Ally Financial, a digital-only bank, announced Wednesday that it will permanently scrap all overdraft fees after being temporarily waived during the pandemic, highlighting the disproportionate way the fees are charged to people who live from paycheck to paycheck , and colored people harm.
Previously, Ally charged a $ 25 fine for every day a customer attempted a transaction or transactions on an overdrawn account, including a returned or paid check, even though the fee was not applied to a single debit card or ATM transaction on an overdrawn account .
The bank had temporarily waived Overdraft fees during the pandemic.
The permanent change applies to around 3.6 million current, savings and money market accounts that Wall Street Journal reported.
“Overdraft fees can be a major cause of concern,” said Diane Morais, president of consumer and commercial banks at Ally Bank, in a statement Wednesday. “We realized that the best way to alleviate this fear is to eliminate these fees.”
95%. That is the segment of consumers who paid a cumulative $ 12.4 billion in overdraft fees last year, which was classified as “Financially Vulnerable” according to data from the 2021 FinHealth Spend Report cited by Ally. Those consumers were also disproportionately black and Latinx, Ally said.
During a Senate committee hearing last week to oversee Wall Street, Senator Elizabeth Warren (D-Mass.) Criticized the chiefs of the country’s largest banks for charging billions of dollars in fees in 2020, even though regulators encouraged them (but didn’t demanded). them) to waive the fees entirely during the pandemic. Warren highlighted Jamie Dimon, JPMorgan’s billionaire CEO, for the nearly $ 1.5 billion overdraft fees his bank levied during the pandemic. During the hearing, Dimon refused to commit to abolishing the fees.
Fintech companies, on the other hand, compete with each other to offer the most competitive overdraft protection services. Last month, digital banking startup Chime announced it would double the maximum amount its customers can overdraw to their accounts to $ 200. Digital bank Dave recently increased its cash advance feature from $ 75 to $ 200.
The Biden administration announced on Tuesday several initiatives designed to fill the racial wealth gap in the United States (some of which were already included in its infrastructure proposals). Among other things, he called for a 50% expansion of federal contracts with small, disadvantaged businesses, a new $ 10 billion community revitalization fund to support infrastructure in colored communities, and a $ 31 billion investment in minority-owned small businesses.
What to look out for
The Consumer Financial Protection Bureau is expected to step up enforcement and tighten the Biden administration’s regulations. Sen. Sherrod Brown (D-Ohio) said NBC News in March that the CFPB will be “an agency for people of color – who are more likely to be hit by larger student loans and more likely to face debt collectors and have to rely on payday lenders – to fight back.” added, “… an agency for those hardest hit by debt and the remains of Jim Crow and redlining.”
Overdraft fees are becoming increasingly popular at Ally Financial (Wall Street Journal)
Sen. Warren Grills billionaire JPMorgan CEO for collecting $ 1.5 billion overdraft fees during the pandemic (Forbes)