In 2020, Americans paid $12.4 billion in overdraft charges.
Overdraft fees are a thorn in the side of most consumers, but for those struggling to make ends meet, they can be financially crippling. That’s why we’re proud our partners at Ally have ended the practice.
“Nationwide, more than 80% of overdraft fees are paid by consumers living paycheck to paycheck, or with consistently low balances — precisely the people who need help stabilizing their finances,” said Ally Financial CEO Jeffrey Brown. “Eliminating these fees helps keep people from falling further behind and feeling penalized as they catch up.”
Banks have long charged customers for overdrawing their accounts. And these fees are often steep. Last year, Americans paid $12.4 billion in overdraft fees, which disproportionately came down on Black and Latinx consumers, according to a recent report.
Through the pandemic, the practice has really come under the microscope: As millions lost work, federal regulators urged banks to suspend overdraft fees and other penalties. And as part of its Covid relief package, Ally waived overdraft fees and forgave negative balances for people who received stimulus payments, Ally’s Chief Marketing and Public Relations Officer Andrea Brimmer told us.
“We heard firsthand from our customers how these acts relieved their anxiety and kept them from falling further behind,” Brimmer said. “The pandemic taught us we could do more. We knew the right thing to do was to permanently eliminate overdraft fees.”
Sen. Elizabeth Warren applauded the move on Twitter, while pushing the country’s largest banks to follow suit.
Last month, Warren urged regulators to keep a closer watch on overdraft charges and criticized JPMorgan Chase CEO Jamie Dimon for profiting off the fees through the pandemic.
“We talk a lot about payday lenders, but the big banks are also squeezing families hard when they get into trouble and using practices that increase the number of overdraft fees,” said Warren. “If the banks want to come in and claim that they’re on the side of their customers, then it can’t just all be words, they need to act.”