Biden Targets Banks’ Junk Fees As Inflation Hurts Households‘ Junk Fees As Inflation Hurts Households
President Joe Biden emphasized the efforts made by his administration to rein down the so-called garbage fees that banks and other businesses impose on their customers.
After months of soaring inflation ate away at Americans’ money and elevated the economy to the top concern for voters, the announcement was made.
Rohit Chopra, the director of the Consumer Financial Protection Bureau, the country’s financial watchdog organization established following the Great Recession, joined Biden. The agency is focusing on bank overdraft fees and bad check costs, which are assessed to bank customers when a check is invalid.
According to the bureau’s recommendations, banks are not permitted to impose an overdraft fee on a transaction when a customer’s account has a positive balance at the time of purchase or when they remove money from it.
According to a bureau estimate, banks collectively assessed their client’s overdraft and bounced check costs of almost $15 billion prior to the epidemic. According to the FBI, the new enforcement campaign against junk fees will result in a $3 billion yearly fee reduction for Americans.
According to Biden, these actions will immediately begin saving Americans billions of dollars in fees.
About two weeks before the midterm elections, Biden is demonstrating his administration’s efforts to lower costs for families at public events. The president’s approval rating has been negatively impacted by high inflation, which has averaged 8.2% over the past year, and Democrats have suffered as a result.
During the economic recovery after the pandemic in 2021, Biden worked to reduce the dangers of long-lasting inflation. Globally, prices have increased as a result of ongoing epidemic shutdowns and Russia’s invasion of Ukraine, a problem that the United States is principally attempting to solve by ordering the Federal Reserve to boost interest rates.
The exorbitant penalties that banks impose on clients when their accounts temporarily go negative have long been criticized. After years of public pressure, banks finally gave in and changed their overdraft fee policies. The overdraft fee charged by Bank of America was decreased from $35 to $10. Other banks have changed their procedures to prevent overdrafts or to repeatedly remind consumers that they must make their accounts current in order to avoid fees.
Before the White House intervened, the banking sector responded that it was reducing fees for customers.
The Consumer Bankers Association, the trade and lobbying organization for the biggest retail banks in the country like Wells Fargo and Bank of America, was founded by Lindsey Johnson, president, and chief executive officer. “These changes were made without regulatory or legislative intervention,” Johnson said.
The CFPB is also focusing on bounced check fees, which are less common now because most Americans no longer write paper checks and instead use peer-to-peer payment services like Zelle, Venmo, PayPal, and CashApp. The consumer depositing the check is responsible for paying these fees, which, according to the bureau, are normally between $10 and $19.
The bureau stated in a statement that imposing a fee on the depositor “penalizes the individual who could not anticipate the check would bounce while doing nothing to prevent the originator from writing faulty checks.”
Because banks do not publicly publish these numbers in regulatory filings, the agency had no idea how much Americans paid in bad check fees.
The government intends to pursue additional costs, including resort fees, processing fees for event tickets, and different airline surcharges, which were also mentioned by Biden.
Biden added, “We’re just getting started.
The White House initiative is also a public show of support for the Consumer Financial Protection Bureau (CFPB) days after the Fifth Circuit Court of Appeals declared that the bureau’s funding method is unlawful. The court with a conservative slant determined that the CFPB’s methods for formulating its rules and regulations are unconstitutional because the bureau is funded by the Federal Reserve rather than by Congressional appropriations.
The judicial case, which may end up before the Supreme Court, is the most recent in a long line of Republican and conservative challenges to the bureau’s organizational design. Republicans criticized the bureau’s announcement within hours.
“It’s no surprise that an out-of-control and unaccountable agency has opted to skirt the congressionally authorized rulemaking process to change the rules of the road,” said Sen. Pat Toomey, R-Pennsylvania and the chair of the Senate Banking Committee. “The Fifth Circuit just declared that the agency is unconstitutional.”