WASHINGTON, D.C. – U.S. Senator Cory Booker (D-NJ) pressed more than a dozen bank CEOs today on their overdraft fee programs, requesting more information on their current practices to encourage participation in so-called “overdraft protection.”
Banks offer overdraft protection to allow account holders to make purchases with a debit card even if they don't have sufficient funds in their account, while charging a fee for the service. But a 2014 study by Pew found that across all banks, more than half of the people who overdrew their checking accounts and paid a fee in the past year could not recall consenting to the overdraft service. These fees disproportionately fall on customers who are least able to afford them, especially workers living paycheck to paycheck.
Last year alone, three of the largest banks in the country collected over $5 billion in overdraft fees. One former bank CEO even named his yacht “Overdraft” in an apparent nod to the importance of such fees to the bank’s bottom line.
“I’m concerned that too many of our nation’s banks are increasingly driven to accumulate these [overdraft] fees, rather than pursue a business model that serves their communities, and are adopting certain practices to drive participation in so-called ‘overdraft protection’ programs,” the letter states.
Federal law requires banks to obtain consent before enrolling a customer in overdraft programs – in other words, customers must “opt in” to overdraft programs. However, investigations have revealed illegal practices used to drive up participation.
For example, a complaint filed by the Consumer Financial Protection Bureau (CFPB) against TCF Bank found that the bank coached its employees to obscure overdraft disclosures and then planted the opt-in agreement among other mandatory items the consumer had to agree to as part of the process of opening a new account. That same investigation also found TCF provided strong incentives to its employees to hit aggressive overdraft opt-in targets – resulting in an overdraft opt-in rate that was triple the industry average.
Booker’s letter is an attempt to uncover additional information about these practices from the following 13 banks: Chase Bank, Wells Fargo, Bank of America, TD Bank, PNC Bank, SunTrust Bank, Regions Bank, Branch Banking and Trust (BB&T), Woodforest Bank, Ameris Bank, Bank Plus, U.S. Bank, and Ocean Bank. They represent the top ten U.S. banks in overdraft and non-sufficient-funds revenue, as well as the U.S. banks with over $2 billion in assets that take in the most overdraft and non-sufficient-funds revenue per account.
The letter asks the banks to provide information on how much the bank depends on overdraft fees for revenue, how many new customers opt-in to overdraft protection, what type of incentives employees are given to boost enrollment in overdraft programs, and the process by which consumers opt-in to such programs.
Full text of the letters can be seen here.
Booker has been a leading voice in the Senate for consumers and workers. In May, he sent a letter to a dozen airline CEOs urging them to improve the pay and benefits of their subcontracted workers. He was also instrumental in advancing and defending an Obama-era protection ensuring investment firms act in the best interest of their clients when it came under attack by the Trump administration earlier this year. And he has been on the front lines of advocating to raise the federal minimum wage to $15 per hour.