“Banks call it a service,” the president said. “I call it exploitation.”
The Biden administration unveiled a new rule Wednesday aimed at slashing bank overdraft fees to as low as $3, a move the president said would help end abusive practices by financial institutions.
Under the proposal, banks could continue to charge fees when a customer’s account falls below zero, but either at a price in line with the bank’s actual costs to administer the overdraft or at an established benchmark created by the new rule.
The Consumer Financial Protection Bureau (CFPB) proposed potential fees of $3, $6, $7 or $14 and is seeking feedback from banks and the public on what would be appropriate. Current overdraft fees often push $30 or more, taking a significant bite out of low-income accounts.
It’s unfair that a bank can make 3 dollars off me for not having 3 dollars to pay. I have to have thousands of dollars in the bank to make 3 dollars. So I think the overdraft should be the exact amount over drafted plus the interest per the amount overdrafted. That’s fair.
It’s not fair because of the risk of total loss. You giving money to the bank earning interest, there’s no risk the bank is just going to stop responding to you and keep your money. There’s a chance someone who owes the bank money is just gonna stop going to that bank and they’ll have to write off the full amount as a loss.
But, I believe this is essentially what they do in Canada. It’s two different rates, because a negative balance is essentially taking out a non-collateralized loan. But you don’t have to ask extra permission on small amounts, you just owe the interest.