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**MARCH 3, 2023**
Kuttner on TAP
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**** Excessive Bank Overdraft Charges
Demand Regulation
It's another vivid case of the junk fees that Biden has begun to
challenge.
TD Bank, based in Toronto, is planning a merger with Memphis-based First
Horizon Bank, in a $13.4 billion all-cash deal. The merger has been
delayed twice. If the merger goes through, the combined entity would be
our sixth-largest bank.
Among the other arguments against excessive and anti-consumer bank
mergers like this one, which are routinely approved by the Federal
Reserve, is TD's appalling record on bank overdraft fees. TD is an
outlier even among other U.S. banks.
According to research and complaints by the Center for Responsible
Lending, TD charges U.S. customers more than $100 a day for overdrafts
by levying $35 fees three times a day. These fees bear no relationship
to the bank's actual costs. They are purely opportunistic.
In Canada, where the authorities regulate these practices, TD and other
banks may charge overdraft fees no more than once a day, at a maximum of
five Canadian dollars, which is about US$3.50.
It reminds you of the differential drug pricing between the U.S. and
other nations, which control drug prices. Since the giant drug companies
are prohibited from gouging consumers overseas, they soak Americans.
First Horizon operates mainly in the Southeast, in such states as
Tennessee, Arkansas, Texas, and Florida, where there are large Black and
Latino communities and a lot of poverty. Excessive overdraft fees in
these communities are unconscionable.
Today, a coalition of 13 consumer and financial reform groups led by the
Center for Responsible Lending, sent a joint letter
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to Michael Hsu, the acting comptroller of the currency (OCC), asking for
regulatory actions against excessive overdraft charges.
As the letter pointed out, "Overdraft practices typically started as
courtesy programs designed to help bank customers avoid bouncing checks,
with the intent that they would be used infrequently when their accounts
had negative balances. At the time, the programs were largely manual,
and the fees charged aligned with the costs of manual operations. Yet
technological innovation and industry practices have morphed what was
once a simple, courtesy program into an automated, high-revenue business
line."
The letter requested the comptroller to require reform of these abuses
"before any OCC-supervised bank is allowed to expand using mergers or
asset-increase approvals." Even better would be across-the-board
regulation limiting bank overdraft charges, as Canada does.
~ ROBERT KUTTNER
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