‘Abhorrent’ -- Michigan Attorney General asking banks to cut overdraft, convenience fees
LANSING, Mich. (WILX) - Michigan Attorney General Dana Nessel is calling on financial institutions to eliminate overdraft and convenience fees.
“We know the costs of goods and services are at an all-time high,” Nessel said. “That’s why it’s more important than ever to fight against companies that charge fees that ultimately do more to hurt the customer than offset their own operating costs.”
Nessel joined a group of attorneys general from other states who have called on the CEOs of JPMorgan Chase, Bank of America, U.S. Bank, and Wells Fargo to eliminate all overdraft fees on consumer bank accounts.
In a letter, the attorneys general argue that overdraft fees have disproportionately affected vulnerable families and communities of color by straddling them deeper into debt.
“Charging overdraft fees that can sometimes be more than five times the amount of the original purchase is abhorrent,” Nessel said. “By eliminating these fees altogether, banks will show that they care as much for their customers’ financial well-being as they do their own.”
A study published by the Consumer Financial Protection Bureau (CFPB) shows that such fees are a significant source of income for four of the top five banks in the U.S., while the vast majority of those fees are collected from low income customers.
Similarly, Nessel joined a coalition of 22 attorneys general urging the CFPB to prohibit mortgage servicers from charging convenience fees. That coalition says convenience fees charged by mortgage servicers are one of the more exploitative “pay to pay” fees consumers face.
The attorneys general argue that, because a mortgage servicer’s most basic function is to accept payments, imposing an additional fee for performing its core function is fundamentally flawed.
News 10 spoke with Patricia Herndon, Executive Vice President, Government Relations at the Michigan Bankers Association.
“The February 2022 Morning Consult survey revealed that approximately 9 out of 10 U.S. consumers find their bank’s overdraft protection valuable,” Herndon said. “3 in 4 consumers who paid an overdraft fee in the past year were happy that their bank covered their overdraft payment, rather than returning or declining payment.”
Herndon says banks adjust their overdraft and convenience fee practices to attract new customers.
“Many have and are in the process of evaluating products and services around overdraft to ensure an array of options for all customers, from accounts without overdraft to pre-authorized advanced pre-approved line of credit coverage,” Herndon said. “This space is evolving quickly as both consumer demand and technology allow for it.”
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