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Study Finds That People With Lowest Incomes Pay Most in Bank Overdraft Fees

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Philadelphia, PAA recent study has found that the largest percentage of bank overdraft fees are collected from bank customers who earn the lowest incomes.

While banks market their overdraft programs as a service, consumers often incur unexpected overdraft fees that exceed the original transaction amount, according to a Dec. 2016 issue brief http://www.pewtrusts.org/en/research-and-analysis/issue-briefs/2016/12/consumers-need-protection-from-excessive-overdraft-costs from The Pew Charitable Trusts, a public information and public policy organization.

The brief cited the 2016 Pew Charitable Trusts’ chart book Heavy Overdrafters: A Financial Profile, which found that heavy over drafters (consumers who pay more than $100 in overdraft and non sufficient funds (NSF) fees in a year) "generally have incomes below the US average, and overdraft fees consumed nearly a full week’s worth of their household incomes on average during the past year."

In recent years, several banks have been criticized and consumers have filed lawsuits against banks over excessive overdraft fees.

In 2011, Fifth Third Bank settled a class action lawsuit for $9.5 million in which plaintiff account holders claimed that Fifth Third "re-sequenced" the order of transactions in order to maximize the number of overdraft fees.

A federal judge in 2010 awarded $203 million in a class action to Wells Fargo plaintiffs who alleged that the bank charged customers "hundreds of millions of dollars" in overdraft fees and used a bookkeeping system that could turn what would have otherwise been one overdraft into as many as ten overdrafts in order to charge more overdraft fees.

In its study, Pew analyzed bank revenue information reported to the Federal Deposit Insurance Corp. (FDIC) from 1984 to 2015 along with bank fee schedules, account agreements and supplemental disclosures of 44 of the largest US banks.

The study found that service charges on deposit accounts, which include overdraft and insufficient fund fees, have "more than doubled" while interest income over the past three decades has decreased.

Most of the largest US banks with checking account customers continue to charge "at least $35" for each overdraft, according to the study, which also found that many of the largest US banks with consumer checking accounts fail to meet Pew's recommended practices on overdraft programs.

"In 2015, US banks with assets exceeding $1 billion reported $11.16 billion in overdraft fee and NSF revenue, which constituted nearly two-thirds of all consumer deposit account fee revenue," according to the Pew brief.

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READER COMMENTS

Posted by

on
The money is there, on a debit charge.yet is bank didn't take the. Money until 2wks later. Yet excessive over draft fees continued

Posted by

on
Commerce bank, now TD bank hit me for overdraft fees monthly for 16 months until i realized it. they gave me 2 months fees back. Is this legal? they didn't notify me personally.

Posted by

on
I have bank with Chase bank,which I had that happen to me alot of overdrafts of 35.00.I have bank with fifth District in the past also again 35.00,in overdrafts fees.I have bank with BancorpSouth,which I was charged with with overdrafts fees.also Captial one with overdraft fees.Now I'm banking with Regions bank . Regions bank gives you a break, you can be up to 5.00 over the limit,and does not charge you to have a overdraft fee .I love Regions bank .But they will notify you by mail that you where a little over the limited but was not charge a overdraft fee.

Posted by

on
i was a us bank customer and i was charged almost 100 dollar in over draft fees as a single mom that was tough

Posted by

on
The money is there, on a debit charge.yet is bank didn't take the. Money until 2wks later. Yet excessive over draft fees continued

Posted by

on
I totally agree. The notification system that the banks use is 3 days behind, so that even if they notify you of an overdraft, it's too late to correct it by making a deposit to the account. Since computers are the fastest information highway, why don't we get the message on the same day an account is overdrafted? It only takes seconds for a sent email to get to its' destination, we should be notified immediately, so that in many cases, funds can be transferred from another account at the same bank. I firmly believe that their systems are constructed to benefit only the banks. It also can occur when a deposit and a withdrawal are made on the same day, but the withdrawal shows up first, so they can charge an overdraft fee even though, technically. the deposit was made before the withdrawal.

Posted by

on
My community bank was charging me so many overdraft and NSF fees that I had to close the account. I had maintained an account with this bank for over 20 years and also opened accounts for my kids. Despite being a loyal customer, at some point in time policy changes dictated that I was incurring fees at an alarming rate. While I take responsibility for not always balancing my checkbook book accurately, there were many instances whereby I just didn't understand how I was racking up all these fees. NSF as minimal as 1 dollar was costing me $35. Finally one day I decided to add up fees I had incurred and over a couple of years I stopped counting at $750+. Disgusted by being reamed by the bank and my own apparent ineptitude at keeping my account in the black, reluctantly I severed my relationship with my neighborhood Savings and Loan Institution. I'd rather keep my money in a shoebox than to just keep giving them my money in such a deflating and counter productive manner!

Posted by

on
It is highway robbery and I'm glad lawyers are getting after them.

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