Overdraft fee horror stories are well known: A mom goes to the store to buy milk and peanut butter. She doesn’t have enough money in her account. Her bank charges an overdraft fee, making a $5 purchase suddenly cost $40.
These fees are often referred to as a “poverty tax” and a reverse Robin Hood scheme since it’s overwhelmingly low-income customers who pay them, and the charges have resulted in substantial profits for many banks and credit unions. A former bank executive even named his boat “Overdraft.”
It’s welcome news that Consumer Financial Protection Bureau Director Rohit Chopra plans to enhance scrutiny on overdraft and non-sufficient-fund fees. Already, his threat of action appears to be driving change.
