Today, Ally Bank announced a complete end to its overdraft fees. In response, Center for Responsible Lending (CRL) Senior Policy Counsel Rebecca Borné issued the following statement:
The evidence is clear that overdraft fees are levied most frequently on families who can least afford it, disproportionately harming low-income and Black and Latino Americans. Abusive overdraft practices are causing people who are struggling to get by to lose their bank account – something diametrically opposed to the financial industry’s claim it wants to bring more Americans into the mainstream banking system. Overdraft practices are frequently underhanded – reminiscent of the tracks and traps commonly seen throughout the financial system before the Dodd-Frank Wall Street Reform law.
Ally Bank’s decision to completely eliminate overdraft fees is a welcome development for its sizable customer base, but systemic reform is needed to fix a desperately broken checking account market. We urge more banks and credit unions to follow Ally’s lead, but instead of waiting for that to happen, our government should step up to protect consumers. Congress and federal bank regulators – the consumer bureau, FDIC, OCC, and Federal Reserve Board – all can and should take action to curb abusive overdraft practices.
It is worth noting that Ally Bank’s overdraft practices were already better than the sorry state of the rest of the industry but getting rid of these fees entirely is definitely a beneficial change and one that brings attention to the need for government to protect the most financially vulnerable among us.
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