• 365 days Will The ECB Continue To Hike Rates?
  • 365 days Forbes: Aramco Remains Largest Company In The Middle East
  • 367 days Caltech Scientists Succesfully Beam Back Solar Power From Space
  • 767 days Could Crypto Overtake Traditional Investment?
  • 772 days Americans Still Quitting Jobs At Record Pace
  • 774 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 777 days Is The Dollar Too Strong?
  • 777 days Big Tech Disappoints Investors on Earnings Calls
  • 778 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 780 days China Is Quietly Trying To Distance Itself From Russia
  • 780 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 784 days Crypto Investors Won Big In 2021
  • 784 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 785 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 787 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 788 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 791 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 792 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 792 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 794 days Are NFTs About To Take Over Gaming?
After Long Silence, McDonald’s, Coca-Cola to Exit Russia

After Long Silence, McDonald’s, Coca-Cola to Exit Russia

“McDonald’s has decided to temporarily…

Western Companies Are Being Shamed Into Leaving Russia

Western Companies Are Being Shamed Into Leaving Russia

“Companies that fail to withdraw…

Oligarch “Traitors” Appear to Flee Russia for Dubai

Oligarch “Traitors” Appear to Flee Russia for Dubai

Hours after Putin’s speech, several…

  1. Home
  2. News
  3. Breaking News

Banks Are Getting Rich On Pandemic Overdrafts

Banks Overdrafts

America’s big banks make more than $11 billion worth of overdraft and related fees every year, and 2020 could break even more records due to the uncertainty caused by the pandemic. They’re counting on customers being disorganized, strapped for cash--or both.

But now, those practices are coming under intensified scrutiny. 

The Center for Responsible Lending (CRL) recently released a report concluding that the biggest banks, “engage in a number of abusive practices that combine to drain massive sums from their customers’ checking accounts”. 

The bulk of those fees, according to CRL, are “shouldered by banks’ most vulnerable customers, often driving them out of the banking system altogether”. 

Last year, the report found that JPMorgan Chase pocketed $2.1 billion in income from overdraft and insufficient funds fees, followed by Wells Fargo and Bank of America (BAC) with $1.7 billion and $1.6 billion, respectively. According to CRL, TD Bank’s overdraft fees represent about one-third of its non-interest income.

The banks typically charge overdraft fees when the customer overdraws on their checking account. Rather than allowing a debit card to be declined or a check to bounce, the bank will cover the difference and charge an overdraft fee, usually about $30 to $35. 

Back in March, Senators Cory Booker and Sherrod Brown introduced a bill called the Stop Overdraft Profiteering Act”, which would bar banks and other financial institutions from charging overdraft fees during the pandemic. 

The bill, however, has not made it into a stimulus package or even into the Senate for a vote

“Millions of hardworking Americans have been thrown into financial insecurity because of this unprecedented global pandemic. For these individuals, and those vulnerable before the outbreak, one $35 overdraft charge can lead to financial free fall,” Booker said in a statement.  

CRL’s report found that as of mid-May, none of the 10 largest banks had offered any sustained relief from overdraft fees during the crisis. On the contrary, in August TD Bank agreed to pay $122 million to settle claims related to overdraft abuse.

Now, the issue has become part of the presidential election campaign. 

As part of his tax plan if elected, former Vice President and Democratic presidential nominee Joe Biden is signalling such abuse may come under even more scrutiny.  

Even though Biden’s plan has not explicitly promised to take action on overdraft fees, CNN reported that he might.

According to his tax plan, which is basically just unwinding Trump's 2017 corporate tax cuts, the top 10 banks would see a $7 billion increase in corporate taxes each year.

But to make any of this a reality, Biden wouldn’t just have to win the presidential election: The Democrats would need to take the Senate and maintain their hold on the House. 

In the end, perhaps the best chance of stopping the abuse practices of America’s biggest banks is simple competition. 

In recent years, a number of fintech start-ups have emerged to challenge the status quo of banking. Some of them are offering standard checking accounts with no overdraft fees.  

By Josh Owens for Safehaven.com

More Top Reads From Safehaven.com:

Back to homepage

Leave a comment

Leave a comment