At Hearing, Warren Calls Out JPMorgan Chase, Bank of America, and Wells Fargo For Continuing to Collect Billions in Overdraft Fees
Warren Calls for Passage of Stop Overdraft Profiteering Act
Warren: “Chase, Bank of America, and Wells Fargo are making tens of billions of dollars in profits, and yet they are still squeezing families on overdraft fees.”
Washington, D.C. – At a hearing of the Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection, U.S. Senator Elizabeth Warren (D-Mass.) called out three of the nation’s largest banks – JPMorgan Chase, Bank of America, and Wells Fargo – for continuing to charge overdraft fees to collect billions in profits from the lowest-income Americans. About 80% of all overdraft and non-sufficient fund fees are paid by only about 9% of account holders, and they are disproportionately Black and Hispanic Americans making less than $50,000 a year. Senator Warren called for Congress to pass the Stop Overdraft Profiteering Act, which would crack down on overdraft fees.
Aaron Klein, a senior fellow in Economic Studies at the Brookings Institution, confirmed to Senator Warren that these three banks raked in billions in profits last year, but are still squeezing Americans with overdraft fees.
Senator Warren noted that earlier that day, she, along with Senator Cory Booker (D-N.J) and Representative Caroline Maloney (D-N.Y.), sent letters to the CEOs of JPMorgan Chase, Bank of America, and Wells Fargo, calling on them to eliminate overdraft fees and demanding answers about how they continue to profit from them.
Transcript: Examining Overdraft Fees and Their
Effects on Working Families
U.S. Senate Committee on Banking, Housing, and Urban Affairs Subcommittee on Financial Institutions and Consumer Protection
Wednesday, May 4, 2022
Senator Elizabeth Warren: Thank you very much, Mr. Chairman. And thank you very much for holding this hearing today. Very important, matters to millions of families across this country. And thank you to our witnesses for being here today.
So during the pandemic, America’s banks got a lot of help from taxpayers. They were given special dispensation to overdraw their accounts at the Federal Reserve if they needed a little help. Now in return, the regulators asked the banks, please do the same thing for your customers. So, last year, I asked the CEOs of the four biggest banks – JPMorgan Chase, Wells Fargo, Bank of America, and Citi – whether they had followed through and automatically waived overdraft fees during the pandemic. Not one of them raised their hand. In fact, in 2020, they collected more than $4 billion in overdraft fees from families. So I asked them, would return the money? And, you guessed it – the CEOs had nothing to say.
But over the last few months, there’s been a quote, “race to the top,” and some of these banks, like Citi and Capital One, eliminated overdraft fees altogether.
Mr. Klein, you’re an expert on the overdraft system and banks’ reliance on these fees. Three of the nation’s biggest banks – JPMorgan Chase, Bank of America, and Wells Fargo – still haven’t eliminated overdraft fees. So can you give us an idea, how much money are they raking in from these fees every year?
Aaron Klein, Senior Fellow in Economic Studies, Brookings Institution: Senator Warren, they’re making billions. In 2019 before the pandemic, JP Morgan Chase earned over $2 billion in overdraft fees, Wells Fargo about 1.7, and Bank of America a bit over 1.5.
Together they earned five and a quarter billion dollars. Those figures declined along with the entire industry as a result of pandemic assistance authored by this Congress and the one before it. But even then, in 2021, overdraft, each of those banks were making more than a billion dollars a year in overdraft fees.
And overdraft fees are basically pure profit for banks.
Senator Warren: Okay, so we got that end of it, the banking end. Over a billion dollars for each one of these giant banks.
So let’s look at the other end. Who are the consumers who are shelling out the billions of dollars to these banks? Well according to the CFPB, 80% of all overdraft and non-sufficient fund fees are paid not by everyone, but by only about 9% of account holders. And these families have an average balance of less than $350. According to Pew, they are also disproportionately Black and Hispanic Americans who make, on average, less than $50,000 a year – in other words, people working hard to try to make it from here to the end of the month.
So, JP Morgan Chase, Bank of America, and Wells Fargo are collecting billions of dollars in overdraft fees from struggling families every year. Mr. Klein, what would happen to these banks if they stopped collecting overdraft fees? Would they go out of business? Would they stumble and teeter and just fall off the profitability line?
Mr. Klein: They’d be fine, Senator. Overdraft fees are a small share of these institutions’ profits. Last year, they were about 3% for JP Morgan, 4% for Bank of America, slightly higher for Wells.
My research indicates that broadly speaking, the less overdraft was a share of bank profit, the more the bank is willing to adopt changes that reduce overdraft revenues. Like Citibank, who never really tried to maximize overdraft from its customers, and for years, managed to be highly profitable without leaning on people living paycheck-to-paycheck.
This is one idea that industry actions alone will fix the overdraft problem is flawed. Senator, there are some entities, with the apparent blessing of their regulators, that are functionally not banks or credit unions, that earn 100% or more of their profits just on overdraft fees alone.
These are not banks, these are check cashers and payday lenders with a banking charter.
Senator Warren: Well, you know, Chase, Bank of America, and Wells Fargo are making tens of billions of dollars in profits, and yet they are still squeezing families on overdraft fees. If Citibank and Capital One can eliminate overdraft fees, so can Chase, and B of A, and Wells.
And that is why, earlier today, along with Senator Booker and Representative Carolyn Maloney, we sent letters to the CEOs of JPMorgan Chase, Bank of America, and Wells Fargo, urging them to end overdraft fees. And by the way, there are eighteen state attorneys general who also agree with us on this.
But we shouldn’t sit around and wait for banks to do the right thing. Congress should pass my and Senator Booker’s Stop Overdraft Profiteering Act, which would crack down on exploitative overdraft fees and practices.
I also want to do one more. The OCC could step in. They have the power to eliminate these fees. Instead of working for the biggest banks, it’s time for government to work on the side of working families.
So, once again, thank you Mr. Chairman for putting this hearing together. I hope we get some action that helps the families who need it.
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