While President Joe Biden’s administration banned so-called “junk fees,” a new study found that banks are relying on these hidden fees heavily in low-income areas of the country.
A study from the progressive public interest group Accountable.US looked at the 20 banks in the United States that generate the most revenue from service fees. It found that almost 60% of these branches are located in districts where the poverty rate is higher than the national average, and 72% of these branches are located in districts where the average income is lower than the national average.
The Consumer Financial Protection Bureau announced a public review of “junk fees” — such as late payment, ATM and overdraft fees — in January 2022. Biden took the baton last week, appearing alongside CFPB Director Rohit Chopra to announce the new rules quickly. Limit credit card late fees.
And he continued that message during his State of the Union address on Tuesday, noting his administration would cut the average credit card late fee from $31 to $8.
“Garbage costs may not be important to the rich, but they are important to most people at home like I grew up with,” Biden said. “They add up to hundreds of dollars a month.”
Many of the banks on the Accountable.US list are smaller regional operations with few branches, but two larger banks — TD Bank and Regions Bank — are also on the list. TD Bank draws 9.3% of its operating revenue from service fees associated with customer deposits, while Regions Bank takes 6.8% of its revenue through these fees.
“Make no mistake: twenty of these banks will still be profiting without nickel and diming low-income families under these exploitative practices,” said Liz Zelnick, director of economic security and corporate power at Accountable.US. “Our research shows a deliberate and predatory practice of setting up in low-income communities and charging exorbitant fees.”
Overdraft fees, in particular, target the poorest banking customers, who are more likely to reduce their accounts than the better-off. A previous CFPB study found just 5% of bank accounts accounted for nearly two-thirds of overdraft fees.
The CFPB announced plans to eliminate overdraft fees in October, following September’s announcement of a $191 million penalty for Regions Bank, most of which will be reimbursed to customers.
“The Biden administration’s major step toward spending on waste is a win-win for working families and the economy,” Zelnick said.