Sen. Cory Booker sends letter to 13 banks to examine overdraft practices

Monday , July 17, 2017 - 2:34 PM

Alex Schiffer

(c) 2017, The Washington Post.

Senator Cory Booker, D-N.J., sent a letter to more than a dozen banks on Monday to inquire about their overdraft fee programs.

The news come after the Consumer Financial Protection Bureau filed a lawsuit against TCF National Bank in January, after the agency alleged that bank employees mislead customers into signing up for overdraft services.

Overdraft is offered by banks for customers who make purchases with their debit card, even if they lack sufficient funds in their account but are charged for the service. Many banks make the service optional for account holders but a 2014 study by the PewCenter showed that across all banks, roughly half of account holders who overdrew their accounts paid a fee that they didn’t recall consenting to.

Consumers usually get charged $35 in overdraft fees when they spend more money than they have in their accounts.

“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,” Booker said in a letter obtained by The Post.

Booker sent the letter to 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. Booker’s spokesperson Kristin Lynch said he chose these banks because “they represent the top ten U.S. banks in overdraft and non-sufficient-funds revenue.”

According to the Federal Deposit Insurance Corporation, last year banks in general made more than $11 billion in consumer overdraft fees. In the first quarter for 2017 they collected $2.78 billion in fees.

Federal law requires banks to obtain customer consent before enrolling them in overdraft programs. But the CFPB said in its lawsuit that banks like TCF used confusing practices to get customers to agree to the services.

For instance, if customers said yes to being asked if they like their check cards to continue working as it currently does, that meant they were opting into the program, the suit claims.

In his letter Booker asks banks to respond by August 11 with information on the bank’s dependence of overdraft fees, consent and transparency, employee incentives to increase overdraft fees and alternatives to overdraft penalties.

banking-booker

Keywords: Sen. Cory Booker sent a letter to more than a dozen banks to examine their overdraft practices.

Sign up for e-mail news updates.

×