Senator Reverend Warnock Examines the Effect of Overdraft Fees on Georgia Families, Reaffirms Commitment to Lowering Rising Costs

Senator Reverend Warnock today chaired a hearing of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection focused on the impacts of overdraft fees

In March, Senator Warnock co-led efforts urging the country’s largest banks to lower or eliminate overdraft fees

In December, the Consumer Financial Protection Bureau (CPFB) released a report that many banks have a deep dependence on overdraft fees

Senator Reverend Warnock’s hearing examined the financial services industry’s practices regarding overdraft fees and the effects those fees have on hardworking families

Senator Reverend Warnock “I’m focused on lowering costs for Georgians and saving them money.”

ICYMI — February 2022: At Banking Subcommittee Hearing, Senator Reverend Warnock Highlights How Community Banking Institutions in Georgia and Nationwide Support Small Businesses, Jobs, and Move the Economy Forward

***WATCH VIDEO OF SENATOR REVEREND WARNOCK’S OPENING STATEMENT HERE***

Washington, D.C. – Today, U.S. Senator Reverend Raphael Warnock (D-GA), chair of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, examined the financial services industry’s practices and innovations around overdraft fees and the negative effects those fees have on hardworking families. The hearing followed Senator Reverend Warnock’s previous efforts to highlight the impact of these fees on hardworking Georgians: in March, Senator Warnock co-led efforts urging the country’s largest banks to lower or eliminate overdraft fees. Senator Warnock highlighted how Congress can better focus on lowering costs for Georgians and the American people, and the importance of the nation’s financial institutions in helping families, small businesses, and communities thrive.

“I’m focused on lowering costs for Georgians and saving them money. Like all of my hearings, this hearing is about helping people, helping communities, and helping small businesses. As American families, small businesses, and communities recover, we must ensure they have the resources they need not only to survive, but to thrive,” said Senator Reverend Warnock.

Last December, the CFPB released a report that many banks have a deep dependence on overdraft fees. Some banks that make billions of dollars per year pad their profits with billions more from charging disproportionate and sometimes predatory fees. Senator Warnock chaired the subcommittee hearing—his third Banking subcommittee hearing to date. The hearing also featured testimony from Mr. Aaron Klein, Senior Fellow in Economic Studies at the Brookings Institution; Mr. Jason Wilk, Founder & Chief Executive Officer at Dave; and Mr. David Pommerehn, Senior Vice President and General Counsel at the Consumer Bankers Association.

During the hearing, Senator Reverend Warnock questioned the witnesses about why a small portion of Americans — 18 % — are responsible for the vast majority — 91 %— of overdraft fees collected and how this imbalance hurts hardworking Georgians. The Senator also spoke with the witnesses about his work to lower costs for Georgians, and discuss the positive economic affect that banks suspending, or completely waiving, fees has had on working families in Georgia.

(WATCH VIDEO OF SENATOR REVEREND WARNOCK’S OPENING STATEMENT HERE)

Excerpt from Senator Reverend Warnock’s opening statement, as prepared, below:

“I’m honored to chair this subcommittee and work with Ranking Member Tillis to lower everyday costs for Georgians and Americans, and ensure stability in our banks, credit unions, fintechs, and other financial institutions that serve families, small businesses, and communities in Georgia and around our country. And I’m proud of our efforts to ensure that communities have equal access to the financial resources that build an economy that works for all Americans.

“Today’s hearing will examine the financial services industry’s practices and innovations around overdraft fees and the effects those fees, or lack of fees, have on hardworking families.

“The economic turbulence of the COVID-19 pandemic has pushed working families to the brink.

“Thanks in part to the relief passed by Congress to combat the pandemic, including the American Rescue Plan, our nation is recovering and rebuilding. Still, there is more to be done to bring financial stability to hardworking families in Georgia and across the country—and heavy overdraft fees keep people within cycles of debt and poverty.

“Last December, the CFPB released a report that many banks have a deep dependence on overdraft fees. Some banks that make billions of dollars per year pad their profits with billions more from charging disproportionate fees, as much as $38 for overdrafting just a few dollars beyond what is allowed.

“Fees also are keeping hardworking Americans out of our financial system, particularly those living on the edge of our economy. One-third of unbanked households cite high fees as the reason that they remain without a bank account. And we know these types of fees affect people of color at a disproportionate rate.

“Studies have found that, on average, banks with branches in predominantly Black neighborhoods charge more for overdraft services. And customers who overdraft the most throughout the year tend to have lower-income, poorer credit scores, and are disproportionally Black and Hispanic.

“In response to the uncertainty brought on our nation by the pandemic, many banks moved to waive fees charged to their customers like overdraft fees, and fees for non-sufficient funds. This is in stark contrast to how the financial industry responded after the 2008 Financial Crisis, and I applaud those banks for making the right choice to help communities.

“Some of these same banks have now voluntarily made these changes permanent, and every month we hear of more following their peers in doing the same.

“Additionally, many fintech companies—like the one before the Subcommittee today—are also offering innovative new products and services to help customers avoid fees.

“I have heard from Georgians about the negative effects overdraft can have on their lives. In the C-F-P-B’s requests for feedback on fees, one Georgian serving in the military wrote about how technical glitches and shady business practices by their large bank cost them money and stress while preparing to deploy to a war zone. In another comment, a student at Georgia Tech wrote about how what little money they had while studying for an engineering degree was being quote “skimmed off by these fees.”

“This is also personal for me: in addition to serving as a Senator for Georgia, I’m also the Senior Pastor of the historic Ebenezer Baptist Church in Atlanta.

“My church counts among its members Georgians from every walk of life. And we look out for each other. As a pastor and as a Senator, I see my work as grounded in serving others and my community—and I want to extend this call to our nation’s banks, credit unions, fintechs, and other financial institutions.

“I believe Congress, and this Subcommittee, in particular, have an important role to play to ensure that the financial institutions that support our communities, small businesses, and working families have the resources, tools, and support to continue their important work. But at the same time, we must hold financial institutions accountable when they juice their profits off the backs of struggling Americans. And ensure that they are not looking at these customers as easy marks to be taken advantage of with onerous or opaque fees.

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