While President Joe Biden’s administration is banning so-called “junk fees,” a new study has found that banks that rely on these hidden fees overwhelmingly operate in low-income parts of the country.
The study by the progressive public interest group Accountable.US looked at the 20 banks in the United States that generate most of their revenue from service fees. It found that nearly 60% of their branches are located in counties where the poverty rate is above the national average and 72% of their branches are located in counties where the median income is below the national average.
The Consumer Financial Protection Bureau announced a sweeping overhaul of “junk fees” — such as late payment, ATM and overdraft fees — in January 2022. Biden took the lead last week, appearing alongside CFPB Director , Rohit Chopra, to suddenly announce a new rule. limit credit card late fees.
And he continued the message during Tuesday night’s State of the Union address, noting that his administration will cut the average credit card late fee from $31 to $8.
“Junk taxes may not matter to the very rich, but they matter to most people in homes like the one I grew up in,” 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 derives 9.3% of its operating income from fees for customer deposit services, while Regions Bank receives 6.8% of its income through these fees.
“Make no mistake: these twenty banks would still be profitable without the nickel and diming of low-income families in this exploitative practice,” said Liz Zelnick, director of economic security and corporate power at Accountable.US. “Our research demonstrates a deliberate and predatory practice of settling in low-income communities and charging exorbitant fees.”
Overdraft fees particularly affect poor banking customers, who are far more likely to withdraw their accounts than wealthier ones. A CFPB study previously found that just 5 percent of bank accounts accounted for nearly two-thirds of overdraft fees.
The CFPB announced plans to clamp down on overdraft fees in October, following the September announcement of a $191 million fine for Regions Bank, most of which it will refund to customers.
“The Biden administration’s first big step toward junk taxes is a win for working families and the economy,” Zelnick said.
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