COMMENT: When 42% of the GDP is receipt of income for providing FINANCIAL SERVICES, it’s no wonder the economy is at a standstill. Get your money out of the national banking system. Credit unions are a great alternative.
Report: Banks Make $6 Billion Off of Fees
New York, NYEven if you think banks make huge profits off the various fees they charge their customers – including overdraft fees – you might still be surprised to learn just how much money the banks make. According to CNNMoney and SNL Financial, the three largest banks earned more than $6 billion in 2015 just from their ATM and overdraft fees. That’s despite new laws that regulate how and when banks can charge overdraft fees.
According to the CNNMoney and SNL Financial report, ATM and overdraft fees collected by JPMorgan Chase, Bank of America and Wells Fargo in 2015 only equate to $25 for every American adult. This was the first year the banks were required to disclose how much money they make from ATM and overdraft fees.
And while the $6 billion covers both ATM and overdraft fees, the bulk of those profits came from overdraft fees. In 2015, the three largest banks collected $5.1 billion in overdraft fees alone. The average overdraft fee is $34 dollars, but according to a 2014 report from the Consumer Finance Protection Bureau (CFPB), the majority of debit card overdraft fees are handed out on transactions of $24 or less and are repaid within three days.
“Put in lending terms, if a consumer borrowed $24 for three days and paid the median overdraft fee of $34, such a loan would carry a 17,000 percent annual percentage rate (APR),” the CFPB noted in 2014.
Overdraft fees are charged when customers attempt to conduct a transaction from their bank account that they do not have the financial means to cover. In recent years, regulators changed the laws to require banks and credit unions to get customer consent (or opt-in) before overdraft fees could be charged on ATM and debit card transactions.
“Despite recent regulatory and industry changes, overdrafts continue to impose heavy costs on consumers who have low account balances and no cushion for error,” said CFPB Director Richard Cordray, in a news release that accompanied the organization’s report.
The banks have said they are clarifying their overdraft policies and procedures to help customers manage their finances. Customers, for their part, have filed lawsuits against some of the financial institutions alleged to have used egregious tactics such as reordering of transactions to maximize profits from overdraft fees.
That includes a reported preliminary settlement with HSBC Bank USA for $30 million in 2015.