Rep. Maloney Examines Bank Overdraft and NSF Fee Practices

Press Release

At yesterday's Financial Services Committee hearing titled "Holding Megabanks Accountable: Oversight of America's Largest Consumer Facing Banks," Congresswoman Carolyn B. Maloney (D-NY), senior member of the committee and author of the Overdraft Protection Act of 2021, highlighted the need for major banks to end the practice of Overdraft and NSF fees.

During the hearing, Rep. Maloney stated, "I thank you for all of your comments, particularly those who talked about wanting to reduce overdraft fees that drain billions of dollars from America's poor and working-class communities every year. The Consumer Financial Protection Bureau has found that overdraft fees cost our consumers over $15 billion in 2019 alone, and these fees disproportionately target and penalize low-income consumers. They found that almost 80% of overdraft and non-sufficient fund fees are borne by only 9% of consumers, and they are all financially vulnerable.

While I am glad to see some banks have taken some initiative by eliminating or moving in that direction, it's concerning to me that it's taken this long and that many banks still have yet to make any voluntary changes. And with banks acting different policies, consumers are left with little consistency. They're very confused by these different policies. We must ensure that we have a comprehensive, permanent solution and act to protect consumers. And that's why I have introduced the Overdraft Protection Act, which has been reported out of the committee. It builds on the Credit Card Bill of Rights, which passed in 2009, and according to the CFPB has saved consumers over $16 billion a year by keeping fees in consumers' pockets.

She then asked the witnesses, "I want to ask Bank of America and Citibank because in your testimony you talked about your actions to eliminate fees. Can you elaborate, what product offerings have you changed to reduce or eliminate the overdraft fees? And can you speak to how your consumer banking division has remained profitable in light of all of these changes?

Brian Moynihan, Chairman and CEO, Bank of America responded, "So I think you heard many of my colleagues talk about this, and this is a product in the industry. The first is a no overdraft product, and especially for students and younger people. We have four million of those, and I think if you add it up across the board that product allows people to have no overdraft capacity. Then you have the ability for other products for people to opt in, and what we've done is reduce staff our overdraft per occurrence fee from 35 to $10. We've reduced the ability to have no NSSF type fees, the numbers, and occurrences.

So, all that totals up that we're down 60% second quarter last year, second quarter this year, and it will fall further because a lot of those changes took place and we recently announced that it's down 90%. But we're able to do that because of the scale and capabilities of our team in consumer banking and these larger banks. A variety of banks participate in our system and there's a variety of business models, but one of the things that will be consistent is the scale we've been able to achieve in our company. These companies at this table have allowed us to pass through those benefits as consumer and still remain profitable.

Jane Fraser, CEO of Citigroup responded, "Thank you very much Representative, lovely to see you. We are proud at Citi to have eliminated overdraft fees and NSF. This was the right decision for our bank and is reflective of a multiyear commitment to having a customer friendly approach to fees. Similar to my colleague, Mr. Moynihan, we also have a product called the access product. It accounts for almost 20% of all of our accounts. In addition to the no overdraft it is also is a very low cost customer friendly account that has been growing substantially over the last few years and played a very important role during the pandemic for those who are most affected. It's something that we're committed to continuing to grow. Thank you.

Rep. Maloney then asked, "Are there any other banks that can commit to overdraft fees, to eliminating overdraft fees altogether by 2025? Anyone else on the panel that can follow the leadership of these two banks?

Committee Witnesses did not respond.

Background

Congresswoman Maloney introduced H.R. 4277, the Overdraft Protection Act of 2021, last June. This legislation would:

Require that fees be "reasonable and proportional" to the cost of processing these transactions and the amount of the overdraft;
Prevent institutions from re-ordering transactions to artificially increase their fees;
Limit the number of fees they can charge to 1 per month and 6 per year;
Empower consumers by requiring that they proactively opt-in to overdraft programs in the first place -- rather than automatically being enrolled;
Improve transparency and disclosures; and
Prohibit charging overdraft fees for "debit holds" that exceed actual transaction amounts, among other strong measures.

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