NC Attorney General Josh Stein joins others in calling on banks to stop collecting overdraft fees, which disproportionately impact communities of color.
Black and Latino households are impacted by overdraft fees at higher rates, according to NC Attorney General Josh Stein, and that’s part of the reason why he’s advocating for big banks to end the practice.
Stein joined 18 other attorneys general from around the country last week in sending letters to the leaders of JPMorgan Chase, US Bank, and Wells Fargo calling for banks to stop penalizing people just because their accounts are short on funds.
“No person should ever be charged a $35 fee for a $5 cup of coffee,” a total of 19 state attorneys general, including Stein, wrote in letters to the big banks.
The fees, typically around $35, are levied when a person uses their debit card, or writes a check, but doesn’t have enough money in their account to cover whatever was bought. Some banks will let a transaction go through instead of declining it for insufficient funds, but then tack on the overdraft charge.
Those fees can add up—sometimes to hundreds of dollars—and it drains people of needed cash while giving lucrative revenue to banks that are already plenty profitable, the group of elected officials wrote.
In 2021, three of the five largest banks in the country brought in billions in profits.
Meanwhile, everyday consumers are seeing the prices of groceries, rent, gas, and other essentials go up as inflation hits a 40-year high in the country. That leaves little ability for families living paycheck to paycheck to take the financial hit that an overdraft fee can deliver.
Credit unions and smaller banks are more likely than bigger banks such as Chase and Wells Fargo to offer overdraft programs that don’t trigger fees, a 2019 study by the Consumer Financial Protection Bureau found. Other large banking institutions, such as Citi and Capital One, agreed in the last year to stop charging overdraft fees.
“Overdraft fees kick people when they are down,” Nadine Chabrier of the Center for Responsible Lending said in March, in response to Citi’s decision to stop collecting overdraft fees later this year.
The financial toll tends to fall most heavily on financially vulnerable, Black, or Latino consumers.
Black households were nearly two times, and Latino households 1.5 times, as likely to pay overdraft fees than white households, according to a 2021 report by the Financial Health Network.
And 90% of overdraft fees were paid by a small group of people that earned less than $50,000 annually, according to another report from Pew Charitable Trust.