AGs: Why can’t you be more like Citi (on overdrafts)?
Few banks can envy Citi’s position on several narratives: its exposure to Russia leading the United States, the long-standing overhaul of its risk management processes and technology, its exit plan from 14 retail markets or the threat of loss of activity on at least one social position.
But attorneys general in 17 states and the District of Columbia are pointing to him as a model citizen in banking for his overdraft fee policy.
“Your peer company, Citi, has rightly concluded ‘that no one should ever be charged $35 for a $5 cup of coffee,’ the attorneys general wrote in letters this week to CEOs of JPMorgan Chase, Bank of America, Wells Fargo and US Bank, asking each to “immediately commit” to eliminating overdrafts and similar fees “on the same schedule as Citi.”
Citi announced in February that it would eliminate overdraft, returned item and overdraft protection fees by this summer. However, each of the banks targeted by the attorneys general reduced their reliance on fees to some degree in the three months leading up to Citi’s announcement.
JPMorgan Chase said in December it would give customers an additional business day — starting this year — to restore overdrawn accounts to $50 in the red or less before a fee is charged. The bank also said it would give users access to direct deposit paychecks two days earlier.
In January, US Bank said it planned, by June, to increase — to $50 from $5 — the amount an account can be overdrawn before a fee is charged. Bank CEO Andy Cecere told Senate Banking Committee Chairman Sherrod Brown, D-OH, in a letter last week that he would also institute a 24-hour grace period to allow customers to replenish their balances before a fee is charged, according to American Banker.
Bank of America, also in January, announced that it would reduce its overdraft fee from $35 to $10 starting in May and eliminate the insufficient funds (NSF) fee and certain transfer fees. Wells Fargo – on the same day – said it would eliminate NSF fees and transfer fees for certain customers in Q1 2022. It added that it would launch a 24-hour grace period in Q3.
Attorneys General for New York, California, Connecticut, Delaware, Hawaii, Illinois, Iowa, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, North Carolina, Oregon, Pennsylvania, and Washington State, in addition to DC, have signed the letters to JPMorgan, Wells Fargo and US Bank. North Carolina Attorney General Josh Stein did not sign the letter to Charlotte-based Bank of America.
Top state attorneys have called ending overdrafts and other fees a “vital” step “towards creating a fairer and more inclusive financial system for consumers,” noting that the Center for Responsible Lending has found ” the overwhelming majority” of the more than $11 billion in fees. billed in 2019 were levied on “the most vulnerable consumers with the lowest average account balances,” including – disproportionately – people of color.
Consumer Bankers Association CEO Richard Hunt, however, said recent changes to banks’ overdraft policies have led to a decline in the use of overdrafts, according to a statement seen by American Banker, adding that many users “knowingly” expose.
“Major U.S. banks have always listened to their customers and are taking proactive steps to help them avoid unexpected charges while protecting their access to a much-needed emergency safety net,” Hunt said in the statement.
Citi, of course, isn’t alone in sending overdraft fees. Capital One announced in December that it would eliminate them. Ally Bank did so in June 2021.
The attorneys general aren’t alone in their anti-discovery advocacy, either. The charges became a point of contention last May — particularly during a tense exchange between Sen. Elizabeth Warren, D-MA, and JPMorgan Chase CEO Jamie Dimon — during a hearing on Capitol Hill. The Consumer Financial Protection Bureau (CFPB) in January solicited input from consumers as part of a crusade against “junk fees”. The move came just over a month after CFPB Director Rohit Chopra said the agency would crack down on financial institutions “addicted” to overdraft fees.