue solution. By leveraging the
advocacy of the credit union movement and the impact of community banks
nationwide, legislators seem to understand that overdrafts are a vital element
in banking solvency. A fully disclosed solution that responds to consumers’
needs and provides value by avoiding a returned-check charge from the merchant
is a benefit to consumer households and the financial services industry. As
long as people can make a choice to use an overdraft solution, it helps
everyone.