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tv   Hearing on Ending Overdraft Fees  CSPAN  April 26, 2022 12:11pm-2:18pm EDT

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fees charged by banks and the impact on low income in minority communities. colorado congressman ed pearl
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mother chairs this hearing on the subcommittee on consumer protection.
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[inaudible] >> this hearing is entitled the end of overdraft fees up. the pope rent for eliminating fees costing our -- four minutes of opening statement. in 1778, it -- faced a cash flow problem. meaning his bank account balance would fluctuate and often drop to zero, which made it difficult for him to pay his own suppliers. so, he went to his bank, the royal bank of scotland to work at a deal to help his business. under the arrangement they came to, he could periodically drop
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more money from his account then he had in his. deposits in return, the bank would charge him interest on the negative balance. they invented what is known today as an overdraft. while this overdraft service proved beneficial to both parties in this example of mr. hogg and the royal bank of scotland, this was not true in all cases as more banks began offering this product. some businesses without as sound revenue and business practices found themselves taking on more debt from overdraft and they could repay. importantly, this service was created in the context of providing liquidity to businesses with sound revenue but poor cash flow. today, financial institutions offer overdrafts are vices to both businesses and consumers. overdrafts are buses have evolved significantly over the past 240 years or so, but the core concept is the same. in many of the fundamental issues we will be discussing today are not new. in fact, we dealt with this very issue about ten years ago.
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and every so often, we should address this to see where we are. however, the current scale and growth of overdraft and not sufficient fund fees has caught the attention of consumer groups, this committee and the regulators. in an average, year consumers in the united states pay around 10 to 12 billion and overdraft fees. and non sufficient fund fees. and just 9% of consumers make up 80% of those overdraft fees. additionally, these types of fees impact people of color at a disproportionate rate. studies have found banks with branches in predominantly black neighborhoods charge more for overdraft on average, and black customers are overrepresented in those who report paying more than $100 of fees in the past year. in december the consumer financial protection bureau published data suggesting many financial institutions are overly reliant on the revenue that they received from over drafters. however, the market is changing. recently, many banks and credit
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unions voluntarily adjusted their overdraft programs to eliminate or reduce fees or create better consumer protections and more transparency. additionally, many non bank fintech companies are also offering products aimed at helping avoid overdraft by improving notifications and information provided to consumers or partnering with depository institutions to offer no or low fee accounts directly to consumers. this initiative is a partner -- another program gaining momentum in recent years, is back on. this initiative is a partnership between the city for financial empowerment fund, financial institutions and our local governments with the goal of providing low cost, basic bank accounts to the unbanked and under bank households. these accounts do not a low of a draft piece. we have two bills noticed with today's hearing -- hr or 4277
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the, overdraft protection act of 2021, by miss maloney, who has been a champion on these issues, which would strengthen protections and disclosures were consumers with respect to overdrafts trees. additionally, we have a discussion draft in entitled expanding access to affordable bank accounts, which would require large financial institutions to offer the east one bank account option that does not charge consumers overdraft and non sufficient boundaries. with that, i will yield to the gentleman from missouri, the ranking member, mr. luke de mar, for his opening remarks. >> thank you, mister chairman, and thank you for having this hearing today on this important topic. on december 1st, 2021, the cpp issued a press released on over data draft fees entitled just backed off reliance on overdraft. we just press release eludes to oh expletive fees charged by financial institutions for overdraft products and went so far as to specifically name and
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shame three financial institutions. to backup this plane, the cepb put together to go to settle on overdraft and non sufficient funds. not sufficient funds. feats when data set is forum 2018, excuse me, 2014, eight years ago. and fails to consider new innovations in overdraft. and the other data set shows that revenue from overdraft at nsf fees only represented 2% of bank revenue in 2019. the cpp's own data would suggest financial institutions affect are not dependent out overdraft fees. truth is, overdraft is a traditional legitimate project that provides a vital service for consumers. according to a study by global data intelligence from toronto, consumers make highly informed choices about when you use of aggression services based on account information ugly disclosure fees, disclosure fees and procedures. even president biden's acting comptroller, sue, acknowledge
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the importance of the projects when he says and i quote, limiting of drastically limits a financial capacity for those who need it most, and quote. this actions for the cepb continues a dangerous pro drug for my colleagues on the other side of the aisle at the time when the 50% of americans will have difficulty paying a four dollar you urgency expense, the actions of this committee on financial regulators aim to reduce consumer's ability to access for short term liquidity and financial products. commercial democrats administration have regulated banks out of small [inaudible] loans, are posed to overdrafts, patty landers, and have made disparaging comments on the innovative products such as buy now, pay later, and earned wage access. so, i asked my colleagues, where are the 40% of americans consumers supposed to go when they need a 40-dollar loan or $4 for any kind of emergency? i'm happy to answer that question. to hear the cfpb did not stop on overdraft piece. on february 2nd 2022, cepb
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released information on fees related to either commercial consumer [inaudible] or what cepb is calling jump. these first notes acknowledge there is no legal authority for the cpp to define the different drugs or nato or that. beta and there is even less authority to act as a private sector in the consumer financial market. the bureau wants information on any fees associated with consumer financial products that seem to high move or were unexpected. these are intentionally vague terms an order for the queue bureau to create a subjective measurement that has no bearing on that a california consumer financial product or service. suggesting otherwise would be to insinuate private market should not be able to set prices for products or services, which is a core principle of our economy. we don't need government setting prices wherever anything everything. the cfpb has also failed to take it into account the lengthy disclosure requires that -- any disclosures
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promulgated by the cepb itself. for example, the cepb list they want information they -- want information. whether we are in mr. trump failed to mention is the cpp -- in 2016, which requires multiple significant disclosures for the prepaid card industry. the cfpb has quite literally manufacturing a crisis about hidden fees for financial products when they are the very people who made up the disclosure regime! this shows the rfi is not about these facing consumers, but it's another attempt by the cfpb to denigrate illegally operating businesses by any means possible and exert as much control as possible over the industries [inaudible] it is simply a power grab. ranking member mckinney and i sent a letter to dr. chopra asking him to clarify many aspects of the overdraft generally proposals like [inaudible] what the role of cfpb should have in [inaudible]
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and that, mister chairman, i yield back. >> the gentleman yields back. the chair now recognizes the chairwoman waters, the full chair of the financial services committee for one meant for her remarks. >> thank you so very much, chair parameter. well, for far too long, our banks have been charging excessive overdraft fees and of course i'm very troubled by consumers of color paying twice as much in fees as white consumers. so, i want to commend representative carolyn maloney for her steadfast work in proposing the overground overdraft reforms we are considering today. we've also not been shy, conducting mega bank oversight pressing if they ceos to reduce and eliminate these costly fees, many of whom are beginning to do just that, with a strong
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cfpb, supporting our, efforts on best [inaudible] junk these like these, we now have a growing list of banks finally reducing or eliminating overdraft fees. so i look forward to hearing from our witnesses on these issues. know how we should build upon this moment. i yield back. thank you. >> gentlelady yields back. without objection, statements from the following organizations and people will be entered into the record. the american bankers association, chime, color of change, consumer bankers association, credit union national association at the national association of federally insured credit unions, the national consumer law center on behalf of its slow in compliance, thierry feline, ph.d., associate professor of social work at the university of michigan. now i'm pleased to welcome each of our witnesses, and want to introduce our panel, three of
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whom are here in person and two on video. mr. jeremy greer is the for cofounder and executive director of liberation and generation. mr. greer's work has focused on racial and economic justice and he formerly worked at the government accountability office for loesch local initiative support initiative and prosperity. now miss elise hicks's consumer policy council at americans for financial reform. mistakes was previously a staff attorney for united policy holders, and she holds degrees from stetson school of business and economic -- stetson school of business and economics at mercer university. charleston school of law, and georgia state university. mr. paul cornered is the president and ceo of you w credit union. mr. kuynert has let let your
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double credit union for 19 years and has formally served on the board of directors of the -- credit union industry think tank focused on issues impacting consumer financial well-being and economic empowerment. mr. santiago [inaudible] is a senior policy analyst with -- mr. sueiro serves as unido u.s. is -- reforming backing eddie lighting policies and consumer finance policy. finally, mr. todd zawicki is a professor of law with the antonin scalia -- mr. zywicki is also senior fellow at the cato institute and former director of the george mason university law and economic center. i'd like to welcome all of our witnesses here today, thank you for being here. you reminded that your oral
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testimony will be limited to five minutes. you should be able to see a timer that will indicate how much time you have left and. without objection, your written statements will be made part of the record. so let's start with you, mr. greer. you're now recognized for five minutes for your testimony. >> thank you, chairman. ranking member, members of the subcommittee, for holding this important hearing and for the opportunity to testify with you today. my name's jeremy greer. i am coal [inaudible] and generation. liberation generation is a national movement support organization found to help people of color to transform their economy. financial institutions as large and small have the ability to unburden their customers from junk fees such as overdraft charges. in the fourth quarter of 2021 commercial banks and savings institutions collected over 72
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billion dollars, or 36% of their income from, fees. this is the assessment of these trees has become part of their business model and their profit margin this burden. this president has pushed disproportionately falling on consumers who cannot afford to pay the threes. about 90% of all as consumers account for almost 80% of overdraft revenue, and nearly half of all overdrafts were made by parents with children under the age of 18. and in the age of covid, with a record unemployment and historical levels of income volatility, volatility, consumers of color have been most hit hard by the pandemic, paid over 4.5 billion dollars in overdraft fees. black families paid about $8 million in in big fees in 2020, while [inaudible] families spent 1.1 billion dollars in fees in the same year. also as millions of consumers of bounced out of the financial
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system following the closure of their accounts due to excessive overdrafts, one third of households without bank accounts have identified high fees as the reason that they remain unbanked. and the unpacked comprise nearly half of black households. these fees operate as an abusive form of high cost credit and are in no way better than a payday loan. to put it into perspective, the cfpb fund that the majority of overdraft fees were incurred on transactions of $24 or less, and were repaid within three days. meaning that a 34 dollar out overdraft fee with charges along, if it were charges alone, it would have an annual percentage rate of 17,000%, 17,000%. this is in no way representative off a fair and inclusive financial [inaudible]
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. it is our recommendation that congress and the biden administration act to bring an end to increase, such as overdraft and non sufficient phone fees. we have seen a number of financial institutions already take this critical step. in march, one of the largest banks in the country, citigroup, announced that it will and overdraft fees for consumers. and in doing so, they called it, doing it so they called it a focus on financial inclusion, which i agree with. and as city made their announcement, capital one announced that they would eliminate their bank overdraft fees in 2022. however, without pressure from congress and the administration, we are leaving it up to banks to self-regulate well bringing in huge profits on the backs of predominantly low wealth customers, largely consumers of
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color. it is time for congress to act to relieve this burden. chairman, ranking member and members of the committee, i appreciate the opportunity to testify and i'm happy to answer any questions that you may have. >> mr. greer, thank you for your testimony. miss hicks, you are now recognized for five minutes for your testimony. >> thank you and good morning, chair perlmutter, ranking member meyer and members of the subcommittee. as a proud former military's best of a specialist in the united states army, i know firsthand that running a household on military pay can be quite difficult for lower enlisted personnel. every month, my husband, who had opted into overdraft protection at one of the top 20 big banks, watched his pay be eaten up by 35 dollar overdraft fees. a cycle that continued, paycheck after paycheck, until i, a d.c. licensed attorney who was stationed in california, was able to find employment
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after jumping through strenuous light seasoning licensing requirements for the state. my husband and i are not alone. overdraft fees are paid the most by people who can least afford them. these are feeds that, one, very no relationship to the caused banks occur in providing overdrafts. to, extended to feeds. and three can be impossible to avoid for people living paycheck to paycheck. according to the research by the cfpb, overdrive fees have become a cash cow for financial institutions. in 2019, banks and credit unions charge more than 15 billion in over draft a non sufficient fund fees. with these fees making up a particularly large portion of smaller banks net profits. this money is mostly made off the backs of some of america's most financially vulnerable families, disproportionately affecting communities of color. overdraft fees are a penalty for being poor or financially insecure. nearly 80% of overdraft fee
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revenue comes to banks from 9% of bank accounts. the median balance for this group is less than $350. it is extremely challenging for people with low balances to avoid being hit with an overdraft fee. the timing of when debits and credits are posted to a checking account is opaque, complicated and out of the consumers control. and, in the past, some banks have changed the order of certain transactions so they debit from largest to smallest, to increase the number of overdraft fees triggered. overdraft fees should not be used as high cost forms of credit and should be eliminated, returned to an occasional courtesy for covering check or pre-authorized electronic payments. banks should be allowed to impose no more than six overdrafts a year. beyond, that they should cover overdrafts through overdraft lines of credit with a reasonable interest rate, instead of a huge overdraft fees. unexpected and i feel like overdraft are often cited as a reason for formerly banked persons to no longer have a
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bank account. when a bank it's a negative balance with repeated overdraft fees, it can make it impossible for the consumer to recover. so, the bank will close the account. when the account is closed, the financial institutions admits the customer's name to a database that acts like a black list, which can prevent a customer from opening a new account elsewhere for several years. among people with checking accounts, black and latino americans are more likely than white americans to incur overdraft fees. it is wrong that a person who is struggling to get by that exploited with a surprise 35 dollar fee, just because they inadvertently over drafted their account while buying milk. some banks have made significant changes to their overdraft programs, with a small number eliminating all overdraft fees. other getting rid of non sufficient fund fees and some making more modest changes like 24-hour grace periods. well this is positive for the banks customers, these measures are insufficient by themselves. we need financial regulators to
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take decisive action to stop abusive overdraft fees at all financial institutions, and to prevent them from coming back. harmful overdraft practices remains a systemic problem that policy makers should address, unless fair, legally binding rules for overdraft are established, bisa fees will remain. we also need to look out for new thin tech forms of overdraft fees, like fees hidden as reportedly voluntary tips. we urge representatives to cosponsor and support representative maloney's overdraft protection act, and for senators to support senator booker's overdraft profiteering act. these bills will cap overdrafts at one per month, six per year, while allowing additional overdrafts to be protected through lines of credit. we also urge cfpb to use its rulemaking authority to end abusive practices and ensure consumers are safe at every bank and credit union. we also urge the financial
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federal regulators to use their supervision and other authorities to address this and other problems. and we urge members of congress to -- the actions taken by these regulators. thank you for inviting me to testify, i will have you to be answering your questions. >> thank, you mistakes, for your testimony. mr. cohen, or you are now recognized for five minutes for your testimony. >> good morning, mister chairman. ranking members and members of the subcommittee. thank you for the opportunity to testify. i name is paul kuhnert, and i'm the president and ceo of the university of wisconsin credit union. i'm testifying today on behalf of my organization. the u w credit union is a state chartered credit union. we have assets a four point $8 million and are among wisconsin's top ten financial depositories. we operate primarily in the wisconsin communities. we have 875 employees and 25 branch locations.
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i provided written testimony in advance of the hearing, so i'll be brief in my comments. as a not-for-profit credit union we believe i job is to improve the financial well-being of our members. this led us to first introduced overdrafts or faces more than 20 years ago, and the same mission led us to be early among financial institutions and reexamining our overdraft program and responding with changes to create a more equitable banking experience. in 2000, one when we introduced our overdraft program, we viewed it as a way for users to avoid bounce checks. in recent years we have observed use of the overdrive program even though all my tools made it easier for members to keep track of their account balances. in 2009, when the federal reserve published an update to regulation easy, it let us to re-examine our overdraft program. about that, time to consumer groups for questioning the values of some overdraft programs, raising concerns that the fees most often fell to those who could least afford
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them. as a result, we made changes to our overdraft program in 2010. including implementing a de minimis gray zone of $10, setting a limit of one per day. we also affirm that we would not ask members to opt into pay overdraft fees related to debit card transactions. we saw a significant decline in overdraft fees income after these changes. over the next decade, we introduced additional types of accounts that helped consumers avoid the possibility of overdrafts altogether. then, in july 2021 we implemented a reduction in the overdraft fee to just $5. this is what led us to lower the fee. during 2020, overdraft programs were again frequently the subject of financial industry news stories. we also witnessed social unrest that prompted us to think deeply about racial inequity and consider business practices from an equity point of view. also, we were influenced by research which show that lower
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income households, particularly black and latin ex-households, were more likely to use overdrafts. we reviewed our costs again in providing overdrafts or vases. in, short a review led us to believe that a five dollar overdraft fee, limited to one per day, would be sustainable for us. it is important to confirm that none of the changes that we have made have reduced the availability of over draft funds to our members. my written testimony includes more details on all of this, so i will just summarize and say, when prices are fair we believe consumers do benefit from access to the credit provided by overdraft programs. thank you for the opportunity to testify today, and i look forward to your questions. >> thank, you mr. kundert for your testimony. mr. sueiro, if i am making mincemeat of your name i apologize. please state your name for the record, and you are now recognized for five minutes. >> thank, you mister chairman. good morning and thank you for
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the invitation. i am santiago sueiro, senior analyst at uni dose u.s.. formally the council of -- the largest civil rights and advocacy organization in the u.s.. for more than 50 years, we have had advanced opportunities for latinos. we also partnered with 300 affiliates from colorado to missouri, small towns in texas and florida,'s two big cities on our coast. our affiliates are local community organizations from across the country that directly serve latinos. latinos are in a precarious moment. the federal government's response to the pandemic was critical to reducing poverty and supporting low income people. but, that supports like the child tax credit expired, many are struggling to make ends meet. recent data shows that, over the last seven days, roughly 63 million people had difficulty covering expenses, and this is like 38% of latinos compared to 23% of whites. yet, the work of latinos is
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fueling the country's economic recovery. latinos start business at more than doubled the overall rate, and we own significant purchasing power. as such, low income people must not be burdened with unfair and unnecessary fees. we are encouraged by recent announcements by some banks that they are reducing or eliminating over and non sufficient funds fees. these actions are, in part, a result of renewed attention from regulators, in addition to pressure from consumers in a competitive market. but, because they are voluntary, they could be reversed if conditions change. for this reason, we strongly encourage policymakers to establish permanent guardrails to ensure a competitive and fair market place for low income people, including with the nose. we have three overarching of observations that is for my work on overdraft. first, most people that incur multiple overdraft fees make less than $50,000 a year. this group is disproportionately comprised of latinos. second, overdraft are not
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sufficient fund feeds are a barrier to entry for unbanked us. holds third, a mix of careful considerations and market regulations can improve access to banking services, resulting in a win-win situation for the industry and overdraft consumers. fees by nature impact customers when they can least afford an additional cost. they are also predominantly if you charged to the lowest incomes consumers. so consider that research shows that black and latino households are far more likely than white households to draw overdrawn account and of moderate income households are more than twice as likely as higher income households to overturn an account. of exactly five implications for those outside of the financial mainstream, as of 2019, roughly 7 million people were unbanked. 12% of latinos roy unbanked. and this is compared to 2.5% of whites. the cost is a major barrier to obtaining an account. some 34% of those who remain on banked say they do not have a bank account because of high fees. and 31% say these are two
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unpredictable. to policy change pathways could help make the marketplace fair and more dynamic. first, excessive fees should be limited by regulatory approaches would could include limits on multiple feeds incurred for the same incident, capstone total fees, reasonable grace periods to your own overdraft, and for example, the overdraft protection act would limit overdraft fees significantly. the consumer financial protection bureau is taking an interest with the recent request for information focused on so-called don't thieves. second, we should deepen support for institutions with more inclusive and affordable bank products. community development financial institutions and minority depository institutions officers products. and we know of many credit unions that go to great lengths to include latinos and their institutions, including low cost products. congress should therefore consider increasing appropriations funding for the cfi funds bagram, allowing them to go and serve more low income consumers.
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yet the cdfi find means compliments to growth fail to meaningful levels. the advancing dell technologies disappointing clearly vaccinated at millions or dollars to cdfi -- and this would significantly improve their ability completely complete with back banks that are in tech products. finally policymakers should incentivize banks to sign on to bank on national gun standards, and bank should provoke these no overdraft locust accounts in underserved communities. some of our financial institution fence that there should be raised to the top business strategy as a path forward for the banking sector. we agree with the sentiment that investing in low income people by providing affordable and high quality products will allow communities and banks to go together thank you, and i look forward to your questions. >> thank you, mister sueiro. i appreciate your testimony. you know we like to hear from mr. zywicki. is it zywicki or zywicki?
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>> zywicki? >> zywicki the. you are now recognized for five minutes for testimony is. >> several trick names on the panel today. thank you chairman brought, it looked, admire and members of the public. and distinctive zoomers are frustrated by -- financial products for consumers today are extremely complex for various reasons, and have a lot of price points. but the point i hope you will take away from today is that exasperations is not a substitute for sound economic analysis and i think this is an area in which underground and unintended consequences of that zone overdraft protection, substantive limits, price controls at the like could have some serious unintended consequences. so i want to talk about unintended consequences briefly on three groups, which are first those who use overdraft protection, a second, bank and in particular small banks, and third, all other consumers who don't use overdraft protection and particularly lower income consumers who would, i think, be most adversely affected by
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unwise or extreme new limits on overdraft protection. first, who are these people who use overdraft protection? i have dealt this in my written testimony, but i'll just give a brief overview here, which is, first, these are individuals have limited access to credit general. the cfpb disturbing in 2017 and they found out they can somewhat have previously been found, which was the primary protector of whether somebody frequently overdraft their account is their credit score. and that people with local discourse used over draft more frequently. it does not correlated with income and other demographic characteristics. there are a lot, a lot of low income households in this country who manage their financial affairs fine and never overdraft their account. and i think that's important to keep in mind. people who use overdraft a lot are also people who don't have access to credit cards. and if they do have access to credit cards, they have much
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less credit access on their credit cards. and so, most consumers use credit cards for short term expenses they cannot. the second thing we know about these people is a general use of a graph, heavily overdraft uses use for what we could call necessities. michael flowers and i did researched and look at fcc coach, merchant, goats we found that overwhelmingly, places like where people overdraft are grocery stores, gasoline pumps, and the like. other studies have found this for things like utility, rent, mortgages, groceries and alike. the third thing is is that as i've mentioned, there seems to be little correlation between heavy overdraft usage and income. in fact, what we find is that higher income households is measured by households that make a lot of deposits each month are actually more likely to be the households that overdraft. what we see is that [inaudible] over bears are households that
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have high income and high deposits, but also just a lot of deposit activity on the air count. they have a lot more debit card transactions and the like. and though average balances. but we are talking about people who just have a lot of income of volatility, but they do not appear to be their income, they tend to be higher income or at least how deposits. the fourth thing we know about people years overdraft protection a lot is they wanted to their accounts a lot more closely. they understand that they are skating near the edge. and when the [inaudible] they typically understand that they are hoping that it will work out, and that he deposit will hit before where a withdrawal, or they know it will not. they check their accounts regularly, they are much more active and checking their accounts. the second group this hits our small banks. thanks, as we've heard, generate a lot of revenue from this, but what we have found, and i can elaborate on this questions if you'd like, is that small banks tend to be more dependent on overdraft fees and large banks. why? because large make events have multiple lines of revenues,
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wealth advising services, insurance, all these sorts of things. small banks will have much more difficult time diversifying if they lose this stream of revenues. the third thing and what i want to close on is to talk about the impact on other consumers, consumers who don't use over drug protection. which is if we get rid of overdraft protection and banks move to pick up revenues somewhere else, what are we going to see? we'll see higher bank fees, we'll see higher minimum monthly deposits as basically insurance against overdrafting. and we will see a lot of access to free checking. and we've seen, and this will impact low income households at the most. a paper by evans, light and [inaudible] found that went if it changed its rules on opt into overdraft protection, the percentage of free bank accounts fell 11 percentage points in one year. that impacts low income consumers. we also have the study by douglas, melcher and work, and that i would refer you to, which is they found when overdraft fees were essentially
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deregulated, what happened there was a decrease in returned check fees and an increase in bank accounts by low income households. so thank you for your time, and i look forward to taking your questions. >> mr. zywicki, thank you for your testimony. the chair will now recognize the chairwoman of the entire financial services committee for five minutes for her questions. >> thank you very much faster perlmutter. i'd like to address this question to mr. greer. mr. greer, in his written testimony, states that a late institutions use racism and discrimination as a tool to expand their power and wealth. all while suppressing economic power of communities of color and other marginalized groups. these elite institutions that control resources use that
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control to change the rules of our economy in their favor. which continues a cycle of profit. you describe your work as, basically, liberation of oppression, of the oppression economy. so, now, many of the large banks have announced changes to their overdraft programs. however, these programs are not all eliminating the use of overdraft fees and providing different features for instance. some large banks are now offering new small loan dollar loans to their customers as part of the changes. one of the most important considerations when evaluating and comparing these different programs that the banks are now offering in lieu of more traditional high cost overdraft fees. mr. greer? >> thank you chairwoman for
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that question. it's so important. the perspective that you laid is exactly the assessment we have of the economy. i think there's a long history of the financial institutions in this country oppressing people of color, whether that's in the mortgage market, whether it's and retail banking. so on and so forth. we still see it today, we see examples of it today in the news. it feels like almost monthly to weekly. what i think is the most important thing to consider is, as financial institutions are served -- as recognizing that they're navigating in a very turbulent economy, especially now in the time of covid. more income volatility, more volatility around the hours that they're able to work. being pushed into the gag economy and structuring products and services to meet those needs for folks are things to consider.
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one thing that i'll raise, miss hicks raised it in her testimony, is access to affordable credit. i say access to affordable credit that is not predatory, but can actually help people manage their finances and actually build wealth. because what we know historically is these fees have become a substitute for folks who cannot access affordable credit in financial institutions, because of discrimination in the credit markets. so, when i would say is we can't look at these things in a vacuum, it's very easy to say if we do this and this will happen, or if we do this in this. we have to look at the whole picture, i know that the financial institutions have a responsibility to meet the full needs of the communities that they serve. >> do you believe that, because of these practices, the wealth gap can never be closed in fact? if these kinds of practices continue? >> absolutely. because what these fees are
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doing is there extracting resources out of the household of communities of color. that would, otherwise, could be used to save money, to put money down on a mortgage, on a house. to put money down on a small business. you know, to participate in an economy that builds wealth. but they're not able to do that because fees like these, and other things that financial institutions do that this committee and others have covered over time, are just pulling and extracting and siphoning resources out of communities that could be used to build wealth. >> the amount of money that you indicated that has been paid by black and latino communities is absolutely extraordinary. do you stand by that? >> it's what we found in the research, in preparing for this interview. >> i think it was about 40 billion dollars you indicated, in one instance here. with the black community.
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>> 800 million and 1.1 billion in bank fees. in 2020. >> thank you very much, miss chairman, i yield back. >> she yields back. the gentleman from missouri, mr. luke mayer is recognized for his questions. >> thank, you mister chairman. professor zywicki, as someone who served on the chair of the cfpb task force for consumer law, do you think the cfpb has a legal authority to set the prices for consumer financial products? >> i don't think they have the legal authority to set the prices on financial products. as we know, dot frank specifically says they can't use use reskilling's. but i think that would be a general role in terms of dictating prices for financial services. >> so, why are they getting involved in this? >> they have this theory of
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junk fees. i assume the theory must be something like that these aren't fair, deceptive are abusive practices. it's not clear what their authority is for it, but basically what we've had is rhetoric, so far. >> it's very concerning to me, when you have an agency like that that basically creates a new word. i've been around the financial service industry for almost 50 years. i've never heard the word junk fees. it's not an any financial services dictionary anywhere, they've created this word. basically, when i think you just said, they're trying to insinuate that there is some sort of exploit of activity going on here, rather than acknowledging that service charges are basically something that is a service that was requested for by the customer for which they pay a fee.
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they don't pay fees if they don't access the service, today not? >> that's right. all these fees are generated by something that people do, but the more general point i think, congressman luke mayer, is a sound one. what is a junk fee versus a risk based feat, for example. if i go off to europe and incur a foreign transaction fee, should some poor guy in rural nebraska be forced to subsidize my foreign transaction fee? if i overdrawn my account, why should somebody else have to pay for my overdrafts? if i pay my credit card late, why all of a sudden it is that a junk fee rather than something that prices my risk and for prevents other people from having to subsidize my behavior? i think the junk fees rhetoric covers a lot of serious economic questions. >> we see, over the last several months here, it really is concerning to me to see the activities of the cfpb and how they're going about business. for instance, they set up the strongmen issue and suddenly,
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the other day, they talk about illegal repositions. they've created the whole situation here that doesn't exist. and said we have to regulate that. we create service fees for a financial institution as junk fees, therefore we have to regulate that. there's nothing there, and yet they try to create something so there's an excuse to regulate it even though they don't have an authority to do that. it's very concerning, how they're going about their business, how they're exploiting their lack of oversight to be able to go about doing this. it's very, very concerning. i'm just curious if there is no overdraft to asian, what happens to people if they can't have access to overdrive services? whether they're going to do when 45% of people can pay a 40-dollar bill and you go to buy a new set of tires and it cost $500 tomorrow? >> well, that's right. basically, they will either had their payment declined, in which case it will be able to do but to buy the goods and services they need. as i said, overwhelmingly it
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seems people use overdraft or things like groceries, utility bills and the like. the second thing they could do is try to go somewhere else, and for a lot of consumers, what we've already said is they don't have access to credit cards. what a lot of heavy users of overdraft to said is their next alternative is a payday loan. so, they either go without or they have to go down the street to a payday loan to get the tires. it's not clear to me how that makes them better off. >> he made a comment a minute ago about, if they don't charge a fee for this, the rest of the customers who patronize that particular business are going to have to pay for that person's ability to have a free loan through higher service fees that they pay. wouldn't be a fair statement? >> that's basic economics 101. >> because, at the end of the day, there is a certain amount of expense that the business has that they have to cover with their charges for their business operations, whatever the business model is. it includes some fees to be
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able to pay for the people who work for, them to be able to do that. to me, it's a simple way of operating, it's a business model that's been there for years. there's nothing exploitative about it if you understand how it operates. i, mean i was in the business for a long, long time and people call up and say i wrote a check today, albeit next week to fix it up. please pay my check so i don't have an overdraft fee -- sorry, i mean a bad check fee. and i can do business. they're willing to pay the fee to be able to translate that piece of business. so, with that, thank you mr. zywicki for your testimony today. chairman, i yield back. >> thank you. now, i will recognize myself for five minutes. at this committee, i have said to people from time to time that i think we have to responsibilities. consumer protection and financial institutions. one of them is to weed out and stop sharp practices. i would say that something, as a bankruptcy lawyer, we heard a lot about. bankers and bankruptcy lawyers, we heard about sharp practices that take advantage of every
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day americans and put them behind the eight ball, where they really have trouble exiting. the other is to make sure that the financial institution remain solvent and strong. those are not incompatible. those things work together. so, i'm going to start with you, mr. kundert if i may. i want to ask about some of the protections your credit union has introduced on your product. beginning back in 2010, university of wisconsin you w credit union implemented a de minimis overdraft offer, published plain language description of the product and made other changes to make the product more consumer friendly. as you, mentioned you also recently cut your overdraft fee from 30 bucks to five. many of these steps for credit union has taken are emblematic of changes many of my colleagues and i would like to see in the market overall. i think a lot of other financial institutions are taking a close look at the
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overdraft programs and hopefully we will see continuing improvements in this which has been the most area. challenging part of improving your overdraft program? >> thank you, mister chairman. well, the most challenging part is adapting to not having the revenues that the programs previously provided us. you know, the revenue from of a great draft programs, especially those that with david transactions can be pretty significant to a financial institution. so we voluntarily made these changes and made them, as you mentioned, ten years ago. so we've had time to adapt our organization to not depend on that overdrafting come. i think operationally it hasn't been as difficult to implement changes as it is just too, just adjust a business model when
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that revenue isn't a part of it. >> how have your customers reacted to the changes that you've made over this period? >> honestly, they've acted, responded quite quietly. we didn't have a lot of complaints about practices before 2010, or even since. obviously, people have benefited from the more affordable cost off the program, and that's been a positive. we enjoy very high members that satisfaction levels overall. but we have received over the years very little feedback one way or another on these programs. but we believe in principled decisions and don't necessarily make them based on public outcry or complaints. >> you said it's -- these provide a significant revenue stream. i heard mr. greer at the beginning of his testimony talking about the 34 dollar charge beat back in three days on a whatever cup of coffee or
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what it is at a 17,000 apr, annual percentage rate. so, mr. greer, do you think these revenues that, you know, people get stuck in -- is that is is -- it a revenue stream that the banks are becoming dependent upon, again this is what i would ask you? >> >> or a bank? any banks? >> yeah, you know. i think dependent upon is a, you know, i think it's pretty clear it's a significant portion of their revenue that's coming in. now, dependence on that revenue does not to me justify the extraction that it's taking from households, particularly the households of color. we have [inaudible] you and congress have to understand the trade-offs of that, you know, this financial instability in the household that the fees are causing households, to me, wouldn't be
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commensurate with the adjustments that a financial institutions would have to make in order to forego some of the revenue that they would lose by not doing, by eliminating these fees. so again, i think the trade-off for families is there much less able to stomach the impact of these fees that a bank would be for cushioning the impact of the loss of revenue. >> thank you. my time is about to expire. i will yield back and recognize the gentleman from florida, mr. fuzzy, for five minutes for his questions. >> thank you very much, chairman promote. so we can, is there any way to be charged and overdraft fee if you don't write bad checks? >> not that i'm aware of. if there was no fee to cover bad checks, who would have the burden of making up lost
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revenue in administrative cost? >> and that's a great point, congressman boise, which you have to keep in mind, the overwhelming majority of americans never or rarely overdraft their account, and so we're talking about what people don't do this. but, if we have a situation which people are writing bad checks that have to be kept off or payments that are made that have to be cashed off, and overdraft line of credit might be 300, 400, $500. if people don't have to pay for that and that ends up getting ripped off, someone else has to bear that cost, and that means another 80% of calf souls presumably who aren't using over draft very often. >> so, when we're talking about the time limits here, the end of overdraft, with examining them, eliminate is a freeze costing consumers billions. i mean, so, if we do, that we shift the burden of responsibility from people who write bad checks to the backs
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of people who don't write bad checks. do i get that correct? am i anywhere in the ballpark -- on this? >> right. the rest of us have to pay for. what bothers me most about this, congressman pointy, the impact this would have on all consumers, which is to say, one way of keeping people from writing bad checks is, for example, requiring to hold higher minimum balance in their accounts so the checks are less, or more likely, and payments are more likely to clear. who is that going to? that's going to hurt low income consumers. you could charge bank fees for everybody, monthly fees in order to provide this, quote, free service. who that go into effect? it's going to most like the affect low-income consumers because they're not going to be able to get the minimum balance is necessary to maintain free checking on the like. and so, there's no free lunch here. there's no free lunch, unfortunately, for when your over draw your account, somebody has to pay for it. >> you know, historically, you
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know, we only subsidize things that we want to encourage. and i wouldn't think we'd want to encourage writing bad checks. but it's almost comical when you stop to think about it that the management of an organization that some 30 trillion dollars in debt, with no plan whatsoever to repay that one, it's continuing to pay interest and burden future generations, is trying to tell banks and credit unions [inaudible] how the should run their business. i mean, it almost doesn't pass a straight face test. you know, i have a real problem [inaudible] that. now, would it be reasonable and beneficial for banks to characterize overdraft fees to become a short-term line of credit with transparent limits on the amount of available credit and the prices of that credit? >> yes. which i think would be a useful way a, more productive way to think about this, congressman boise, and i feel very strongly about this, we've been talking
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about this in our test report. i think this is the answer to this is more competition. which is, it's regrettable that if you can't get and over transaction you have to go get a payday loan. i think the answer is to open up things like finn tech, crater charge ring of credit unions, more access to different sorts of banks like walmart being given a banking charter. i think that weren't wage access as we talked about, directed deposit advance, and i also think a very important thing that was mentioned in some of the background materials in this hearing is it is time for the fed to get its act together on faster payments! somebody needs to get this faster payments problem solved! the rest of the world knows how to do faster payments! why can't we do faster payments so that it takes three or four days for your bag to check declare in a back? and i don't know whether it's fed or whether it's at the clearinghouse or somebody, but there are a lot of things that could be done to promote competition and provide promote
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access, i think, without going down this path of abandoning banning products, price controls, and things that will have terrible unintended consequences for people. >> >> the gentleman i thank you, pd what time is about to expire, so i yield back, mister chairman. >> gentleman yields back. the chair now recognizes the gentleman from texas, mr. green, who is also the chair of the subcommittee on oversight and investigations. and you are now recognized for five minutes for your questions. >> thank you, mister chair. am i audible, mister chairman? can you hear me? >> yes, but try to speak up a little bit. it just -- your pretty audible, but you are going to have to be just a little louder, thanks. >> i'll be as loud as i can. how is that? >> good. >> thank you, mister chairman. mister chairman, i'm grateful for this hearing and i especially want to thank you and the chair of the full committee. i am just amazed at how this
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hearing has unearthed facts that are so disturbing. and i want to mention this, the chair of the full committee [inaudible] the honorable maxine waters, when it comes to housing, the homeless and consumer protection, nobody's in front of her in that line, the persons who desire to do so, so i'm grateful to you, madam chair, so [inaudible] to serve under leadership. with reference to the free lunch, no free lunch, let's talk to mr.. mister president, you have been without these overdraft fees for sometime now. are you at risk of going out of business? >> no, i'm happy to report that we are doing very well. >> how do you respond to a comment about no free lunch when it comes to doing something that obviously benefits your clientele? >> well, we did not eliminate
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the overdraft fee entirely. our action was to change the likelihood that it would be imposed, make sure it wouldn't be imposed more than once a day. and to study our actual costs and make sure that defeat we were charging was proportional and appropriate for the service we are providing. we do provide our account holders between 200 and $600 off liquidity through these programs, and so, to be sustainable, we believe that we need to charge something. it wasn't possible for us or wise, i should say, we didn't think, to charge nothing for the feet, because we think there should be a greater cost to receiving an advance from the credit union that not receiving one. and i think that goes to some of the comments that have been made about fairness to all the members that we serve. but it isn't -- we're not serving all the members well to,
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we think, to disproportionately profit from one segment of our memberships, simply to benefit another. we do think that we have, we need to be diligent in monitoring the levels of income that we, that we received from the various products we have. >> well, i'm grateful that you've given us some consideration, to be very candid with you. i have one more question for you, and i know have to move on. in doing this, how much less are you charging the persons that you're referencing? what was the feet initially, and what is it now? >> we made substantial changes to the likelihood you would incur iffy and no more than 1:10 years ago, but last year we reduced the fee from $30 to $5. $30, we were comfortable with that amount in 2010 because it was at that time sort of considered the competitive market rate for an overdraft.
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our focus was to make sure you wouldn't incur that from a debit card transaction. it would be purely from a check transactions or an ach debit. but then it was last year we reduced duffy after more examination of the program. >> and you are maintaining your business model and doing well? >> we are. thank you. >> thank you. mr. greer, let me go to you rather quickly. you indicated that these fees, presidents would usually have $20 or less in their overdraft, and that that would be repaid in about three days. i think you said that interest rate annually would compute to about 17,000%. correct my mistake, i think that is [inaudible] information for me for future reference? >> no, that's correct, congressman. >> and $24 or less. and what would the typical
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amount of the overdraft fees before this $24 or less? >> yeah, anywhere underneath that $24. so you're talking about, and it is great, like routine, kind of, purchases. at the grocery store, carton of milk. >> i guess what i'm asking is what would defeat at the backward [inaudible] . >> oh, it would charge $34 on like a five dollar. >> $34 on a five dollar overdraft. >> yes. >> well, i thank you mister chairman, and i yield back. >> gentleman yields back. the chair now recognizes the gentleman from kentucky, mr. barr, for five minutes for his questions. >> thank you, mister chairman. and thanks to our witnesses for this testimony today. and it's the discussion has progressed, i notice inseam continues to come up. and that's the benefit of short term liquidity for consumers provided by these overdraft eligible accounts. and ahead of this hearing, i asked many of my constituents,
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kentucky, for some anecdotes about their experiences with bank accounts and overdraft fees and i got a whole lot of feedback, you know. and one of them, i just have to share. there were a couple of brothers, and they were horse traders, kentucky is synonymous with horses. and these guys would buy western performance horses for cutting it raining. and they bought them for about $3,000 and they sold him for 5000. they had short term liquidity needs. and they sometimes paid the bank $1,000 in overdraft fees and negative bows his. but they wanted to do it. they knew that they were going to have to do it. they didn't qualify for a line of credit, so they wanted to do this because they had no problem paying a 30 dollar overdraft fees to buy a house that they would then make $2,000 on. they knew about this product. they liked the product. and the bank had a problem with it not because the bank didn't believe that these folks were going to pay them back, but because the regulators had a problem with it. that's why the bank had a
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problem with their overdraft. another great story. from a kentucky in. and it's one thing to speak about these fees in the abstract but it's a totally different thing to hear about what happens in reality and to hear directly. a young mother, husband was deployed in the army, and the car broke down. she had no way to pay for the car repair but forgot that you didn't have sufficient funds in her checking account. the overdraft protection on that account allowed her to address her emergency. and you relate that data feed that she paid was worth the convenience in the circumstance. and of our many other stories similar to this one. professor zywicki, in the circumstances like the one who just described, what options would be available to that young mother whose husband was deployed overseas, what alternatives which he have if
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accounts with overdraft protection were banned? it would be the alternative for her if she faced that short terms catch strap the? >> well what you know you've asked most people, including people in this room, we just use a credit card, right? credit cards are, that's what credit cards are. at the people that use overdraft are by definition they say we don't have credit cards. i think we need to understand, according to the cfpb people with overdraft who overdosed their accounts frequently have a quite a score of five 63. five 60. three these are deep subprime. so we're talking about of drafting extending 300, $500 of credit to someone. these are accounts that go bad. these are overdraft accounts that go bad, which is why you charge a fee on them. and these are people who are not going to get a credit card. so for this young woman, presumably, she had a credit card, she would have used. she didn't and so her alternative was probably a payday loan is the best he's going to do at that point, were going without. >> and to that point, this woman saw her bank go to
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grocery store, and went up and thanked the bank for the convenience that that agreement overdraft protection provided. professor zywicki, can you describe the regulations for that the regulations -- and the transparency process protections that these already provide to customers. >> yeah, there's already a lot of disclosures that there were required with the respect the point of violent atms. they've changed throws so it's up to him and so consumers have to actually opt into that and unsurprisingly, what we see is the consumers who use overdraft protection are a lot more likely to opt in when that was passed because they have the greatest need for the product. >> you know, in the final, minute i want to focus on another point that you made and the ability of community banks, small, banks to handle over regulation off of a draft versus large banks. it's wonderful that we heard from one of our witnesses, mr. kundert, about his institutions
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ability to reduce those fees. and that's the thing about a competitive marketplace. and presumably, because of that, of that move, maybe, his institution is able to attract more customers. that's his choice, and that's what the free market and competition does. but can you compare the relative ability of large banks and small banks to absorb the costs of overdraft protection if ease are further curtailed or pay budget? >> yeah, i think it's great that banks are innovating on this, they are competing. if, you know, large banks want to be more generous on overdrafts, that's great. that in thousand flowers bloom. but the reality is is that larger banks have a lot more places they can generate trees from. and so one of the big ones is small banks have continued to be able to be competitive because the offer no annual fee bank accounts. right? large banks in general have moved away from that, and -- >> minister zywicki's, time is good expired, thank you.
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and just anecdotes, you reminded me, mr. barr, of my daughters buying their cup of coffee at starbucks, overdrawn two bucks, and didn't charge 35 on their overdraft. so, you know, it goes -- there all over the map on this thing. i'm going to recognize now the gentleman from california, mr. vargas, who's recognized for five minutes for his questions. >> thank you very much, mister chairman. i appreciate this meeting very much and i want to thank also the ranking member. doctor zywicki, you've said a few things here today that to me sound very counterintuitive. so i want to make sure that i understood what you said and give you an opportunity to clarify them for me, if i am incorrect. you said this -- who are the people that use overdraft? you said, it's not correlated to poverty. higher income families use overdraft more than lower
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income families. and they use it for groceries and utilities. that sounds very counterintuitive to me. i don't believe we've ever used overdraft, for an upper middle class family. i think you also said the, great majority of americans differ use overdraft. that seems to me what you said completely, completely untrue intuitive. could you, you explain that to me? >> sure, and be happy to. so, if you take for example the question about income. if you look at the cfpb 2017 report on frequent overdraft or, is what we find is when you look at monthly deposits, very frequent overdrafts who overdraft over 20 times a year have monthly deposits of $2,554. people who infrequently overdraft, 1 to 3 times a month, have $1,726.01 month. so a hot $800 more per month. and it goes down from high,
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from 20 to 10 and down. it goes from 2500 down to 1700, linearly. what we also see is that people in that category have very low credit scores, very low available credit on their credit cards, and much higher levels of point of sale debit card transactions, twice as many, as the people who have lower income and overdraft list frequently. so the logic seems to be what's seems to be driving overdraft protection for a lot of these people is they simply have a lot of money flowing through their accounts, and things get out of whack, right? and so, it would not be, unfortunately, unsurprising your family [inaudible] -- >> and dr. -- doctor, i'm going to interrupt you for a second. >> sure, i'm sorry i the testimony that other people spoke of, people of color, especially, over drafting, doesn't seem to judge with what you're saying at all. just to be frank. i mean, this seems to me a little bit like the old lawyers that got up there for the tobacco companies and said, no,
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no, tobacco, there's no health problem here. would someone else like to answer these questions or refute or contest what doctor zywicki has said? any of the other witnesses? >> sure, this is santiago with unidosus. so i believe in the same report we've been looking at the 9% of consumers that account for 80% of all overdraft fees. in that report, if you look at the 9% of consumers, seven out of ten of them earn less than $50,000 per year. so if you are looking at it in terms of income. >> of course. >> a majority of them are relatively lower income rather than looking at it in terms of composite amounts. >> it seems ridiculous to me to believe that mostly wealthy families overdraft. i mean, that, to be, sounds --
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maybe it's not -- but it seems to be ridiculous, especially if you see so many people of color who are normally not wealthy paying of so much in overdrive trees. anyone else? but they like to comment on that? >> this is elise hicks from america's for financial reform. >> yes. >> i particularly agree that it does not [inaudible] high income families are using overdraft protection. when low income families do not own a lot of the wealth in this country. so quite naturally, the accounts that hold -- that are -- the 9% -- 9% of accounts that hold $350 or less that are using overdraft protection the most do seem to go to the low income people in the country. >> i mean, that, that seems to be obvious. i mean, it seems, i mean,
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that's why, but it could be right, i don't know. i think more should be done on that because that, to be, sounds ridiculous. the wealthy families are the ones that pay the overdraft, and a portrait. it doesn't correlate to poverty. that sounds utterly ridiculous. it sounds like that old commercial for the tobacco companies. but again, my time has run out. i appreciate searing very much. thank you. >> gentleman's time is expired. he yields his time. the gentleman from texas, mr. williams, is now recognized for five minutes. >> thank you mister chairman. mr. zywicki, do you want to quickly respond to any of those accusations? >> sure. this is cfpb data. this is a cfpb study. michael flores did a study that found the same thing. people with high, that iowa overdraft was -- again, most households don't overdraft or overdraft rarely, right? so we're talking about high over drafters. cfpb it's not that, michael flores's study found the same thing, which is that what correlates with people is they
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have high deposits high, transactions, and low average policies. >> we know the cfpb it's always right, so? thank you for that. >> i wouldn't [inaudible] cut to the cigarette industry. >> it's funny we're having this hearing highlighting a phenomenon that the private sector, and i'm a private sector guy, i'm a small business owner, is already taking care of. there's a thing called competition. a lot of people don't understand but it drives the financial industry to lower and get rid of overdrafts and charlie. the customers tell people what to do. they tell businesses what to do. this is not happening because of government mandates, but businesses who are competing for customers. it started with some fine tech companies like chime, who got rid of these trees almost five years ago, and a few years later more traditional banks like ally change their offer draft policy. in their, opinion but better, to better serve their customers. most importantly one of the most largest banks in the country, citibank, got rid of these fees as well. so the market is naturally, naturally taking care of this issue with government intervention and we do not need
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morals from washington mandating the entire industry moves in this direction, because i know when i opened up my first checking account, i agreed to write checks and have money in the back before the check cleared. it's pretty simple. so, professor zywicki, in what ways do you think banks should, would recoup some of their last revenues if overdraft fees were suddenly banned across the board? >> right, let me again emphasize what you said, which i think it's great that there's different models of competition and credit unions, obviously, a member organizations. they can have a different model from the back, the kind of, is open to all comers. but i think what we would probably see is a reduction of rechecking. we would see higher monthly requirement minimum balances. this is what the duke loss and other research found was that there was restrictions. and we would see higher bank fees, like higher monthly fees. so. >> okay. so if we, if we that just laid away overdraft fees, some private sector participants will simply block these transactions from going through
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at the time of the sale. and this will leave consumers, again, the very people we want to help sometimes, we end up hurting. and we will leave consumers a few options. if they are left in a pinch and do not have sufficient funds in their account. so we saw, after dot frank, when the government came in with a heavy-handed regulatory approach, debit card rewards and free checking accounts, somebody left suddenly left their mark. that these are trade-offs to all these policies we can act in these, in this committee. and we should not look at outright bans on certain products that are provided unnecessary service to customers. in texas, we've got a thing is a deal is a deal. and so, professor zywicki, what are some ways we can expand consumers options in the small dollar credit space, instead of this blanket big government ban? >> i think that's the best way to think about this, congressman williams, it's first, i think there [inaudible] example is a very bright cautionary tale of how this act happens. and i would advise you like that. but as i mentioned, i think things like finn tech, nothing
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greater chartered of industrial loan banks, such as walmart, potentially getting up, and which access, direct access projects, all these sorts of things, more competition is the answer for this consumers, much ice rather than putting them in this pocket where they either have to get over to after a payday loan, which is a terrible situation to be in, where do a lot of these people find themselves, because there aren't enough alternative. >> mistreat america has been hammered. and i'm main street america, i'm in the car business. made streets been hammered with new regulations during president biden's first year in office. and one study estimated the true cost to be around 202 billion dollars of regulations, and 130 billion man hours to deal with these regulations. and it's a cost that businesses have to hire complaints people rather than sales people to comply with these governor mandates. so this means these businesses are forced to hire more compliance office that he will be nothing more than a drag on
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the company's bottom line because they generate nothing. i mean the business's total commission in. if you don't sell something, you don't eat. and to hire a compliance officer does nothing for me, does not help. so quickly, i know you've studied this topic expensive extensively and can you give us an overview or your view of regulatory optimism -- what's regulatory optimization? >>? >> it >> and that's a great point, which is this is one of the big reasons why this hit small banks so heavily. which is, every time you enter a new business, a new line of revenue, you also have new compliance costs that go along with it. so, if you're going to start selling insurance or something for small banks, this is very difficult. >> if you have a way to put a compliance officer on commission, let me know. >> gentleman's time has expired, he yields back to the gentleman from new york. mr. taurus is now recognized for five minutes, for his questions. >> thank, you mister chair. you know, it's become increasingly fashionable for
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banks and corporations to preach the gospel of equity and inclusion, but the banking industry should do some soul searching and ask itself, what are we to make of the racial inequity and exclusion brought on by overdraft fees? the imposition of over draftees at the expense of the poorest people of color, in places like the south bronx, flatly contradicts notions of equity and inclusion. poverty is expensive in america, in the prohibitive expense of poverty in america can be measured in part by overdraft fees. the overdraft fees for a single transaction can be $35, which is five times higher than the federal minimum wage. in 2019, overdraft and sufficient fun fees generated a historic high of more than $50 million for the banking industry. according to the cfpb, and asset fees make up two thirds of revenues generated by fees. overdraft fees are so common that one and 11 americans pay more than $350 a year. and even more troubling, less than 8% of customers pay a staggering 80% of the overdraft
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fees. is it fair to say, miss hicks, that those customers are disproportionately lower income people of color? mistakes? >> it is fair to say that the overdrafts are affecting people of color disproportionately. again, in my testimony, we're looking at 80% of overdraft fees from 9% of those accounts. and, going back to my colleague, mr. zywicki's point about overdraft fees not affecting low income people, again i state people of color do not own the most wealth in this country. so, if 80% of over travels are coming from 9% of the accounts, it must be coming disproportionately from people of color.
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>> according to the charitable trust in 2017, some president of customers who reportedly overdraft earn less than $50,000 a year. which is hardly high income in a place like washington d.c. or new york city. nearly 25% of the repeat overdraft fees equal to one week or more of wages. so, let that sink in for a moment. there are 52 weeks in a year, and their wage earners for whom a whole week of wages, several weeks of wages, are devoured by overdraft fees alone. is it fair to see, mr. sueiro, that those wage earners are more likely to face barriers to accessing reliable credit? >> yes. so, one of the things we see is in the cdfi from 2019, three answers that unbanked people gave that were associated with costs when it came to barriers to gaining entry into the financial system. another report from the center for responsible lending found that 1 million people, roughly, who are left out of the banking
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system as a result of overdraft fees specifically. and then, we've seen a lot of research showing that the high cost of banking, generally, is an impediment for low income people and latinos taking access to the financial system. >> so, again, it's fair to say when it comes to credit, there's a tale of two americans. those with higher incomes and access to affordable and reliable credit, and those with lower incomes in places like the south bronx, who often have no choice but to pursue de facto credit in the form of an overdraft. which, again, carries a fee that is five times the federal minimum wage. miss hicks, you spoke about the closing of accounts leading to the blacklisting of the lowest income americans. can you elaborate? >> yes, so, overdraft fees, when you put in the cycle of over traffic is like my husband and i were before i was able to find a job in california. it contributes to the cycle of,
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when you're getting paid, most of your check is going to those overdraft fees. so, with that, it does lead to people being unbanked. because if you over draft multiple times, the bank is going to close the account. because of these fees, people do not trust banks. and decide to stay on bank. >> mr. zywicki, it's a speck we're going to disagree on this question. but there are banks that, for which the majority of the revenues come from overdraft fees. if you are a bank from which the majority of your profitability, on which our very existence depends on overdraft fees, does that strike you as a healthy business model for a bank? >> yeah, i'm familiar, i've seen user reports on a couple of small banks. in particular, that do this. one that particularly concerns me is that there does seem to be some evidence that, ever since the military lending act went into effect, thereby
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restricting access to the military for a lot of other forms of credit, that they've ended up using a lot of overdraft. >> mr. zywicki, i'm sorry i keep interrupting you. but everybody seems to end on you and i have to stop you. so, i apologize for that. there will be an opportunity for the members to submit written questions to all of you, to follow up on this kind of thing. so, the gentleman from georgia. mr. louder milk is now recognized for his questions. >> thank you chairman, this is an intriguing subject and, as someone who is very familiar with overdraft fees, especially in my younger years in the military, i paid quite a few of those. this is an interesting subject, but i do want to quickly go back to some of the discussions we had about who is paying the overdraft fees. i'm going to ask mr. grittier or mistakes, whoever can answer this, i'm going to ask about
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who is paying the most fees. either instances where banks that are in minority communities, because some of the information i'm getting kind of sounds this way. our banks that are in minority communities charging a higher fee per overdraft than banks not in minority communities, is that what we're saying? is that why minority communities are paying more and over, drafty as they're being charged more? whoever can answer that question. >> no, that's not what we're saying. overdraft fees seemed to be pretty standard across the board. except, when you're looking at credit unions. >> so, the result is, you're saying, minority committees communities are doing more overdrafts than non minority communities. is that what we're getting at? >> minority communities are usually low income communities. making $50,000 or less a year.
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when you're taking care of a family, and you're buying, going to the grocery store and inadvertently over drafted your account, yes. when there is inflation. >> in most of my life, before i got into congress, i made $50,000 a year or less. i never considered myself poor in that aspect, and i never overdraft after i learned a great listen from that. and that lesson was i went to the grocery store one-time, had a buggy full of groceries that my family needed in the grocery store wouldn't accept my check. because i had an unpaid overdraft fees which, is to mr. zywicki's point, that is what a lot of people are using it for. the issue i had was the expenditures i made at the beginning of the month, which, while my colleagues in the military were bringing their lunch to work, i was eating out. i was going out with my family. so, those decisions --
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in fact, i started listening to zigzag, lure i don't know if you remember, that zigzag lure had lost a whole lot of weight and he finally decided that he was choosing to be overweight. he said, because i never accidentally ate a double cheeseburger. with that told me was, i was making particular choices. it's one of my colleagues, mr. barr said, there's people who are making those choices. for, instance the horse traders. they're paying a lot less in the overdraft they would for a line of credit. right? so, there is a choice function there. i'm not saying they're having to make this choice. yes, there are some problems with this and we do have to address, it one way or the other. because, at the rate administration is driving up inflation, i imagine this is going to get worse before it gets better. i do like some of the things that i heard mr. kundert say that they have done in their credit union, and i do have one question to ask their. you said this did cause you
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some revenue when you made your changes to overdraft fees. how did you make up for that revenue? did you just take that as a loss, did you raise fees and other areas or did you open up more lines of revenue coming in? how did you make up for that loss? >> we primarily made up for it overtime by building more efficiency in the organization. when we benchmark are operating cost to other, similar sized institutions, were often in the 90th percentile for opportunity expensive fish and c per household. so, that took some time and some focus. that's primarily how we did it, because we have to compete on price on all the other consumer products we offer. we can't be -- >> so, basically, uk cost in other areas. okay, that answers that question. as i'm quickly running out of time, mr. zywicki. is it economically sound to expect a private business or private service, to provide a
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service that can't afford? what's going to happen if we force banks, and i know some banks that exclusively operated minority communities, if we force those banks to make changes that they can't afford? they can't cut costs like the credit union has done. what is the result of that? >> well, the first thing that will happen is will have to find fee somewhere else. the second thing is, if you reduce the cost of overdraft, people are probably going to overdraft more. which is going to mean your losses will go up as well. >> that does put people in a spiral. i've been in that spiral. but it was a spiral i knew i inevitably chose to be in, because people who are in the same income bracket i was and we're not having the same problem i was having. i'm not saying that's every case, but we do have to consider that when we're looking at making national changes. and i yield back the remaining time i know longer have. >> the gentleman yields back the time he doesn't have. the gentlelady from massachusetts, vice chair of the subcommittee miss pressley
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is recognized for five minutes for her questions. >> thank, you chairman perlmutter. being poor in america is expensive. workers and families are living paycheck to paycheck, struggling to make ends meet due to low wage, it's the lack of affordable health care, absence of paid leave in many other policies that are pushing families farther to the margins. and, yet these are the very same people, the very same families who, at their most financially vulnerable moments, our charge overdraft fees by banks. miss hicks, some large banks have voluntarily reduced or eliminated overdraft fees, but many have not. according to the institution, as of 2020, 16 banks relied on these fees for more than half of their net income and three of those banks relied on them for 100% of the profits. is it fair to say that this business model is based on making poverty a sustainably profitable enterprise?
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>> well, thank you representative pressley for that question. i keep going back to this point, because i want to drive it in. and i wholeheartedly agree that this business model is based on making poverty a sustainable sustainably profitable enterprise. as i stated in my testimony, nearly 80% of over driving you comes from 9% of accounts with median account balances of $350 or less. making it very expensive to be pour. just to go back to the point that was made previously, it's not about choices, it's a bit access to resources. >> thank you miss hicks, certainly no apologies here ever for being repetitive. as tired as people might be of hearing those sobering data points, imagine how exhausting it is to live those. can we really trust banks that reliant overdraft fees for a majority of their income, of their net income, to
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voluntarily reform? or do you agree that we need to ban overdraft and other junk fees for good? >> i am extremely leery of financial institutions who, in 2020, made billions of dollars on overdraft fees at one of the most vulnerable times in american history. to voluntarily seize profiting from these fees. using regulatory and legislative intervention is imperative to protect those living on the margins. from being preyed upon for financial institutions. just to level the playing field for those who are being taken advantage of by these. >> thank, you miss hicks. while i was calling for it to your point, building on that. well myself and others were calling for overdraft fees to be abolished last year, big banks actually raked and billions of dollars of profits from those fees. so, can you tell us how big banks capitalized off of people facing great and unprecedented economic hardship during this pandemic?
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>> well, representative pressley, speaking of sobering data points. according to the american prospect, jpmorgan chase, for example, made 1.5 billion in revenue on overdraft alone in 2020. in the recent findings from the ftc, in the same time bank of america made 1.1 billion in profits, wells fargo made 1.3 billion in profits. in the final three months of 2020, when the pandemic was at its worst, and deadliest, all three of those banks made 300 million just in overdrive fees alone. so, while americans suffered through the worst wave of the worst public health crisis and 100 years, and unemployment was skyrocketing, the country's biggest banks were gouging for americans for billions of dollars in punitive fees. thank you >> thank you, miss six. i think it's clear because it is profitable, it certainly is not incentivizing for them to do this on their own.
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so again we reform such an abusive and predatory practices that punishes people just for being poor? the short answer is that we don't. we have to abolish these practices once and for all. thank you, and i yield. >> gentle yay lady yields back. the gentleman from tennessee, mr. kustoff, is now recognized for five minutes for his question. >> thank you mister chairman. and thank you for the witnesses for appearing today. professor zywicki, if i can with you, i received an email, probably my colleagues to two, from morning consult. it was in february they came out. their numbers showed in their survey that 89% of consumers find the banks overdraft protection value. 74% of consumers who paid an overdraft fee in the past year, they were glad that their bank covered the overdraft, which
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went contrary, obviously, to the turn of this year. but if i can, i would like to drill a little bit into congressman barr's question to you. and as it relates to overdraft fees for deputize a gm transaction, the bank has to provide the consumer with a disclosure which list stuffy for the charge for the overdrive transaction. i'm correcting that, right? is that right? okay. and then, the consumer has to opt in -- i'm correct? for overdraft coverage in order to be charged and overdraft fees, at least as it relates to the debit card on the atm. is that correct? >> that's correct, yes. >> and as a corollary, the consumer also can opt out at anytime, is that right? >> that's correct, yes. >> i'm just going to ask a rhetorical question. if a consumer can willingly up into overdraft coverage or opt
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out, why are we trying to protect consumers or implore additional restrictions or take away the right for them to have overdraft protection on a product? >> i don't know. they can opt in, they can opt out. and i think it's also significant, as i mentioned in remarks, that people who are overdraft frequently actually check their balances more often and they make more use of online banking and that kind of constantly know what's going through their accounts, and they know they are taking a chance, basically, when they write, when they make that payment. >> thank you, professor. i think as we all know, we're experiencing the highest inflation that we've experienced in 40 years, due to the economic policies and the wild spending that the federal government has engaged in in the last 12 months. the federal reserve reports right now that half of the country couldn't cover a 400 dollar emergency expenditure and obviously, a few people have the resources to turn anywhere else to get help.
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so, in the past we've had banks offer short term equity object. obviously regulation has taken a number of banks out of the space, which means that ultimately, consumers have fewer alternatives for emergency needs. so, if i can, i came from a community bank board. hypothetically, if you were running a community bank, and overdraft protection where to completely go away, how would, how would your community bank respond and ultimately what would that mean for consumers? >> i don't know. it's very limited. as you said, every time you try to enter new project, that adds more complexity, more compliance costs. the other thing we know is important [inaudible] commitment f already stepped back from projects they used to have such as mortgages marches because a regulatory costs and complies associated with that. so i think it puts community backs in a very difficult
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position. >> if your you are a policy maker, or you are in the financial services industry, what we do to support or create innovative products to try to help consumers with their short term needs? what else can we do? >> as i mentioned, i think the answer here is more competition, more entry. as i said, again, now fintech industrial loan companies earn wage access, direct deposit advance. these things, i think, are viable options for consumers. that's all this. and if i can just add one last thing is the correlation, here -- it is that it doesn't affect our consumers, this affects all consumers who overdraft, especially low income consumers because it's a fixed we. but what drives this is credit score. and if it has shown that credit score is generally not correlated with income and is not correlated with democratic factors such as race. the credit score issue, not a
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race or income issue. once you control for credit score. in that sense, i'm not talking about, sort of, some of the things they're talking about. but that's, i just wanted to make that very clear. >> thank you, professor. mister chairman, i yield back. >> gentleman yields back. i think we have three more members to ask questions. so i'm going to go to mr. rhodes first and then miss maloney and then mr. timmins. the gentleman from tennessee is recognized for five minutes. >> thank you, chairman perlmutter and ranking member luetkemeyer folding this hearing, and thank you to our witnesses for being with us today. the cfpb under director chopra continues to assert that financial services industry is not competitive and is using this as a premise to justify an extremely aggressive rulemaking agenda. yesterday, cfpb program manager joe violently published a blog
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post stating that, quote, overdraft fees are among the kinds of junk fees that far exceed what it costs the institution to provide the associated product or service, and do not appear to be subject to competitive forces, close quote. professor zywicki, would you describe the market for overdraft products and other short term credit as competitive? or do you agree with this blog post from the cfpb? >> i think it's a competitive. it could be more competitive. and we know for example, in states that have low payday loans, what happens is in a safe fees go up, bounced checks go up, overdraft trees go up, right? and so, when you take away competition from banks, they make more money off of overdraft fees and nsf these. and so, i think the corollary is more competition for banks. there's already competition, but more competition, i think, would be the path i would pursue here. >> the biden administration
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seems to think that regulation, not market forces, drive competition, drives competition. this was made especially clear in president biden's 2021 executive order on promoting competition in the american economy. professor zywicki, do you think more regulation from the cfpb is the solution to increasing market competition? >> no, and unfortunately, usually regulations reduce competition rather than increasing it, at least the way that it has been transpiring. >> professor, you previously served as the chair of the cfpb 's to on consumer financial law under. the task force identified recommendations for improving competition, including studying ways to ease changing accounts between financial institutions, avoiding the anticompetitive barriers to entry and studying the cost of renting in key product markets. could you describe some of the task force's work on these issues?
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>> thank you, yes. and we have a number of recommendations to go to this. someone, to mention [inaudible] earlier. i believe the faster payments is really something that we should be, really be something that we should push on, but also bank about portability, as you said, greater fintech. but we've also talked, i've talked about credit scores. and i think one opportunity is to make greater use of alternative financial data, right? to look at other sources, rather than traditional credit scores, in determining who is a good risk and the like. and so i think there's a lot of room for innovation in this, this market, to put more competitive pressure on banks to do better, to create bank account portability, open banking, and a lot of things that would cause them to be more responsive, i think, to consumer demand good you drill down a little on the banking accountability question, and what sorts of approaches you would recommend, or like to see implemented there? >> the details of that, i think, are still need to be worked
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out. but the model is obviously self owned portability, which has been very popular, right? you can change or cell phone carrier was changing our number. right now it's very difficult to change that kind. right now it's difficult, because you have to deal with trailing checks and so on. i think that trying to work through the regulation at the process would facilitate bank accounts, because right now people can change credit cards very easily, for example. which drives a lot of competition in the credit card market, but when it comes to bank accounts, the very sticky. and banks make them more sticky. and rather than facilitate competition, it's a back wants to do workouts rather than try your track [inaudible] it seems it just by another bank, right? and so, we consolidate the industry, we are getting more in the like, and so, so i think that would be something to be worthy of study by the fed and others of how to improve bank account, make it easier to switch blanket. >> thank you. i want, in the last seconds i have, to just relate and canada
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from one of my bankers back in my district, to, who i was having dinner with just a few weeks, ago and he related to be one of his customers, and this is kind of following on what representative barr said earlier, but he described as a customer, an elderly lady of limited income, and she, she perpetually came up short at the end of the month, and so, essentially once a month, she overdraft it. and she came to the mink and she said, please, whatever you do, don't take away my overdraft capability. and i think it underscores that this oftentimes provides immediate outlook for many customers of banking. and thank you, chairman. i yield back. >> gentleman yields back. i was mistaken. mr. timmins, you are going next. so i'm going to yield to the gentleman from south carolina, and then we'll close with miss maloney from new york. gentleman's recognized for five minutes. >> thank you, mister chairman. professor zywicki, since doug
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bank passed, have community backs across the country generally failed -- fared? >> if not fared well. as we know, the banking industry has become more consolidated and community banks have shrunk. >> what about the g7s that regional bags? >> the regional banks have tended to constrict also. the big banks have gotten bigger. in the two big to fail banks have gotten even bigger. >> general, who bears the brunt of proposals or such as the maloney overdraft bill? what types of institutions? >> in the short run, small banks where most of the brunt for the reasons we've talked about. >> and federal requirements, federal regulations are largely more challenging to comply with when you are a smaller bank, is that fair? >> that's right. to hire another hundred 50 lawyers at city is around [inaudible] to hire one more complex officer at some smoke that could be the difference between compass profitability or not. >> so they're already struggling with things like
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cybersecurity where they're trying to invest appropriately, and that's a huge line on their balance sheet. so it's fair to say that if you are a small bank in this country, put dodd-frank, it's been challenging, and they're barely getting by. >> that's an understatement. >> thank you, professor. i'm confused at what exactly we think we're accomplishing with this hearing. and the maloney bill. it's obvious to me, most [inaudible] on this mandate for smaller financial institutions like community banks and credit unions, especially given that consumers already have to opt in for overdraft protection and can opt out at anytime. on top of this, a recent survey from morning consult shows that 89% of consumers value their banks overdraft protection, and even 74% of individuals who have been subject to and over directly over the last few years, we're glad the bank had over the payment. and why would there not be? what's the alternative to a graph protection? professor, if consumers no longer had access to overdraft protection through that financial institutions, what recourse when they have? >> they would either be forced
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not to be able to purchase things that they would need or they would have to turn to some less attractive alternative, usually payday loans. because we talk about, credit got out available for these people. the other thing we know is that occasional of drafters or frequent over directors are a different category. you can often get a fee waiver, especially if you are an occasional over grafter. and an important point that michael floyd found is that low income consumers are more likely to get fee waivers than people with high levels of deposits. and so, there's other things going on the peoples relationships with banks, if their occasional overdraft versus frequent overdraft. >> as i remember long ago i had challenges with this. you know, first debit card didn't really -- i wasn't really very good with my money. a certain point in my. time wife might say, my entire life. but my question is this. i mean, how often do people get the benefit of a draft protection? and it changes their day or their week, and instead of the
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alternative, which is to be declined and to be unable to do something, gas stations, grocery stores, there is oftentimes where if you are not able to get the benefit of your overdraft protection, it could be very problematic. >> >> and that's the fundamental problem here, congressman timmins, which is taking away peoples options isn't going to resolve the problem. right? which is taking away the supply of overdraft protection, it isn't going to take away the demand that people still have. a lot of bills they need to, pay a lot of necessities that they need to pay. that's a fundamental problem here, the fundamental difficulty. which is what happens to these people if you take it away? they saw on what i can, tell the options are even less attractive than the ones they have now. especially given they seem to be using a heavy overdraft at least knowingly, they opted in, they're monitoring their balances and they understand, basically, what they're doing here. but they don't have better
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options available to them. >> sir, thank you. this hearing, this proposal is just another example of my colleagues across the aisle thinking they know what's best for the american people. they want to run our lives because they don't think that we're capable of making the right decisions. this proposal removes choice and options for consumers and the name of protection, but it's really just another way to impose the will of my colleagues across the aisle on the american people. thank, you mister chairman. i yield back. >> gentleman yields back. i was mistaken again. so, mr. foster has arrived and we will let him ask his questions for five minutes. then miss maroney will close. gentleman is recognized for five minutes. >> thank, you mister chair. i find it interesting that many banks and credit unions are already making changes to over draft policies. according to the cfpb, since september 2021, nearly half of the banks that collect the most overdraft fees have announced that they will eliminate the fees altogether.
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i think this sort of behavior is likely to continue as we move to a high interest rate environment, where you actually have alternate sources of income for banks and they won't depend on reordering things and so on to generate overdraft fees. so, several of these have already eliminated, as i mentioned, the overdrive free programs in place. chris leonard, the ceo of velocity, and overdraft and compliance management company, has asserted that over traffic should not be jettison completely. stating that many consumers actually like having the option. oh i am agile and very few like having the things reordered to maximize those fees. in reality, most of these fees are incurred because people are simply unaware that their account is too low and that they're about to ankara charge. then, unfortunately, they get their cup of coffee or pay for parking and they're handed a 30 or 40-dollar fee to complete
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the five dollar transaction. considering that most accounts are rectified very quickly, that short term financing options seems wildly unappealing from a consumer's financial standpoint. i'm personally very glad to see that competition among the banks has driven this trend to modify or eliminate these derangements. my question, i guess to all witnesses. somebody has to be the first to eliminate overdraft fees and they're checking products, is this just a reaction to a wildly consumer popular idea? or are there other factors influencing the change across the industry? such as, for example, moving to a higher interest rate environment. >> congressman, one thing i want -- we've been talking about protection, and we've been talking about fees. those two are different things. people can opt into protection, get an expense covered through
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credit -- a fee. there's bank that to, that wells fargo is one of them, for example. then there are people that can opt out, then what they get is an insufficient fund iffy. even though the transactions been blocked. i think there's been a lot of conversation about protections and fees, i just want to say that those are two different things. in the financial sector. so, that's one. as far as, like, industry wide, i think, again, low income people of color are particularly low wealth. not having access to credit is one of the things that drives that. not having access to regular -- income, that allows them to build assets allows them to build wealth. to strip that money out of their accounts through things like feeds has implications beyond whether they're able to buy a cup of coffee or not. >> and, to your question, congressman.
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about what has caused some banks to make these changes. in the middle of last year, around the middle of last, year allied bank and chime, online banks, made announcements that they would eliminate fees or reduce overdraft fees. so, that has put pressure on other banks to follow suit. then, in late last year, director chopra of the cfpb also made an announcement that the cfpb would focus more on junk fees, but an overdraft fees specifically. so, i think the combination of the two things have also, in addition to consumers saying that they want overdraft protection and overdraft fees reduced, has led to the changes. >> miss hicks, do you have anything? any comments on what's driving this and how much we can expected to continue without more intervention by the government? >> i think my colleagues summed it up beautifully, of what's
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driving it. i just wanted to hone in on the point that fees and protection are different things. we are not saying anything about overdrive protection, we're just saying that these fees, as representative maloney point that in her bill, should be reasonable and proportional to what it costs the banks to actually take care of the overdraft. >> mr. kundert, can you talk about how your credit union was involved in this process? >> and my written testimony i covered it in great detail. but we reformed our practices in 2010, in response to the rag -y update. and then, last year, reduced our feet to $5. definitely, there is change happening in the industry. prior to 2020, you might have questioned if there is competition. there wasn't much evidence for it. but things are changing now, they've changed in the last year. how much of it is concern over regulatory scrutiny and how much was competition? i couldn't sort out right now. i think time will reveal that.
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>> mr. kundert, i'm going to interrupt you this time. the gentleman from illinois's time has expired. i will now recognize the gentlelady from new york for five minutes for her questions. >> chairman perlmutter, may i express how sad i am that you've decided to retire. today's hearing shows your focus on protecting consumers, your focus on affordable housing, you will be deeply missed. thank you for having this hearing, as well as the ranking member. there is a report that came out from cfpb that showed that, in 2019, consumers paid over 15 billion dollars in overdraft fees. granted, some people opted in, i'm not trying to take away an opt in. i think an opt and should be there. if they want to, fine. but, too often, people are caught in tricks and gimmicks and unfair, deceptive practices
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that force them into overdraft fees. such as reordering the priority of your fees, so that your rent check comes first. i know constituents, some of whom pay $200 an overdraft fees, they don't even know they've ever drafted. they did know that they took the rent check and put it before their coffee or their sandwich and it racks up. so, my bill tries to cut down on these unfair and deceptive practices. i have here a report from the cfpb that i requested, there are many, many people who have taken steps for the overdrafts eased, to eliminate them in some cases or to lower them. i have been studying this since 2009, when i put my bill in. and it is confusing to me. because everybody is doing something different. everybody is doing something different, and i applaud their efforts. but if i were a consumer, and i am a consumer, it's very
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confusing. so, my question to mr. greer, miss hicks, mr. kundert and mr. sueiro is, do you think consumers would benefit by at least a minimum having some baseline level of protections for overdraft practices, such as my bill? let's start with you, miss hicks. yes or no? >> absolutely. >> thank you. mr. kundert? >> yes, i do. >> okay, mr. sueiro? >> yes. >> okay. so, now, that's great, you all agree on that. do you think those protections should include common sense limits on the number of overdrafts that are allowed per month? improve transparency, so people understand what's happening? banning banks from reordering transactions to maximize the number of overdraft fees for
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people? let's start with you, mr. greer. >> yes, i think it would. >> let's just go down, miss hicks, mr. sueiro? >> yes. >> mr. sueiro? >> yes, it depends on what that looks like. we agreed that some people definitely want overdraft protection. but yes, we agree with that. >> so, that's exactly what my bill does. but it allows people, if they want to have the overdraft protection, to opt in. that's one of the requirements of the bill, that people be notified. that, if you want this protection, you opt in. but too often, i hear from my constituents that they bought a loaf of bread, $35, a cup of coffee, $35. a newspaper, $35. and some, at the end of the weekend, because they didn't know they over drafted, we'll have like $200 in fees. i would say that that is an unfair and deceptive and extremely hard on some of the
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most vulnerable in our society. from your perspective, mistakes, do you think someone should be charged for a two dollar cup of coffee? >> now, especially if they did know that over drafted. >> mr. sueiro? >> i hundred percent agree. >> mr. greer and mr. kundert? >> no. >> okay, no. you've gone down to a five dollar cup of coffee. that's a movement in the right direction. but everybody's got something different here. >> actually, no. we have a de minimis so no overdraft will be anchored for anything less than $10, and we don't approve overdressed from debit card users. >> but, as you say, everybody has a different proposal. i would like to suggest, since the cfpb was reference ever times during this committee, that we invite the chairman of the cfpb committee for some clarifications on this. i do have a bell that i've had in for a number of years, the overdraft protection act.
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which has common sense, some of the panelists today have endorsed it. it has common sense practices that protect the consumer. and i, for one, would like to see that 15 billion dollars kept in the pockets of some of our most needy residents. not going to unfair, deceptive, manipulative overdraft fees. my time has expired. >> gentlelady's time has expired. mr. chopra is to testify in front of the full committee next month. so, we will have an opportunity to discuss this with him then. do you want to introduce that chart into the record? >> i would like to introduce it into the record, and i'm going to have it up on my website. you can put it up on the website for the committee. it's very confusing, but i applaud wells fargo, jpmorgan chase, bank of america, tv, bank citibank -- >> okay, it's in the record.
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>> there's about 13 banks, 13 banks have come out and curb them in some way or another. but, each one has done it differently. no one has done the same way. >> we got, it the lady's time has expired. we will introduce your chart into the record. i want to thank the witnesses, and i want to thank all of you. the discussion about fees versus protection is very important. and make that distinction. i appreciate everybody's testimony here today, without objection all members will have five legislative days within which to submit additional written questions for the witnesses to the chair. which will be forwarded to the witnesses for their response. i ask our witnesses to please respond as promptly as you're able. without objection, all members will have five legislative days within which to submit extraneous materials like that chart to the chair tuned for inclusion in the record. finally, i remind members that written questions and materials for the record should be
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submitted to email address provided to your offices. thank you all very much for your time, your testimony, your patience with us. with that, this hearing is adjourned. [indistinct conversation] >>
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wednesday, homeland security secretary alejandro mayorkas testifies on the departments 2023 budget request and the administration's immigration policies. that's in front of the house homeland security committee, live at 2 pm eastern on c-span 3, online at or full coverage on c-span now, our free video app.
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hearing on lead pipe replacement improvements to wastewater systems. the senate environment and public works subcommittee and what he hears about contaminants in water systems replacing out due to drinking wastewater infrastructure, and economics the opportunities for disadvantaged communities. >> tried to read a story to a roomful of --


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