Several US senators are demanding that 25 US banks address concerns that a recent law change may increase debanking.
Senator Elizabeth Warren (D-Mass.), a ranking member of the Senate Banking, Housing and Urban Affairs Committee, is leading an effort to take banks to task for the impacts their overdraft fee policies may have on customers, after a law to limit what they can charge was overturned earlier this year.
Warren, along with Senators Richard Blumenthal (D-Conn.) and Bernie Sanders (D-Vt.), sent a letter to 25 banks, including JPMorgan Chase, Wells Fargo and Bank of America, asking for information on the charges they impose when consumers spend more money than they have in their accounts.
In late 2024, the Consumer Financial Protection Bureau (CFPB) adopted a rule that prohibited banks from charging exorbitant overdraft fees and generally capped them at $5. However, President Trump signed a Republican-led bill into law in May that overturned the rule.
Says the letter,
“Overdraft and non-sufficient fund (NSF) fees are ‘one of the most common exploitative mechanisms big banks use to target the poor.’ The CFPB found nearly twice as many consumers with incomes between $35,001 and $65,000 were charged overdraft and NSF fees (35%), versus consumers with incomes between $100,000 and $175,000 (18%).’ When consumers’ finances are already stretched thin, exorbitant overdraft fees can cause other payments to bounce-leading to even more fees in a vicious circle that can ‘turn setbacks into crises.’
The (CFPB) rule closed (an) outdated loophole exempting overdraft from standard regulation around credit, which has ‘allowed many large banks to transform overdrafts into a massive junk fee harvesting machine.’ Had President Trump and congressional Republicans not thrown out the CFPB’s final rule, these changes would have saved consumers up to $3.5 billion in annual overdraft fees, or $225 per household that pays these fees.”
The senators believe that overdraft fees cause many Americans to lose their access to bank services altogether.
“Overdraft fees are the source of tens of millions of bank account closures, meaning this law will likely increase debanking, running counter to President Trump’s stated goal of reducing debanking.”
The letter demands that the banks respond by September 12th.
Follow us on X, Facebook and TelegramGenerated Image: Midjourney