[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]


                       THE END OF OVERDRAFT FEES?
                       EXAMINING THE MOVEMENT TO
                       ELIMINATE THE FEES COSTING
                           CONSUMERS BILLIONS

=======================================================================

                             HYBRID HEARING

                               BEFORE THE

                  SUBCOMMITTEE ON CONSUMER PROTECTION
                       AND FINANCIAL INSTITUTIONS

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 31, 2022

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 117-76
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT] 


                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE                    
47-274 PDF                 WASHINGTON : 2022                     
          
-----------------------------------------------------------------------------------   


                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             FRANK D. LUCAS, Oklahoma
GREGORY W. MEEKS, New York           BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            ANN WAGNER, Missouri
ED PERLMUTTER, Colorado              ANDY BARR, Kentucky
JIM A. HIMES, Connecticut            ROGER WILLIAMS, Texas
BILL FOSTER, Illinois                FRENCH HILL, Arkansas
JOYCE BEATTY, Ohio                   TOM EMMER, Minnesota
JUAN VARGAS, California              LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey          BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas              ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida                   WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam            TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
RITCHIE TORRES, New York             JOHN ROSE, Tennessee
STEPHEN F. LYNCH, Massachusetts      BRYAN STEIL, Wisconsin
ALMA ADAMS, North Carolina           LANCE GOODEN, Texas
RASHIDA TLAIB, Michigan              WILLIAM TIMMONS, South Carolina
MADELEINE DEAN, Pennsylvania         VAN TAYLOR, Texas
ALEXANDRIA OCASIO-CORTEZ, New York   PETE SESSIONS, Texas
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
NIKEMA WILLIAMS, Georgia
JAKE AUCHINCLOSS, Massachusetts

                   Charla Ouertatani, Staff Director
     Subcommittee on Consumer Protection and Financial Institutions

                   ED PERLMUTTER, Colorado, Chairman

GREGORY W. MEEKS, New York           BLAINE LUETKEMEYER, Missouri, 
DAVID SCOTT, Georgia                     Ranking Member
NYDIA M. VELAZQUEZ, New York         FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California             BILL POSEY, Florida
AL GREEN, Texas                      ANDY BARR, Kentucky
BILL FOSTER, Illinois                ROGER WILLIAMS, Texas
JUAN VARGAS, California              BARRY LOUDERMILK, Georgia
AL LAWSON, Florida                   TED BUDD, North Carolina
MICHAEL SAN NICOLAS, Guam            DAVID KUSTOFF, Tennessee, Vice 
SEAN CASTEN, Illinois                    Ranking Member
AYANNA PRESSLEY, Massachusetts,      JOHN ROSE, Tennessee
    Vice Chair                       WILLIAM TIMMONS, South Carolina
RITCHIE TORRES, New York
                            
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 31, 2022...............................................     1
Appendix:
    March 31, 2022...............................................    39

                               WITNESSES
                        Thursday, March 31, 2022

Crawford-Hicks, Elyse, Consumer Policy Counsel, Americans for 
  Financial Reform (AFR).........................................     6
Greer, Jeremie, Co-Founder/Executive Director, Liberation in a 
  Generation.....................................................     5
Kundert, Paul, President and CEO, University of Wisconsin (UW) 
  Credit Union...................................................     8
Sueiro, Santiago, Senior Policy Analyst, UnidosUS................     9
Zywicki, Todd, George Mason University Foundation Professor of 
  Law, Antonin Scalia Law School, George Mason University........    11

                                APPENDIX

Prepared statements:
    Crawford-Hicks, Elyse........................................    40
    Greer, Jeremie...............................................    43
    Kundert, Paul................................................    47
    Sueiro, Santiago.............................................    52
    Zywicki, Todd................................................    59

              Additional Material Submitted for the Record

Perlmutter, Hon. Ed:
    Written statement of the American Bankers Association........    86
    Written statement of Chime...................................    95
    Written statement of Color of Change.........................    97
    Written statement of the Consumer Bankers Association........   100
    Written statement of the Consumer Federation of America......   124
    Joint written statement of the Credit Union National 
      Association and the National Association of Federally-
      Insured Credit Unions......................................   128
    Written statement of the Credit Union National Association...   130
    Written statement of Terri Friedline, Associate Professor of 
      Social Work at the University of Michigan..................   135
    Written statement of Gusto...................................   145
    Written statement of the Independent Community Bankers of 
      America....................................................   148
    Written statement of the Merchants Payments Coalition........   151
    Written statement of the National Association of Federally-
      Insured Credit Unions......................................   153
    Written statement of the National Consumer Law Center........   155
    Written statement of Corey Stone.............................   166
    Written statement of the Virginia Credit Union League........   175
Maloney, Hon. Carolyn:
    Chart, ``Overdraft/NSF metrics for Top 20 banks based on 
      overdraft/NSF revenue reported''...........................   177
McHenry, Hon. Patrick:
    Written statement of the Independent Community Bankers of 
      America....................................................   148

 
                       THE END OF OVERDRAFT FEES?
                       EXAMINING THE MOVEMENT TO
                       ELIMINATE THE FEES COSTING
                           CONSUMERS BILLIONS

                              ----------                              


                        Thursday, March 31, 2022

             U.S. House of Representatives,
                Subcommittee on Consumer Protection
                        and Financial Institutions,
                           Committee on Financial Services,
                                                     Washington, DC
    The subcommittee met, pursuant to notice, at 10 a.m., in 
room 2128, Rayburn House Office Building, Hon. Ed Perlmutter 
[chairman of the subcommittee] presiding.
    Members present: Representatives Perlmutter, Green, Foster, 
Vargas, Pressley, Torres; Luetkemeyer, Posey, Barr, Williams of 
Texas, Loudermilk, Budd, Kustoff, Rose, and Timmons.
    Ex officio present: Representative Waters.
    Also present: Representative Maloney.
    Chairman Perlmutter. The Subcommittee on Consumer 
Protection and Financial Institutions will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the subcommittee at any time. Also, without 
objection, members of the full Financial Services Committee who 
are not members of the subcommittee are authorized to 
participate in this hearing.
    Today's hearing is entitled, ``The End of Overdraft Fees? 
Examining the Movement to Eliminate the Fees Costing Consumers 
Billions.''
    I now recognize myself for 4 minutes to give an opening 
statement.
    In 1778, William Hog, a merchant in Edinburgh, faced a cash 
flow problem. His business was doing well, but his customers 
were often not timely in their payments, meaning his bank 
account balance would fluctuate and often drop to zero, which 
made it difficult for him to pay his own suppliers. So he went 
to his bank, the Royal Bank of Scotland, to work out a deal to 
help his business. Under the arrangement they came to, Mr. Hog 
could periodically draw more money from his account than he had 
in his deposits. In return, the bank would charge him interest 
on the negative balance. They invented what is known today as 
an overdraft.
    While this overdraft service proved beneficial to both 
parties in this example of Mr. Hog and the Royal Bank of 
Scotland, this was not true in all cases, as more banks began 
offering this product. Some businesses without such sound 
revenue and business practices found themselves taking on more 
debt through overdraft than they could repay.
    Importantly, this service was created in the context of 
providing liquidity to businesses with sound revenue but poor 
cash flow, and today, financial institutions offer overdraft 
services to both businesses and consumers. Overdraft services 
have evolved significantly over the past 240 years or so, but 
the core concept is the same, and many of the fundamental 
issues we will be discussing today are not new. In fact, we 
dealt with this very issue about 10 years ago, and every so 
often, we should address this to see where we are.
    However, the current scale and growth of overdraft and non-
sufficient funds fees has caught the attention of consumer 
groups, this committee, and the regulators. In an average year, 
consumers in the United States pay around $10 billion to $12 
billion in overdraft fees and non-sufficient funds fees, and 
just 9 percent of consumers make up 80 percent of those 
overdraft fees.
    Additionally, these types of fees impact people of color at 
a disproportionate rate. Studies have found that banks with 
branches in predominantly Black neighborhoods charge more for 
overdraft, on average, and Black customers are overrepresented 
in those who report paying more than $100 in fees in the past 
year.
    In December, the Consumer Financial Protection Bureau 
(CFPB) published data suggesting that many financial 
institutions are overly-reliant on the revenue from overdraft 
fees. However, the market is changing. Recently, many banks and 
credit unions voluntarily adjusted their overdraft programs to 
eliminate or reduce fees or to create better consumer 
protections and more transparency. Additionally, many non-bank 
fintech companies are also offering products aimed at helping 
avoid overdraft by improving notifications and information 
provided to consumers or partnering with depository 
institutions to offer no- or low-fee accounts directly to 
consumers.
    Another program gaining momentum in recent years is BankOn. 
This initiative is a partnership between the Cities for 
Financial Empowerment (CFE) Fund, financial institutions, and 
local governments, with the goal of providing low-cost, basic 
bank accounts to unbanked and underbanked households. These 
accounts do not allow overdraft fees.
    We have two bills noticed with today's hearing. First, H.R. 
4277, the Overdraft Protection Act of 2021, by Representative 
Maloney--who has been a champion on these issues--which would 
strengthen protections and disclosures for consumers with 
respect to overdraft fees.
    And second, we have a discussion draft entitled the, 
``Expanding Access to Affordable Bank Accounts Act,'' which 
would require larger financial institutions to offer at least 
one bank account option that does not charge consumers 
overdraft and non-sufficient funds (NSF) fees.
    With that, I will yield to the ranking member of the 
subcommittee, the gentleman from Missouri, Mr. Luetkemeyer, for 
his opening remarks.
    Mr. Luetkemeyer. Thank you, Mr. Chairman, and thank you for 
having this hearing today on this important topic.
    On December 1, 2021, the CFPB issued a press release on 
overdraft fees entitled, ``CFPB Research Shows Banks' Deep 
Dependence on Overdraft Fees.'' This press release alludes to 
exploitative fees being charged by financial institutions for 
overdraft products, and went so far as to specifically name and 
shame three financial institutions.
    To back up this claim, the CFPB put together two data sets 
on overdraft and non-sufficient funds fees: one data set is 
from 2014, 8 years ago, and fails to consider new innovations 
in overdrafts; and the other data set shows that revenue from 
overdraft and NSF fees only represented 2 percent of bank 
revenue in 2019. So, the CFPB's own data would suggest that 
financial institutions, in fact, are not deeply dependent on 
overdraft fees.
    The truth is that overdraft is a legitimate short-term 
liquidity product that provides a vital service for consumers. 
According to a study by a global data intelligence firm, 
Curinos, consumers make highly-informed choices about when to 
use overdraft services based on account information and 
disclosure of the fees and procedures. Even President Biden's 
Acting Comptroller of the Comptroller, Michael Hsu, 
acknowledged the importance of overdraft products when he said, 
``Limiting overdrafts may limit the financial capacity for 
those who need it most.''
    The latest actions of the CFPB continue a dangerous trend 
from my colleagues on the other side of the aisle. At a time 
when 50 percent of Americans would have difficulty paying a 
$400 emergency expense, the actions of this committee on 
financial regulators aimed to reduce consumers' ability to 
access short-term liquidity financial products. Democrats and 
the Administration have regulated banks out of small-dollar 
loans, are opposed to overdrafts, and payday lenders, and have 
made disparaging comments on innovative products such as, ``buy 
now, pay later,'' and earned wage access.
    So, I ask my colleagues, where are the 40 percent of 
American consumers supposed to go when they need a $400 loan, 
or $400 for any kind of emergency? I would be happy to get an 
answer to that question.
    The CFPB did not stop with overdraft fees. On February 2, 
2022, the CFPB released a request for information on fees 
related to other consumer financial products and services, or 
what the CFPB is calling, ``junk fees.''
    First, let's acknowledge that there is no legal authority 
for the CFPB to define the term, ``junk fee,'' or any other 
term for that matter, and there is even less authority to act 
as a price-setter in the consumer financial market. The CFPB 
wants information on any fees associated with consumer 
financial products that seem too high or were unexpected. These 
are intentionally-vague terms in order for the CFPB to create a 
subjective measurement that has no bearing on the legality of 
any consumer financial product or service. Suggesting otherwise 
would be insinuating that private markets should not be able to 
set prices for products and services, which is a core principle 
of our economy. We don't need the government setting prices for 
everything.
    The CFPB has also failed to take into account the lengthy 
disclosure requirements that consumer financial products 
already comply with under the Truth in Lending Act (TILA), and 
fee disclosures promulgated by the CFPB itself. For example, 
the CFPB specifically lists pre-paid cards as a financial 
product they want information on, but what the CFPB and 
Director Chopra fail to mention is that the CFPB issued a 
rulemaking that was finalized by Director Cordray in 2016 which 
requires multiple significant disclosures for the pre-paid card 
industry.
    The CFPB is quite literally manufacturing a crisis about 
hidden fees for financial products when they are the very 
people who made up the disclosure regime, which shows that this 
request for information (RFI) is not about fees facing 
consumers, but is another attempt by the CFPB to denigrate 
legally-operating businesses by any means possible, and exert 
as much control as possible over the industry, and thus the 
economy. It is simply a power grab.
    Ranking Member McHenry and I sent a letter to Director 
Chopra asking him to clarify many aspects of the overdraft and 
junk fee proposals. I look forward to asking this panel about 
what role the CFPB should have in the pricing of consumer 
financial products.
    With that, Mr. Chairman, I yield back.
    Chairman Perlmutter. The gentleman yields back.
    The Chair now recognizes the Chair of the full Financial 
Services Committee, Chairwoman Waters, for 1 minute.
    Chairwoman Waters. Thank you so very much, Chairman 
Perlmutter.
    For far too long, banks have been charging excessive 
overdraft fees. And, of course, I am very troubled that 
consumers of color pay twice as much in fees as White 
consumers. So, I want to commend Representative Carolyn Maloney 
for her steadfast work in proposing the overdraft reforms we 
are considering today.
    We have also not been shy in conducting megabank oversight, 
and pressing their CEOs to reduce and eliminate these costly 
fees, many of whom are beginning to do just that.
    With a strong CFPB supporting our efforts by investigating 
junk fees like these, we now have a growing list of banks that 
are finally reducing or eliminating overdraft fees.
    So, I look forward to hearing from our witnesses on these 
issues and how we should build on this momentum.
    I yield back. Thank you.
    Chairman Perlmutter. The gentlelady yields back.
    Without objection, statements from the following 
organizations and people will be entered into the record: the 
American Bankers Association; Chime; Color of Change; the 
Consumer Bankers Association; the Credit Union National 
Association (CUNA); the National Association of Federally-
Insured Credit Unions (NAFCU); the National Consumer Law Center 
on behalf of its low-income clients; and Terri Friedline, 
Ph.D., Associate Professor of Social Work at the University of 
Michigan.
    I am now pleased to welcome each of our witnesses, three of 
whom are here in person, and two of whom are on video.
    Mr. Jeremie Greer is the co-founder and executive director 
of Liberation in a Generation. Mr. Greer's work has focused on 
racial and economic justice, and he formerly worked at the 
Government Accountability Office (GAO), the Local Initiatives 
Support Corporation (LISC), and Prosperity Now.
    Ms. Elyse Crawford-Hicks is a consumer policy counsel at 
Americans for Financial Reform. Ms. Crawford-Hicks was 
previously a staff attorney for United Policyholders, and she 
holds degrees from the Stetson School of Business and Economics 
at Mercer University, the Charleston School of Law, and Georgia 
State University.
    Mr. Paul Kundert is the president and CEO of UW Credit 
Union. Mr. Kundert has led UW Credit Union for nearly 19 years, 
and he formerly served on the board of directors of the Filene 
Research Institute, a credit union industry think tank focused 
on issues impacting consumer financial well-being and economic 
empowerment.
    Mr. Santiago Sueiro is a senior policy analyst with 
UnidosUS. Mr. Sueiro serves as UnidosUS's institutional expert 
on policy solutions related to reforming banking and lending 
policies and consumer finance policy.
    Finally, Mr. Todd Zywicki is the Foundation Professor of 
Law with the Antonin Scalia Law School at George Mason 
University. Mr. Zywicki is also a senior fellow at the Cato 
Institute, and the former executive director of the George 
Mason University Law & Economic Center.
    I would like to welcome all of our witnesses here today. 
Thank you for being here. You are reminded that your oral 
testimony will be limited to 5 minutes. You should be able to 
see a timer that will indicate how much time you have left, and 
without objection, your written statements will be made a part 
of the record.
    Mr. Greer, you are now recognized for 5 minutes for your 
testimony.

  STATEMENT OF JEREMIE GREER, CO-FOUNDER/EXECUTIVE DIRECTOR, 
                   LIBERATION IN A GENERATION

    Mr. Greer. Thank you, Chairman Perlmutter, Ranking Member 
Luetkemeyer, and members of the subcommittee, for holding this 
important hearing and for the opportunity to testify today.
    My name is Jeremie Greer, and I am the co-founder and co-
executive director of Liberation in a Generation. Liberation in 
a Generation is a national movement support organization 
founded to help build the power of people of color to transform 
the economy.
    Financial institutions, large and small, have the ability 
and authority to unburden their customers from junk fees such 
as overdraft charges. In the 4th quarter of 2021, commercial 
banks and savings institutions collected over $72 billion, or 
36 percent of their income, from fees. The assessment of these 
fees has become part of their business model and their profit 
margin. This burden has disproportionately fallen on consumers 
who cannot afford to pay these fees. About 9 percent of all 
consumers account for almost 80 percent of overdraft revenue, 
and nearly half of all overdrafts are made by parents with 
children under the age of 18.
    In the age of COVID, with record unemployment and historic 
levels of income volatility, consumers of color who have been 
hit hardest by the pandemic paid over $4.5 billion in overdraft 
fees. Black families paid about $8 million in bank fees in 
2020, while Latinx families spent $1.1 billion in fees in the 
same year.
    Also, as millions of consumers are bounced out of the 
financial system following the closure of their accounts due to 
excessive overdrafts, one-third of households without bank 
accounts have identified high fees as the reason that they 
remain unbanked. And the unbanked comprise nearly half of Black 
households.
    These fees operate as an abusive form of high-cost credit 
and are in no way better than a payday loan. To put it into 
perspective, the CFPB found that a majority of overdraft fees 
were incurred on transactions of $24 or less, and were repaid 
within 3 days, meaning that a $34 overdraft fee would have an 
annual percentage rate of 17,000 percent--17,000 percent. This 
is in no way representative of a fair and inclusive financial 
market.
    It is our recommendation that Congress and the Biden 
Administration act to bring an end to junk fees, such as 
overdraft and non-sufficient funds fees. We have seen a number 
of financial institutions already take this critical step. In 
March, one of the largest banks in the country, Citigroup, 
announced that it will end overdraft fees for consumers, and in 
doing so they called it, ``a focus on financial inclusion,'' 
and I agree. And as Citi made their announcement, Capital One 
announced that they would eliminate their bank overdraft fees 
in 2022.
    However, without pressure from Congress and the 
Administration, we are leaving it up to banks to self-regulate, 
while bringing in huge profits on the backs of predominantly 
low-wealth customers, largely consumers of color. It is time 
for Congress to act to relieve this burden.
    Mr. Chairman, Mr. Ranking Member, and members of the 
subcommittee, I appreciate the opportunity to testify and I am 
happy to answer any questions that you may have.
    [The prepared statement of Mr. Greer can be found on page 
43 of the appendix.]
    Chairman Perlmutter. Mr. Greer, thank you for your 
testimony.
    Ms. Crawford-Hicks, you are now recognized for 5 minutes 
for your testimony.

  STATEMENT OF ELYSE CRAWFORD-HICKS, CONSUMER POLICY COUNSEL, 
              AMERICANS FOR FINANCIAL REFORM (AFR)

    Ms. Crawford-Hicks. Thank you, and good morning, Chairman 
Perlmutter, Ranking Member Luetkemeyer, and members of the 
subcommittee.
    As a proud former military spouse of a Specialist in the 
United States Army, I know firsthand that running a household 
on military pay can be quite difficult for lower enlisted 
personnel.
    Every month, my husband, who had opted into overdraft 
protection at one of the top 20 big banks, watched his pay get 
eaten up by $35 overdraft fees, a cycle that continued paycheck 
after paycheck until I, a D.C.-licensed attorney who was 
stationed in California, was able to find employment after 
jumping through strenuous licensing requirements for the State.
    My husband and I are not alone. Overdraft fees are paid the 
most by the people who can least afford them. These are fees 
that: one, bear no relationship to the costs banks incur in 
covering overdrafts; two, have the potential to explode into 
hundreds of dollars in fees; and three, can be near impossible 
to avoid for people living paycheck to paycheck.
    According to research from the CFPB, overdraft fees have 
become a cash cow for financial institutions. In 2019, banks 
and credit unions charged more than $15 billion in overdraft 
and non-sufficient funds fees, with these fees making up a 
particularly large portion of smaller banks' net profits. This 
money is mostly made off the backs of some of America's most 
financially-vulnerable families, disproportionately affecting 
communities of color.
    Overdraft fees are a penalty for being poor or financially 
insecure. Nearly 80 percent of overdraft fee revenue to banks 
comes from 9 percent of bank accounts, and the median account 
balance for this group is less than $350.
    It is extremely challenging for people with low balances to 
avoid being hit with an overdraft fee. The timing of when 
debits and credits are posted to a checking account is opaque, 
complicated, and out of the consumer's control, and in the 
past, some banks have changed the order of certain transactions 
so that they debit from largest to smallest to increase the 
number of overdraft fees triggered.
    Overdraft fees should not be used as high-cost forms of 
credit, and should be eliminated or returned to an occasional 
courtesy for covering a check or preauthorized electronic 
payment. Banks should be allowed to impose no more than six 
overdraft fees a year. Beyond that, they should cover 
overdrafts through overdraft lines of credit with a reasonable 
interest rate instead of a huge overdraft fee.
    Unexpected and high fees like overdrafts are often cited as 
a reason for a formerly-banked person to no longer have a bank 
account. When a bank hits a negative balance with repeated 
overdraft fees, it can make it impossible for the consumer to 
recover, so the bank will close the account. When the account 
is closed, the financial institution submits the customer's 
name to a database that acts like a blacklist, which can 
prevent the customer from opening a new account elsewhere for 
several years.
    Among people with checking accounts, Black and Latino 
Americans are more likely than White Americans to incur 
overdraft fees. It is wrong that a person who is struggling to 
get by, gets exploited with a surprise $35 fee just because 
they inadvertently overdrew their account while buying milk.
    Some banks have made significant changes to their overdraft 
programs, with a small number eliminating all overdraft fees, 
others getting rid of their non-sufficient funds fees, and some 
making more modest changes like 24-hour grace periods. While 
this is positive for these banks' customers, these measures are 
insufficient by themselves. We need financial regulators to 
take decisive action to stop abusive overdraft fees at all 
financial institutions and to prevent them from coming back.
    Harmful overdraft practices remain a systemic problem that 
policymakers should address. Unless fair, legally-binding rules 
for overdrafts are established, abusive fees will remain. We 
also need to look out for new fintech forms of overdraft fees, 
like fees hidden as purportedly voluntary tips.
    We urge Representatives to co-sponsor and support 
Representative Maloney's Overdraft Protection Act, and Senators 
to support Senator Booker's Stop Overdraft Profiteering Act. 
These bills would cap the number of overdraft fees at one per 
month, and six per year, while allowing additional overdrafts 
to be covered through overdraft lines of credit.
    We also urge the CFPB to use its rulemaking authority to 
end abusive fee practices and to ensure that consumers are safe 
at every bank and credit union.
    We also urge the Federal financial regulators to use their 
supervision and other authorities to address this problem. And 
we urge Members of Congress to highlight the importance of the 
actions taken by these regulators.
    Thank you for inviting me to testify, and I will be happy 
to answer your questions.
    [The prepared statement of Ms. Crawford-Hicks can be found 
on page 40 of the appendix.]
    Chairman Perlmutter. Thank you, Ms. Crawford-Hicks, for 
your testimony.
    Mr. Kundert, you are now recognized for 5 minutes for your 
testimony.

  STATEMENT OF PAUL KUNDERT, PRESIDENT AND CEO, UNIVERSITY OF 
                  WISCONSIN (UW) CREDIT UNION

    Mr. Kundert. Good morning, Chairman Perlmutter, Ranking 
Member Luetkemeyer, and members of the subcommittee. Thank you 
for the opportunity to testify.
    My name is Paul Kundert, and I am the president and CEO of 
the University of Wisconsin Credit Union, and I am testifying 
today on behalf of my organization.
    UW Credit Union is a State-chartered, Federally-insured 
financial institution. We have assets of $4.8 billion and are 
among Wisconsin's top 10 financial depositories. We operate 
primarily in the Madison and Milwaukee communities. We have 
about 310,000 members, 875 employees, and 29 branch locations.
    I have provided written testimony in advance of the 
hearing, so I will be brief in my comments.
    As a not-for-profit credit union, we believe our mission is 
to improve the financial well-being of our members. This 
mission led us to first introduce account overdraft services 
more than 20 years ago, and this same mission led us to be 
early among financial institutions in re-examining our 
overdraft program and responding with changes to create a more-
equitable banking experience.
    In 2001, when we introduced our overdraft program, we 
viewed it as a way for members to avoid bounced checks. But 
over the years, we observed an increase in the use of the 
overdraft program, even though new online tools made it easier 
for members to keep track of their account balances.
    In 2009, when the Federal Reserve published an update to 
Regulation E, it led us to re-examine our overdraft program. 
About that time, too, consumer groups were questioning the 
value of some overdraft programs and raising concerns that the 
fees most often fell to those who could least afford them.
    As a result, we made changes to our overdraft program in 
2010, including implementing a de minimis grace zone of $10, 
setting a limit of one fee per day, and we also affirmed that 
we would not ask members to opt-in to pay overdraft fees 
related to debit card transactions. We saw a significant 
decline in overdraft fee income after these changes. Over the 
next decade, we introduced additional types of accounts that 
helped consumers avoid the possibility of overdrafts 
altogether.
    Then, in July 2021, we implemented a reduction in the 
remaining overdraft fee to just $5. Here is what led us to 
lower the fee. During 2020, overdraft programs were again 
frequently the subject of financial industry news stories. We 
also witnessed social unrest that prompted us to think more 
deeply about racial equity and to consider business practices 
from an equity point of view.
    Also, we were influenced by research which showed that 
lower-income households, particularly Black and Latinx 
households, were more likely to use overdrafts.
    We also reviewed our cost again in providing overdraft 
services. In short, our review led us to believe that a $5 
overdraft fee, limited to one per day, would be sustainable for 
us.
    It is important to confirm that none of the changes that we 
have made have reduced the availability of overdraft funds to 
our members.
    My written testimony includes more details on all of this, 
so I will just summarize and say that when prices are fair, we 
believe consumers do benefit from access to the credit provided 
by overdraft programs.
    Thank you for the opportunity to testify today, and I look 
forward to your questions.
    [The prepared statement of Mr. Kundert can be found on page 
47 of the appendix.]
    Chairman Perlmutter. Thank you, Mr. Kundert, for your 
testimony.
    Mr. Sueiro, if I am making mincemeat of your name, I 
apologize. Please state your name for the record, and you are 
now recognized for 5 minutes.

 STATEMENT OF SANTIAGO SUEIRO, SENIOR POLICY ANALYST, UNIDOSUS

    Mr. Sueiro. Thank you, Mr. Chairman. Good morning, and 
thank you for the invitation. I am Santiago Sueiro, senior 
policy analyst at UnidosUS.
    It is okay, people get my name wrong all the time.
    UnidosUS, formerly the National Council of La Raza, is the 
largest Hispanic civil rights and advocacy organization in the 
United States. For more than 50 years, we have advanced 
opportunities for Latinos. We also partner with nearly 300 
affiliates from Colorado to Missouri, from small towns in Texas 
and Florida to big cities on our coasts. Our affiliates are 
local community organizations from across the country that 
directly serve Latinos.
    Latinos are in a precarious moment. The Federal 
Government's response to the pandemic was critical to reducing 
poverty and supporting low-income people. But as supports like 
the Child Tax Credit expire, many are struggling to make ends 
meet. Recent data shows that over the last 7 days, roughly 63 
million people had difficulty covering expenses, and this 
afflicts 38 percent of Latinos, compared to 23 percent of 
Whites.
    Yet, the work of Latinos is fueling the country's economic 
recovery. Latinos start businesses at more than double the 
overall rates and wield significant purchasing power. As such, 
low-income people must not be burdened with unfair and 
unnecessary fees. We are encouraged by recent announcements by 
some banks that they are reducing or eliminating overdraft and 
non-sufficient funds fees. These actions are, in part, the 
result of renewed attention from regulators in addition to 
pressure from consumers in a competitive market.
    But because they are voluntary, they could be reversed if 
conditions change. For this reason, we strongly encourage 
policymakers to establish permanent guardrails to ensure a 
competitive and fair marketplace for low-income people, 
including Latinos.
    We have three overarching observations that inform our work 
on overdraft. First, most people who incur multiple overdraft 
fees make less than $50,000 a year, and this group is 
disproportionately comprised of Latinos. Second, high overdraft 
and non-sufficient funds fees are a barrier to entry for 
unbanked households. Third, a mix of careful regulations and 
market-driven solutions can improve access to banking services, 
resulting in a win-win situation for the industry and 
consumers.
    Overdraft fees, by nature, impact consumers when they can 
least afford an additional cost. They are also predominantly a 
fee charged to the lowest-income consumers. Consider that 
research shows that Black and Latino households are far more 
likely than White households to overdraw an account, and low- 
to moderate-income households are nearly twice as likely as 
higher-income households to overdraw an account.
    Overdraft fees have implications for those outside of the 
financial mainstream. As of 2019, roughly 7 million people were 
unbanked, and 12 percent of Latinos were unbanked, compared to 
2.5 percent of Whites. Cost is a major barrier to obtaining an 
account. Some 34 percent of those who remain unbanked say they 
do not have a bank account because of high fees, and 31 percent 
say fees are too unpredictable.
    Two policy change pathways could help make the marketplace 
more fair and dynamic. First, excessive fees should be limited 
by regulatory approaches, which could include limits on 
multiple fees incurred for the same incident, caps on total 
fees, reasonable grace periods to cure an overdraft, and, for 
example, the Overdraft Protection Act would limit overdraft 
fees significantly. The Consumer Financial Protection Bureau is 
taking an interest with the recent request for information 
focused on so-called, ``junk fees.''
    Second, we should deepen support for institutions with 
more-inclusive and affordable bank products. Community 
Development Financial Institutions (CDFIs) and Minority 
Depository Institutions (MDIs) offer such products, and we know 
of many credit unions that go to great lengths to include 
Latinos in their institutions, including offering low-cost 
products. Congress should therefore consider increasing 
appropriations funding for the Community Development Financial 
Institution (CDFI) Fund program, allowing them to grow and 
serve more low-income consumers.
    Yet, the CDFI Fund needs complements to grow the field to 
meaningful levels. The Advancing Technologies to Support 
Inclusion Act would invest billions of dollars in CDFIs and 
MDIs to upgrade their technology capabilities, which would 
significantly improve their ability to compete with banks that 
offer fintech products.
    Finally, policymakers should incentivize banks to sign on 
to Bank On national account standards, and banks should promote 
these no-overdraft, low-cost accounts in underserved 
communities.
    Some of our financial institution friends said there should 
be a race-to-the-top business strategy as the path forward for 
the banking sector. We agree with the sentiment that investing 
in low-income people by providing affordable and high-quality 
products will allow communities and banks to grow together.
    Thank you, and I look forward to your questions.
    [The prepared statement of Mr. Sueiro can be found on page 
52 of the appendix.]
    Chairman Perlmutter. Thank you, Mr. Sueiro. I appreciate 
your testimony.
    Mr. Zywicki, you are now recognized for 5 minutes for your 
testimony.

 STATEMENT OF TODD ZYWICKI, GEORGE MASON UNIVERSITY FOUNDATION 
   PROFESSOR OF LAW, ANTONIN SCALIA LAW SCHOOL, GEORGE MASON 
                           UNIVERSITY

    Mr. Zywicki. Thank you, Chairman Perlmutter, Ranking Member 
Luetkemeyer, and members of the subcommittee. I understand 
consumers are frustrated by overdraft fees, and other bank 
fees. Financial products for consumers today are extremely 
complex for various reasons, and have a lot of price points. 
But the point I hope you will take away from today is that 
exasperation is not a substitute for sound economic analysis, 
and I think this is an area in which unintended consequences of 
bans on overdraft protections--substantive limits, price 
controls and the like--could have some serious unintended 
consequences.
    I am going to talk about unintended consequences briefly on 
three groups: first, those who use overdraft protection; 
second, banks, and in particular small banks; and third, all 
other consumers who don't use overdraft protection, and 
particularly lower-income consumers, who I think would be most 
adversely affected by unwise or extreme new limits on overdraft 
protection.
    First, who are these people who use overdraft protection? I 
have detailed this in my written testimony, but I will just 
give a brief overview here, which is, first, these are 
individuals who have limited access to credit generally. The 
CFPB did a study in 2017 which confirmed what had been 
previously found, which is that the primary predictor of 
whether somebody frequently overdrafts their account is their 
credit score, and that people with low credit scores use 
overdraft more frequently. It is not correlated with income and 
other demographic characteristics.
    There are a lot of low-income households in this country 
who manage their financial affairs just fine, and never 
overdraft their account, and I think that is important to keep 
in mind.
    People who use overdraft a lot are also people who do not 
have access to credit cards, and if they do have access to 
credit cards, they have much less credit access on their credit 
cards. So, most consumers use credit cards for short-term 
expenses, but they cannot.
    The second thing to know about these people is that heavy 
overdraft protection users use it for what could be called 
necessities. Michael Flores and I did research where we looked 
at Merchant Category Classification (MCC) codes, and we found 
that overwhelmingly, the places where people overdraft are 
grocery stores, gasoline pumps, and the like. Other studies 
have found it is for things like utilities, rent, mortgage, 
groceries, and the like.
    The third thing is that, as I mentioned, there seems to be 
very little correlation between heavy overdraft usage and 
income. In fact, what we find is that higher-income households, 
as measured by households that make a lot of deposits each 
month, are actually more likely to be the households that 
overdraft. What we see is that what causes overdraft, it 
appears, are households that have high income and high 
deposits, but also just a lot of deposit activity on their 
account. They have a lot more debit card transactions and the 
like, and lower average balances. So, we are talking about 
people who just have a lot of income volatility, but they do 
not appear to be lower income. They tend to be higher income, 
or at least higher on deposits.
    The fourth thing we know about people who use overdraft 
protection a lot is that they monitor their accounts a lot more 
closely. They understand that they are skating near the edge, 
and when they overdraft, they typically understand that they 
either are hoping that it will work out and a deposit will hit 
before a withdrawal, or they know it will not. They check their 
accounts regularly. They are much more active in checking their 
accounts.
    The second group this hits are small banks. Banks, as we 
have heard, generate a lot of revenue from this. But what we 
have found--and I can elaborate on this question if you would 
like--is that small banks tend to be more dependent on 
overdraft fees than large banks. Why? Because large, megabanks 
have multiple lines of revenue, wealth advising services, 
insurance, all these sorts of things. Small banks will have a 
much more difficult time diversifying if they lose this stream 
of revenue.
    The third thing, and the one I want to close on, is to talk 
about the impact on other consumers, consumers who don't use 
overdraft protection, which is if we get rid of overdraft 
protection and banks move to pick up revenues somewhere else, 
what are we going to see? We will see higher bank fees, we will 
see higher minimum monthly deposits as basically insurance 
against overdrafting, and we will see a loss of access to free 
checking, and this will impact low-income households the most. 
A paper by Evans found that when the Fed changed its rules on 
opting into overdraft protection, the percentage of free bank 
accounts fell 11 percentage points in one year, which impacts 
low-income consumers.
    We also have the study by Federal Reserve Economists Brian 
Melzer and Donald Morgan that I would refer you to, where they 
found that when overdraft fees were essentially deregulated, 
there was a decrease in returned check fees and an increase in 
bank accounts by low-income households.
    So, thank you for your time, and I look forward to 
answering your questions.
    [The prepared statement of Mr. Zywicki can be found on page 
59 of the appendix.]
    Chairman Perlmutter. Mr. Zywicki, thank you for your 
testimony.
    The Chair will now recognize the Chair of the full 
Financial Services Committee, Chairwoman Waters, for 5 minutes 
for her questions.
    Chairwoman Waters. Thank you very much, Mr. Perlmutter.
    I would like to address this question to Mr. Greer.
    Mr. Greer, in his written testimony, states that elite 
institutions use racism and discrimination as a tool to expand 
their power and wealth, all while suppressing the economic 
power of communities of color and other marginalized groups. 
These elite institutions that control resources use that 
control to change the rules of our economy in their favor, 
which continues the cycle of profit.
    You describe your work as basically liberation from the 
oppression economy. Many of the large banks have announced 
changes to their overdraft programs. However, these programs do 
not all eliminate the use of overdraft fees and provide 
different features. For instance, some large banks are now 
offering new small-dollar loan products to their customers as 
part of the changes.
    What are the most important considerations when evaluating 
and comparing these different programs that the banks are now 
offering in lieu of more traditional high-cost overdraft fees?
    Mr. Greer. Thank you, Madam Chairwoman, for that question. 
It is so important. The perspective that you laid out is 
precisely the assessment of the economy that we have. I think 
there is a long history of the financial institutions in this 
country oppressing people of color, whether that is in the 
mortgage market, whether it is in retail banking, so on and so 
forth, and we still see it today. We see examples of it today 
in the news, it feels like almost monthly or weekly.
    What I think is the most important thing to consider is as 
financial institutions [inaudible], is recognizing and 
understanding that they are navigating a very turbulent 
economy, especially now in the time of COVID, more income 
volatility, more volatility around the hours that they are able 
to work, being pushed into the gig economy, and structuring 
products and services to meet those needs for folks are things 
to consider.
    One thing that I will raise, and that Ms. Crawford-Hicks 
raised in her testimony, is access to affordable credit, and I 
would say access to affordable credit that is not predatory but 
that will actually help people manage their finances and 
actually build wealth, because what we know historically is 
that these fees have become a substitute for folks who cannot 
access affordable credit in financial institutions because of 
discrimination in the credit markets.
    So, what I would say is we can't look at these things in a 
vacuum. It is very easy to say, well, if we do this, then this 
will happen, or if we do this, then this. We have to look at 
the whole picture and know that the financial institutions have 
a responsibility to meet the full needs of communities that 
they serve.
    Chairwoman Waters. And do you believe that because of these 
practices, the wealth gap can never be closed, in fact, if 
these kinds of practices continue?
    Mr. Greer. Absolutely, because what these fees are doing is 
they are extracting resources out of the households of 
communities of color that otherwise could be used to save 
money, to put money down on a mortgage, on a house, to put 
money down on a small business, to participate in the economy 
in a way that builds wealth, but they are not able to do that 
because fees like these and other things that financial 
institutions do, that this committee and others have covered 
over time, are just pulling and extracting and siphoning 
resources out of communities that could be used to build 
wealth.
    Chairwoman Waters. The amount of money that you indicated 
that has been paid by Black and Latino communities is 
absolutely extraordinary. Do you stand by that?
    Mr. Greer. It is what we found in the research in preparing 
for this hearing.
    Chairwoman Waters. I think about $40 billion, you indicated 
in one instance here, with the Black community?
    Mr. Greer. It was $800 million, and $1.1 billion in bank 
fees in 2020.
    Chairwoman Waters. Thank you very much.
    Mr. Chairman, I yield back.
    Chairman Perlmutter. The gentlelady yields back.
    I now recognize the ranking member of the subcommittee, the 
gentleman from Missouri, Mr. Luetkemeyer, for 5 minutes for his 
questions.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Professor Zywicki, as someone who served as the Chair of 
the CFPB's Task Force on Consumer Financial Law, do you think 
the CFPB has the legal authority to set the prices for consumer 
financial products?
    Mr. Zywicki. I don't think they have the legal authority to 
set the prices on financial products. And as we know, the Dodd-
Frank Act specifically says they cannot impose usury ceilings, 
but I think that would be a general rule in terms of dictating 
prices for financial services.
    Mr. Luetkemeyer. So, why are they getting involved in this?
    Mr. Zywicki. They have this theory of junk fees, and I 
assume the theory must be something like, these are unfair, 
deceptive, or abusive practices. It is not quite clear what 
their authority is for it, but basically what we have had so 
far is rhetoric.
    Mr. Luetkemeyer. It is very concerning to me when you have 
an agency like that basically create a new word. I have been 
around for almost 50 years. I have never heard the words, 
``junk fees.'' It is not in any financial services dictionary 
anywhere. They created this word, and basically, what I think 
you just said is they are trying to insinuate that there is 
some sort of exploitative activity going on here, rather than 
acknowledging that service charges are basically something that 
is charged for a service that has been requested by the 
customer, for which they pay a fee. They don't pay fees if they 
don't access the service, right?
    Mr. Zywicki. That is right. All of these fees are generated 
by something people do. But the more general point, I think, 
Congressman Luetkemeyer, is a sound one, which is, what is a 
junk fee versus a risk-based fee, for example? If I go off to 
Europe and incur a foreign transaction fee, should some poor 
guy in rural Nebraska be forced to subsidize my foreign 
transaction fee? If I overdraw my account, why should somebody 
else have to pay for my overdrafts? If I pay my credit card 
late, why all of a sudden is that a junk fee rather than 
something that prices my risk and prevents other people from 
having to subsidize my behavior? So, I think the junk fees 
rhetoric covers a lot of serious economic questions.
    Mr. Luetkemeyer. Over the last several months here, it has 
really been concerning to me to see the activities of the CFPB 
and the way they are going about their business. For instance, 
they set up this strawman issue. The other day, they talked 
about illegal repossessions, which is quite a--they created a 
whole situation that doesn't exist, and say they have to 
regulate that. They create service fees for financial 
institutions as junk fees, so therefore we have to regulate 
that. There is nothing there, and yet they try and create 
something so they can make an excuse to regulate it, when you 
just said they don't have the authority to do that. It is very 
concerning, by the way, how they are going about their 
business, how they are exploiting their lack of oversight to be 
able to go about doing this. It is very, very concerning.
    I am just curious, if there is no overdraft situation, what 
happens to people if they can't have access to overdraft 
services? What are they going to do when they have--40 percent 
of people can't pay a $400 bill, and you wind up having to go 
buy a new set of tires, and it costs $500?
    Mr. Zywicki. That is right. Basically, they will either 
have their payments declined, in which case they won't be able 
to buy the goods or services they need--as I said, 
overwhelmingly, it looks like people use overdraft for things 
like groceries, utility bills, and the like.
    The second thing they can do is try to go somewhere else. 
For a lot of consumers, as we have already said, they don't 
have access to credit cards, and what a lot of heavy users of 
overdraft have said is that their next-best alternative is a 
payday loan. So, they go without, or they have to go down the 
street and get a payday loan in order to buy the tires, and it 
is not clear to me how that makes them better off.
    Mr. Luetkemeyer. You made a comment a minute ago that if 
they don't charge a fee for this, the rest of the customers who 
patronize that particular business are going to have to pay for 
that person's ability to have a free loan through higher 
service fees that they pay. Would that be a fair statement?
    Mr. Zywicki. That is basic Economics 101.
    Mr. Luetkemeyer. Because at the end of the day, there is a 
certain amount of expense the business has if they have to 
cover with their charges for their business operations, 
whatever their business model is, that includes some fees to be 
able to pay for the people who work for them to be able to do 
that. To me, it is a simple way of operating. It is a business 
model that has been there for years. There is nothing 
exploitative about it if you understand how it operates. I was 
in a business for a long, long time and I can tell you, people 
call up and say, I wrote a check today, I will be in next week 
to pick it up, please pay my check so I don't have an overdraft 
fee or don't have a bad check fee and I can do business; they 
are willing to pay the fee to be able to transact that piece of 
business.
    With that, thank you, Mr. Zywicki, for your testimony 
today.
    Mr. Chairman, I yield back.
    Mr. Zywicki. Thank you.
    Chairman Perlmutter. I thank the gentleman.
    Now, I am going to recognize myself for 5 minutes.
    In this subcommittee, I have said to people from time to 
time that I think we have two responsibilities: consumer 
protection; and financial institutions. One of them is to weed 
out and stop sharp practices. I would say that is something 
that as a bankruptcy lawyer, I heard a lot about. Bankers and 
bankruptcy lawyers, we heard about sharp practices that take 
advantage of everyday Americans and put them behind the eight 
ball, where they really have trouble exiting. The other is to 
make sure that the financial institution remains solvent and 
strong, and those are not incompatible. Those things work 
together.
    So, I am going to start with you, Mr. Kundert, if I may. I 
want to ask you about some of the consumer protections your 
credit union has implemented to your overdraft product.
    Beginning back in 2010, the University of Wisconsin, (UW) 
Credit Union implemented a de minimis overdraft buffer, 
published a plain-language description of the product, and made 
other changes to make the product more consumer-friendly. As 
you mentioned, you also recently cut your overdraft fee from 
$30 to $5. Many of these steps your credit union has taken are 
emblematic of the changes many of my colleagues and I would 
like to see in the market overall. I think a lot of other 
financial institutions are taking a close look at their 
overdraft programs, and hopefully we will see continuing 
improvements in this area.
    What has been the most challenging part of improving your 
overdraft program?
    Mr. Kundert. Thank you, Mr. Chairman. The most challenging 
part is adapting to not having the revenue that the programs 
previously provided us. The revenue from overdraft programs, 
especially those that include debit card transactions, can be 
pretty significant to a financial institution. So, we 
voluntarily made these changes and made them, as you mentioned, 
starting 10 years ago, so we have had time to adapt our 
organization to not depend on that overdraft income.
    I think operationally, it hasn't been as difficult to 
implement changes as it is just to adjust the business model 
where that revenue isn't a part of it.
    Chairman Perlmutter. How have your customers reacted to the 
changes that you have made over this period?
    Mr. Kundert. Honestly, they have responded quite quietly. 
We didn't have a lot of complaints about practices before 2010, 
or even since. Obviously, people have benefited from the more 
affordable cost of the program, and that has been a positive. 
We enjoy very high member satisfaction levels overall. But over 
the years. we have received very little feedback one way or the 
other on these programs. But we believe in principled decisions 
and don't necessarily make them based on public outcry or 
complaints.
    Chairman Perlmutter. You said these provide a significant 
revenue stream. I heard Mr. Greer at the beginning of his 
testimony talk about the $34 charge paid back in 3 days on a 
cup of coffee or whatever it is, at a 17,000 annual percentage 
rate (APR).
    So, Mr. Greer, do you think these revenues that people get 
stuck in, is it a revenue stream that the banks are becoming 
dependent upon, I guess is what I would ask you? Or a bank, any 
banks?
    Mr. Greer. Yes. ``Dependent upon,'' I think is--I think it 
is quite clear that it is a significant portion of their 
revenue that is coming in. Now, dependency on that revenue to 
me doesn't justify the extraction that it is taking from 
households, particularly households of color. Members of 
Congress have to understand the tradeoffs of that. The 
financial instability in the households that these fees are 
causing households to me wouldn't be commensurate with the 
adjustments that financial institutions would have to make in 
order to forego some of the revenue that they would lose by 
eliminating these fees.
    Again, I think the tradeoff for families is they are much 
less able to stomach the impact of these fees than the bank 
would be for cushioning the impact of the loss of revenue.
    Chairman Perlmutter. Thank you.
    My time is about to expire, so I will yield back, and 
recognize the gentleman from Florida, Mr. Posey, for 5 minutes.
    Mr. Posey. Thank you very much, Chairman Perlmutter.
    Professor Zywicki, is there any way to be charged an 
overdraft fee if you don't write bad checks?
    Mr. Zywicki. Not that I am aware of.
    Mr. Posey. If there was no fee to cover bad checks, who 
would have the burden of making up lost revenue and 
administrative costs?
    Mr. Zywicki. That is a great point, Congressman Posey. You 
have to keep in mind that the overwhelming majority of 
Americans never or rarely overdraft their account. So, most 
people don't do this. But if we have a situation in which 
people are writing bad checks that have to be cashed off or 
payments that are made that have to be cashed off, an overdraft 
line of credit might be $300, $400, $500, and if people don't 
have to pay for that and that ends up getting written off, 
somebody else has to bear that cost, which means that other 80 
percent of households presumably who aren't really using 
overdraft very often.
    Mr. Posey. When we are talking about the title of this 
hearing, ``The End of Overdraft Fees? Examining the Movement to 
Eliminate the Fees Costing Consumers Billions,'' if we do that, 
we shift the burden of responsibility from people who write bad 
checks to the backs of people who don't write bad checks, 
correct?
    Mr. Zywicki. That is right, the rest of us have to pay for 
it. And what really bothers me about it, what I am most 
concerned about, Congressman Posey, is the impact this would 
have on all consumers, which is to say one way of keeping 
people from writing bad checks is, for example, requiring them 
to hold higher minimum balances in their accounts so the 
payments are more likely to clear. Who is that going to hurt? 
That is going to hurt low-income consumers. You could charge 
bank fees for everybody, monthly fees, in order to provide 
this, ``free,'' service. Who is that going to affect? It most 
likely will affect low-income consumers because they are not 
going to be able to get the minimum balances necessary to 
maintain free checking and the like.
    So, there is no free lunch here. There is no free lunch, 
unfortunately, for when you overdraw your account. Somebody has 
to pay for it.
    Mr. Posey. Historically, we only subsidize things that we 
want to encourage, and I wouldn't think we would want to 
encourage writing bad checks, but it is almost comical when you 
stop and think about it, that the management of an organization 
that is $30 trillion in debt, with no plan whatsoever to ever 
repay that money, just continue to pay interest and burden 
future generations, is trying to tell banks and credit unions 
and other lenders how they should run their business. That 
almost doesn't pass the straight-face test. I have a real 
problem with that.
    Would it be reasonable and beneficial for banks to 
characterize overdraft fees to become a short-term line of 
credit with transparent limits on the amount of available 
credit and the prices of that credit?
    Mr. Zywicki. What I think would be a useful way, a more 
productive way to think about this, Congressman Posey, and I 
feel very strongly about this, and we talked about this in our 
CFPB task force report--I think the answer to this is more 
competition, which is it is regrettable that if you can't get 
an overdraft transaction, you have to go get a payday loan. I 
think the answer is to open up things like fintech, greater 
chartering of credit unions, more access to different sorts of 
banks, like Walmart being given a banking charter. I think that 
earned wage access, as we talked about, direct deposit advance.
    And I also think a very important thing that was mentioned 
in some of the background materials is it is time for the Fed 
to get its act together on faster payments. Somebody needs to 
get this faster payments problem solved. The rest of the world 
knows how to do faster payments. Why can't we do faster 
payments so that it takes 3 or 4 days for your paycheck to 
clear in a bank? I don't know whether it is the Fed or whether 
it is the clearinghouse or somebody, but there are a lot of 
things that could be done to promote competition and promote 
access, I think, without going down this path of banning 
products, price controls, and things that are going to have 
terrible unintended consequences for people.
    Mr. Posey. Thank you.
    My time is about to expire, so I yield back, Mr. Chairman.
    Chairman Perlmutter. The gentleman yields back.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, who is also the Chair of our Subcommittee on Oversight 
and Investigations. You are now recognized for 5 minutes for 
your questions.
    Mr. Green. Thank you, Mr. Chairman.
    Mr. Chairman, I am grateful for this hearing, and I 
especially want to thank you and the Chair of the Full 
Committee. I am just amazed at how this hearing has unearthed 
facts that are so disturbing.
    And I want to mention this: the Chair of the Full 
Committee, if I may, the Honorable Maxine Waters, when it comes 
to housing the homeless and consumer protection, nobody is in 
front of her in that line of persons who desire to do so. So, I 
am grateful to you, Madam Chairwoman. It is an honor to serve 
under your leadership.
    With reference to the comment about no free lunch, let's 
talk to Mr. Kundert. You have been without these overdraft fees 
for some time now. Are you at risk of going out of business?
    Mr. Kundert. No. I am happy to report that we are doing 
very well.
    Mr. Green. How do you respond to a comment about no free 
lunch when it comes to doing something that obviously benefits 
your clientele?
    Mr. Kundert. We did not eliminate the overdraft fee 
entirely. Our action was to change the likelihood that it would 
be imposed, make sure it wouldn't be imposed more than once a 
day, and to study our actual costs to make sure the fee we were 
charging was proportional and appropriate for the service we 
were providing.
    We do provide our accountholders between $200 and $600 of 
liquidity through these programs, so to be sustainable, we 
believed that we needed to charge something. It wasn't possible 
for us, or wise I should say, we didn't think, to charge 
nothing for the fee, because we think there should be a greater 
cost to receiving an advance from the credit union than not 
receiving one, and I think that goes to some of the comments 
that have been made about fairness to all of the members that 
we serve.
    But we are not serving all our members well, we think, to 
disproportionately profit from one segment of our membership 
simply to benefit another. We do think that we need to be 
diligent in monitoring the levels of income that we receive 
from the various products we have.
    Mr. Green. I am grateful that you have given it some 
consideration, to be very candid with you. I have one more 
question for you and then I will have to move on. In doing 
this, how much less are you charging the persons that you are 
referencing? What was the fee initially, and what is it now?
    Mr. Kundert. We made substantial changes to the likelihood 
you would incur a fee, and no more than one, 10 years ago. But 
last year we reduced the fee from $30 to $5. We were 
comfortable with $30 in 2010 because it was, at the time, sort 
of considered the competitive market rate for an overdraft. Our 
focus was to make sure you wouldn't incur that from a debit 
card transaction. It would be purely from a check transaction 
or an ACH debit. But last year, we reduced the fee after more 
examination of the program.
    Mr. Green. And you are maintaining your business model and 
doing well?
    Mr. Kundert. We are. Thank you.
    Mr. Green. Thank you.
    Mr. Greer, let me go to you rather quickly. You indicated 
that the people who incurred these fees usually would have $24 
or less in their overdraft, and that it would be repaid in 
about 3 days. I think you said that the interest rate annually 
would compute to about 17,000 percent. Correct my mistake, 
because I think this is great information for me for future 
reference.
    Mr. Greer. No, that is correct, Congressman.
    Mr. Green. And $24 or less. What would the typical amount 
of the overdraft fee be for this $24 or less?
    Mr. Greer. Anywhere underneath that $24. So, you are 
talking about routine kinds of purchases at the grocery store, 
for example, a carton of milk.
    Mr. Green. I guess what I am asking is, what was the fee 
that the bank would charge for that?
    Mr. Greer. They would charge $34 on, say, a $5 overdraft.
    Mr. Green. Thirty-four dollars on a $5 overdraft.
    Mr. Greer. Yes.
    Mr. Green. Okay.
    I thank you, Mr. Chairman, and I yield back.
    Chairman Perlmutter. The gentleman yields back.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr, for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman, and thanks to our 
witnesses for their testimony today.
    As the discussion has progressed, I notice a theme 
continues to come up, and that is the benefit of short-term 
liquidity for consumers provided by these overdraft-eligible 
accounts.
    Ahead of this hearing, I asked many of my constituents, 
Kentuckians, for some anecdotes about their experiences with 
bank accounts and overdraft fees, and I got a whole lot of 
feedback, and one of them I just have to share.
    They were a couple of brothers, and they were horse 
traders; Kentucky is synonymous with horses. And these guys 
would buy Western performance horses for cutting and rating, 
and they bought them for about $3,000, and they sold them for 
$5,000. They had short-term liquidity needs, and they sometimes 
paid the bank $1,000 in overdraft fees and negative balance 
fees.
    But they wanted to do it. They knew that they were going to 
have to do it. They didn't qualify for a line of credit, so 
they wanted to do this because they had no problem paying a $30 
overdraft fee to buy a horse on which they would then make 
$2,000. They knew about this product, they liked the product, 
and the bank had a problem with it, not because the bank didn't 
believe that these folks were going to pay them back, but 
because the regulators had a problem with it. That is why the 
bank had a problem with the overdraft.
    Another great story from a Kentuckian. It is one thing to 
speak about these fees in the abstract, but it is a totally 
different thing to hear about what happens in reality, and to 
hear it directly. A young mother, her husband was deployed in 
the Army, and her car broke down. She had no way to pay for the 
car repair, but forgot that she didn't have sufficient funds in 
her checking account. The overdraft protection on that account 
allowed her to address her emergency, and she relayed that the 
fee she paid was worth the convenience in the circumstance. And 
I have heard many other stories similar to this one.
    Professor Zywicki, in a circumstance like the one I just 
described, what options would be available to that young mother 
whose husband was deployed overseas? What alternatives would 
she have if accounts with overdraft protection were banned? 
What would be the alternative for her as she faced that short-
term, cash-strapped need?
    Mr. Zywicki. What we know is that if you asked most people, 
including people in this room, they would just use a credit 
card, right? That is what credit cards are for. But people who 
use overdraft say, ``We don't have credit cards.''
    I think we need to understand that according to the CFPB, 
people who overdraft their accounts frequently have a credit 
score of 563, which is deep sub-prime. So when we are talking 
about overdrafting, extending $300 or $500 of credit to 
someone, these are accounts that go bad. They are overdraft 
accounts that go bad, which is why you charge a fee on them, 
and these are people who are not going to get a credit card.
    So for this young woman, presumably, if she had a credit 
card, she would have used it. She didn't, and so her 
alternative is probably a payday loan, which is the best she is 
going to do at that point, or going without.
    Mr. Barr. And to that point, this woman saw her banker at a 
grocery store and went up and thanked the banker for the 
convenience that overdraft protection provided.
    Professor Zywicki, can you describe the requirements for 
banks under Regulation E with respect to overdraft fees and the 
transparency and protections that those rules already provide 
to customers?
    Mr. Zywicki. There are already a lot of disclosures that 
are required. With respect to point-of-sale and ATM overdraft 
fees, we know they changed the rules so it is opt in, so 
consumers actually have to opt into that. And unsurprisingly, 
what we see is that consumers who use overdraft protection a 
lot are a lot more likely to opt in when that was passed 
because they have the greatest need for the product.
    Mr. Barr. In my final minute, I want to focus on another 
point that you made, about the ability of community banks, 
small banks, to handle overregulation of overdraft versus large 
banks. It is wonderful that we heard from one of our witnesses, 
Mr. Kundert, about his institution's ability to reduce those 
fees, and that is the great thing about a competitive 
marketplace. And presumably because of that move, maybe his 
institution is able to attract more customers. That is his 
choice, and that is what the free market and competition does.
    But can you compare the relative ability of large banks and 
small banks to absorb the costs of overdraft protection if fees 
are further curtailed or prohibited?
    Mr. Zywicki. Yes. I think it is great that banks are 
innovating on this, they are competing. If large banks want to 
be more generous on overdrafts, that is great. Let a thousand 
flowers bloom. But the reality is that larger banks have a lot 
more places from which they can generate fees. Small banks have 
continued to be able to be competitive because they offer no-
annual-fee bank accounts. Large banks have generally moved away 
from that.
    Chairman Perlmutter. Mr. Zywicki, his time has expired. 
Thank you.
    With your anecdotes, Mr. Barr, you reminded me that my 
daughters find that their cup of coffee at Starbucks has 
overdrawn them by $2, and they get charged $35 on their 
overdraft. So, they are all over the map on this thing.
    I now recognize the gentleman from California, Mr. Vargas, 
for 5 minutes.
    Mr. Vargas. Thank you very much, Mr. Chairman. I appreciate 
this hearing very much, and I want to also thank Ranking Member 
Luetkemeyer.
    Dr. Zywicki, you have said a few things here today that to 
me sound very counterintuitive, so I want to make sure that I 
understood what you said and give you an opportunity to clarify 
them for me if I am incorrect.
    You said this: Who are the people that use overdraft? You 
said it is not correlated to poverty. Higher-income families 
use overdraft more than lower-income families, and they use it 
for groceries and utilities.
    That sounds very counterintuitive to me. I don't believe we 
ever used overdraft, an upper middle-class family. I think you 
also said the great majority of Americans never use overdraft. 
That seems to me, to be completely counterintuitive. Could you 
explain that to me?
    Mr. Zywicki. Sure, I would be happy to. For example, on the 
question about income, if you look at the CFPB's 2017 report on 
frequent overdrafters, what we find is that when you look at 
monthly deposits, very-frequent overdrafters who overdraft more 
than 20 times a year have monthly deposits of $2,554. People 
who infrequently overdraft, one to three times a month, have 
$1,726 per month, so $800 more per month, and it goes down from 
the high of $20 to $10 and down. It goes from $2,500 down to 
$1,700 linearly.
    What we also see is that people in that category have very 
low credit scores, very low credit available on their credit 
cards, and much higher levels of point-of-sale debit card 
transactions, twice as many as the people who have lower income 
and overdraft less frequently.
    What seems to be driving overdraft protection for a lot of 
these people is they simply have a lot of money flowing through 
their accounts and things get out of whack, right? So it would 
not be, unfortunately, surprising if their--
    Mr. Vargas. Dr. Zywicki, I am going to interrupt you for a 
second, because there was testimony that other people have 
spoken of, about people of color especially overdrafting. It 
doesn't seem to jibe with what you are saying at all, just to 
be frank. This seems to me a little bit like the old lawyers 
who got up there for the tobacco companies and said no, no, 
tobacco, there is no health problem here.
    Would someone else like to answer these questions to refute 
or contest what Dr. Zywicki has said, any of the other 
witnesses?
    Mr. Sueiro. Sure. This is Santiago with Unidos. I believe 
in the same report we have been looking at, that 9 percent of 
consumers account for 80 percent of all overdraft fees. In that 
report, if you look at the 9 percent of consumers, 7 out of 10 
of them earn less than $50,000 per year. So if you are looking 
at it in terms of income, a majority of them are relatively 
lower income, rather than looking at it in terms of deposit 
amounts.
    Mr. Vargas. It seems ridiculous to me to believe that it is 
mostly wealthy families who overdraft. Maybe it is not, but it 
seems ridiculous to me, especially when you see so many people 
of color, who are normally not wealthy, paying so much in 
overdraft fees.
    Would anyone else who would like to comment on that?
    Ms. Crawford-Hicks. This is Elyse Crawford-Hicks from 
Americans for Financial Reform. I particularly agree that it 
does sound ridiculous that high-income families are using 
overdraft protection when low-income families do not own a lot 
of the wealth in this country. So quite naturally, the 9 
percent of accounts that hold $350 or less, that are using 
overdraft protection the most, do seem to belong to the low-
income people in the country.
    Mr. Vargas. That seems obvious to me. But it could be 
right, I don't know. I think more should be done on that 
because it sounds ridiculous, that the wealthy families are the 
ones that pay the overdraft and the poor do not, that it 
doesn't correlate to poverty. That sounds utterly ridiculous. 
It sounds like that old commercial for the tobacco companies.
    But again, my time has run out. I appreciate this hearing 
very much. Thank you.
    Chairman Perlmutter. The gentleman's time has expired.
    The gentleman from Texas, Mr. Williams, is now recognized 
for 5 minutes for his questions.
    Mr. Williams of Texas. Thank you, Mr. Chairman.
    Mr. Zywicki, do you want to quickly respond to any of those 
accusations?
    Mr. Zywicki. Sure. This is CFPB data. This is a CFPB study. 
Michael Flores did a study that found the same thing. People 
with high overdraft--and again, most households don't overdraft 
or overdraft rarely, right? We are talking about high 
overdrafters. The CFPB, and Michael Flores' study, found the 
same thing, which is that what correlates with people is that 
they have high deposits, high transactions, and low average 
balances.
    Mr. Williams of Texas. We know the CFPB is always right, so 
thank you for that.
    Mr. Zywicki. Compared to the cigarette industry.
    Mr. Williams of Texas. It is funny that we are having this 
hearing highlighting a phenomenon that the private sector--and 
I am a private sector guy, I am a small business owner--is 
already taking care of. There is a thing called competition 
that a lot of people don't understand, but it drives the 
financial industry to lower or get rid of overdraft fees 
entirely. Customers tell people what to do, tell businesses 
what to do. This is not happening because of government 
mandates but businesses who are competing for customers.
    It started with some fintech companies like Chime, who got 
rid of these fees almost 5 years ago, and a few years later, 
more traditional banks like Ally changed their overdraft 
policy, in their opinion to better serve their customers. And 
most importantly, one of the largest banks in the country, 
Citibank, got rid of these fees as well.
    So, the market is taking care of the issue without 
government intervention, and we do not need more rules from 
Washington mandating that the entire industry move in this 
direction, because I know when I opened up my first checking 
account, I agreed to write checks and have money in the bank 
before the check cleared. Pretty simple.
    So, Professor Zywicki, in what ways do you think banks 
would recoup some of their lost revenues if overdraft fees were 
suddenly banned across-the-board?
    Mr. Zywicki. Let me again emphasize that I think it is 
great that there are different models of competition. Credit 
unions obviously are member organizations. They can have a 
different model from a bank that is kind of open to all comers.
    But I think what we would probably see is a reduction of 
free checking, and we would see higher required monthly minimum 
balances. This is what the research found, that there were 
restrictions. And we would see higher bank fees, like higher 
monthly fees.
    Mr. Williams of Texas. So if we legislate away overdraft 
fees, some private sector participants will simply block these 
transactions from going through at the time of the sale, and 
this will leave consumers--again, the very people we want to 
help, whom we sometimes end up hurting--with fewer options, and 
they are left in a pinch and do not have sufficient funds in 
their account.
    We saw after Dodd-Frank, when the government came in with a 
heavy-handed regulatory approach, debit card rewards and free 
checking accounts suddenly left the market. These are tradeoffs 
to all of these policies we enact in this committee, and we 
should not look at outright bans on certain products that 
provide a necessary service to customers.
    In Texas, we have a saying that a deal is a deal. Professor 
Zywicki, what are some ways we could expand consumers' options 
in the small-dollar credit space instead of this blanket big-
government ban?
    Mr. Zywicki. I think that is the best way to think about 
this, Congressman Williams, that first, I think the Durbin 
Amendment example is a very bright cautionary tale of how this 
happens. So, I would advise you to look at that.
    But as I mentioned, I think things like fintech, I think 
greater chartering of industrial loan banks such as Walmart 
potentially getting in, earned wage access, direct deposit 
advance products, all these sorts of things--more competition 
is the answer for these consumers, more choice, rather than 
putting them in this bucket where they have to either get an 
overdraft or a payday loan, which is a terrible situation to be 
in, which is where a lot of these people find themselves 
because there aren't enough alternatives.
    Mr. Williams of Texas. Main Street America has been 
hammered, and I am Main Street America. I am in the car 
business. Main Street has been hammered with new regulations 
during President Biden's first year in office, and one study 
estimated the true cost to be around $202 billion of 
regulations, and 130 million manhours to deal with these 
regulations, and it is a cost that forces businesses to hire 
compliance people rather than salespeople to comply with these 
government mandates.
    This means businesses are forced to hire more compliance 
officers who will be nothing but a drag on a company's bottom 
line because they generate nothing. I am in a business that is 
totally commission. If you don't sell something, you don't eat. 
And to hire a compliance officer, does nothing for me; it does 
not help.
    So quickly, I know you have studied this topic extensively, 
so can you give us your view of regulatory optimization? What 
is regulatory optimization?
    Mr. Zywicki. That is a great point, which is this is one of 
the big reasons why this hits small banks so heavily, which is 
every time you enter a new business, a new line of revenue, you 
also have new compliance costs that go along with it. So if you 
are going to start selling insurance or something, for small 
banks, this is very difficult.
    Mr. Williams of Texas. If you have a way to put a 
compliance officer on commission, let me know.
    I yield back.
    Chairman Perlmutter. The gentleman's time has expired.
    The gentleman from New York, Mr. Torres, is now recognized 
for 5 minutes for his questions.
    Mr. Torres. Thank you, Mr. Chairman.
    It has become increasingly fashionable for banks and 
corporations to preach the gospel of equity and inclusion, but 
the banking industry should do some soul searching and ask 
itself: What are we to make of the racial inequity and 
exclusion brought on by overdraft fees? The imposition of 
overdraft fees at the expense of the poorest people of color in 
places like the South Bronx flatly contradicts every notion of 
equity and inclusion. Poverty is expensive in America, and the 
prohibitive expense of poverty in America can be measured, in 
part, by overdraft fees.
    The overdraft fee for a single transaction can be as high 
as $36, which is 5 times higher than the Federal minimum wage. 
In 2019, overdraft and non-sufficient funds fees generated an 
historic high of more than $15 billion in revenue for the 
banking industry. According to the CFPB, overdraft and NSF fees 
make up two-thirds of revenues generated by fees. Overdraft 
fees are so common that 1 in 11 Americans pay more than $350 a 
year. And even more troubling, less than 8 percent of customers 
pay a staggering 80 percent of the overdraft fees.
    And is it fair to say, Ms. Crawford-Hicks, that those 
customers are disproportionately lower-income people of color?
    Ms. Crawford-Hicks. It is fair to say that the overdrafts 
are affecting people of color disproportionately. Again, in my 
testimony, we are looking at 80 percent of overdraft fees from 
9 percent of those accounts.
    And going back to my colleague, Mr. Zywicki's, point about 
overdraft fees not affecting low-income people, again I state 
that people of color do not own the most wealth in this 
country. So if 80 percent of overdraft fees are coming from 9 
percent of the accounts, it must be coming disproportionately 
from people of color.
    Mr. Torres. According to the Pew Charitable Trust, in 2016, 
7 in 10 customers who repeatedly overdrafted earned less than 
$50,000 a year, which is hardly high income in a place like 
Washington, D.C., or New York City. Nearly 25 percent of the 
repeat overdrafters pay fees equal to one week or more of 
wages. Let that sink in for a moment. There are 52 weeks in a 
year, and there are wage earners for whom a whole week of 
wages, or several weeks of wages, are devoured by overdraft 
fees alone.
    Is it fair to say, Mr. Sueiro, that those wage earners are 
more likely to face barriers to accessing affordable and 
reliable credit?
    Mr. Sueiro. Yes. One of the things that we see in the FDIC 
report from 2019 is that three answers that unbanked people 
gave were associated with cost when it came to barriers to 
gaining entry into the financial system.
    Another report from the Center for Responsible Lending 
found that a million people, roughly, were left out of the 
banking system as a result of overdraft fees specifically. And 
then, we have seen a lot of research showing that the high cost 
of banking generally is an impediment for low-income people and 
Latinos gaining access to the financial system.
    Mr. Torres. So, it is fair to say that when it comes to 
credit, there is a tale of two Americas. Those with higher 
incomes have access to affordable and reliable credit, and 
those with lower incomes in places like the South Bronx often 
have no choice but to pursue de facto credit in the form of an 
overdraft, which again carries a fee that is 5 times the 
Federal minimum wage.
    Ms. Crawford-Hicks, you spoke about the closing of accounts 
leading to the blacklisting of the lowest-income Americans. Can 
you elaborate?
    Ms. Crawford-Hicks. Yes. Overdraft fees, and when you are 
put in a cycle of overdraft fees, just like my husband and I 
were before I was able to find a job in California, it 
contributes to the cycle of when you are getting paid, most of 
your check is going to those overdraft fees. So, it does lead 
to people being unbanked, because if you overdraft multiple 
times, the bank will want to close the account, and because of 
these fees, people do not trust banks and decide to stay 
unbanked.
    Mr. Torres. Mr. Zywicki, I suspect we are going to disagree 
on this question, but there are banks for which the majority of 
their revenues come from overdraft fees. If you are a bank for 
which the majority of your profitability on which your very 
existence depends comes from overdraft fees, does that strike 
you as a healthy business model for a bank?
    Mr. Zywicki. Yes, I am familiar; I have seen these reports 
on a couple of small banks in particular that do this. One that 
particularly concerns me is that there does seem to be some 
evidence that ever since the Military Lending Act went into 
effect, thereby restricting access of the military to a lot of 
other forms of credit, they have ended up using a lot of 
overdraft.
    Chairman Perlmutter. Mr. Zywicki, I am sorry that I keep 
interrupting you, but everybody seems to end on you, and I have 
to stop you, so I apologize for that. There will be an 
opportunity for the Members to submit written questions to all 
of you to follow up on this kind of thing.
    The gentleman from Georgia, Mr. Loudermilk, is now 
recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman. This is a very 
intriguing subject, and as someone who is very familiar with 
overdraft fees--especially in my younger years in the military, 
when I paid quite a few of those--this is an interesting 
subject.
    But I do want to quickly go back to some of the discussion 
we have had about who is paying the overdraft fees. I will ask 
Mr. Greer or Ms. Crawford-Hicks, whomever can answer this, I 
have heard the numbers we are talking about, who is paying the 
most fees. Are there instances that banks that are in minority 
communities--because some of the information I am getting kind 
of sounds this way. Are banks that are in minority communities 
charging a higher fee per overdraft than banks not in minority 
communities? Is that what we are saying? Is that why minority 
communities are paying more in overdraft, because they are 
being charged more? Whomever can answer that question.
    Ms. Crawford-Hicks. No, that is not what we are saying. 
Overdraft fees seem to be pretty standard across-the-board, 
except when you are looking at credit unions.
    Mr. Loudermilk. So, what you are saying is that minority 
communities are doing more overdrafts than non-minority 
communities. Is that what we are getting at?
    Ms. Crawford-Hicks. Minority communities are usually low-
income communities, making $50,000 or less a year. And when you 
are taking care of a family and you are going to the grocery 
store and inadvertently overdrafting your account, yes, there 
is inflation.
    Mr. Loudermilk. Okay. Most of my life, before I got into 
Congress, I made $50,000 a year or less. I never considered 
myself poor in that aspect. And as far as overdraft, after I 
learned a great lesson from that--that lesson was I went to a 
grocery store one time, had a cart full of groceries that my 
family needed, and the grocery store wouldn't accept my check 
because I had unpaid overdraft fees, which, to Mr. Zywicki's 
point, is what a lot of what people are using it for. But the 
issue I had was the expenditures I made at the beginning of the 
month, because while my colleagues in the military were 
bringing their lunch to work, I was eating out, I was going out 
with my family. So, it was a decision I was making.
    In fact, I started listening to Zig Ziglar. I don't know if 
you remember that. Zig Ziglar had lost a whole lot of weight, 
and he said that he finally decided that he was choosing to be 
overweight, because he never accidentally ate a double 
cheeseburger. Now, what that told me is that I was making 
particular choices. As one of my colleagues, Mr. Barr, said, 
there are people who are making those choices, for instance, 
the horse traders. They are paying a lot less in an overdraft 
fee than they would for a line of credit, right?
    So, there is a choice function there. I am not saying that 
they are having to make this choice. Yes, there are some 
problems with this, and we do have to address it one way or the 
other, because at the rate this Administration is driving up 
inflation, I imagine this is going to get worse before it gets 
better.
    I do like some of the things that I heard Mr. Kundert say 
that they have done in their credit union, but I do have one 
question to ask there. You said this did cost you some revenue 
when you made your changes to overdraft fees. How did you make 
up for that revenue? Did you just take that as a loss? Did you 
raise fees in other areas, or did you open up more lines of 
revenue coming in? How did you make up for that loss?
    Mr. Kundert. We primarily made up for it over time by 
building more efficiency into the organization. When we 
benchmark our operating costs to other similar size 
institutions, we are often in the 90th percentile for operating 
expense efficiency per household. That took some time and some 
focus, but that is primarily how we did it, because we have to 
compete on price on all of the other consumer products we 
offer. We can't be out of line in market--
    Mr. Loudermilk. So, you cut costs in other areas. Okay, 
that answers that question.
    As I am quickly running out of time, Mr. Zywicki, is it 
economically sound to expect a private business to provide a 
service it can't afford? What is going to happen if we force 
banks--and I know some banks that exclusively operate in 
minority communities. If we force those banks to make changes 
they can't afford, and they can't cut costs like the credit 
union has done, what is the result of that?
    Mr. Zywicki. The first thing that will happen is they will 
have to find fees somewhere else. The second thing is that 
people are probably going to overdraft more, which probably 
means your losses are going to go up as well.
    Mr. Loudermilk. And that does put people in a spiral. I 
have been in that spiral, but it was a spiral I knew I 
inevitably chose to be in because people who were in the same 
income bracket I was in were not having the same problem I was 
having. I am not saying that is in every case, but we do have 
to consider that when we are looking at making national 
changes.
    And I yield back the remaining time I no longer have, Mr. 
Chairman.
    Chairman Perlmutter. The gentleman yields back the time he 
doesn't have.
    The gentlelady from Massachusetts, who is also the Vice 
Chair of this subcommittee, Ms. Pressley, is now recognized for 
5 minutes.
    Ms. Pressley. Thank you, Chairman Perlmutter.
    Being poor in America is expensive. Millions of families 
and workers are living paycheck to paycheck, struggling to make 
ends meet due to unlivable wages, a lack of affordable health 
care, the absence of paid leave, and many other policies which 
are pushing families farther to the margins. And yet these are 
the very same people, the very same families who, at their most 
financially vulnerable moments, are charged overdraft fees by 
banks.
    Ms. Crawford-Hicks, some large banks have voluntarily 
reduced or eliminated overdraft fees, but many have not. 
According to the Brookings Institution, after 2021, 6 banks 
relied on these fees for more than half of their net income, 
and 3 of those banks relied on them for 100 percent of their 
profits.
    Is it fair to say that this business model is based on 
making poverty a sustainably profitable enterprise?
    Ms. Crawford-Hicks. Thank you, Representative Pressley, for 
that question. I keep going back to this point because I want 
to drive it in. I wholeheartedly agree that this business model 
is based on making poverty a sustainably profitable enterprise. 
As I stated in my testimony, nearly 80 percent of overdraft 
revenue comes from 9 percent of accounts, with median account 
balances of $350 or less, making it very expensive to be poor. 
And just going back to the point that was made previously, it 
is not about choices; it is about access to resources.
    Ms. Pressley. Thank you, Ms. Crawford-Hicks, and certainly 
no apologies needed here for being repetitive. As tired as 
people might be of hearing those sobering data points, imagine 
how exhausting it is to live it.
    Can we really trust banks that rely on overdraft fees for a 
majority of their income, their net income, to voluntarily 
reform? Or do you agree that we need to ban overdraft and other 
junk fees for good?
    Ms. Crawford-Hicks. I am extremely leery of financial 
institutions that in 2020 made billions of dollars in overdraft 
fees at one of the most vulnerable times in American history, 
to voluntarily cease profiting from these fees. Using 
regulatory and legislative intervention is imperative to 
protect those living on the margins from being preyed upon by 
financial institutions, and just to level the playing field for 
those who are being taken advantage of by this.
    Ms. Pressley. Thank you, Ms. Crawford-Hicks. While I was 
calling for, to your point, building upon that, while myself 
and others were calling for overdraft fees to be abolished last 
year, big banks actually raked in billions of dollars of 
profits from those fees. So, can you tell us how big banks 
capitalize off of people facing great and unprecedented 
economic hardship during this pandemic?
    Ms. Crawford-Hicks. Representative Pressley, speaking of 
sobering data points, according to The American Prospect, 
JPMorgan Chase, for example, made $1.5 billion in revenue on 
overdraft alone in 2020. And according to the recent findings 
from the FDIC, during that same period, Bank of America made 
$1.1 billion in profits, and Wells Fargo made $1.3 billion in 
profits. And in the final 3 months of 2020, when the pandemic 
was at its worst and deadliest, all 3 of those banks made $300 
million just in overdraft fees alone. So, while Americans 
suffered through the worst wave of the worst public health 
crisis in 100 years, and unemployment was skyrocketing, the 
country's biggest banks were gouging poor Americans for 
billions of dollars in punitive fees.
    Ms. Pressley. Thank you, Ms. Crawford-Hicks.
    It is clear that because it is profitable, it certainly is 
not incentivizing for them to do this on their own. So, how can 
we reform such an abusive and predatory practice that punishes 
people simply for being poor? The short answer is that we 
don't. We have to abolish these practices once and for all.
    Thank you, and I yield back.
    Chairman Perlmutter. The gentlelady yields back.
    The gentleman from Tennessee, Mr. Kustoff, is now 
recognized for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman, and thank you to the 
witnesses for appearing today.
    Professor Zywicki, I received an email from Morning 
Consult. It was in February it came out, and their numbers 
showed in their survey that 89 percent of consumers find their 
bank's overdraft protection valuable. Seventy-four percent of 
consumers who have paid an overdraft fee in the past year 
likely were glad that their bank covered the overdraft, which 
runs contrary, obviously, to the tone of this hearing.
    But if I can, I would like to drill down a little bit from 
Congressman Barr's questions to you. As it relates to an 
overdraft fee or a debit card or an ATM transaction, the bank 
has to provide the consumer with the disclosure which lists the 
fee for the charge for the overdraft transaction. Is that 
correct? And then, the consumer has to opt in, if I am correct, 
for overdraft coverage in order to be charged an overdraft fee, 
at least as it relates to the debit card or the ATM. Is that 
correct?
    Mr. Zywicki. That is correct, yes.
    Mr. Kustoff. And as a corollary, the consumer also can opt 
out at any time. Is that correct?
    Mr. Zywicki. That is correct, yes.
    Mr. Kustoff. I am just going to ask a rhetorical question. 
If a consumer can willingly opt into overdraft coverage or opt 
out, why are we trying to protect consumers or employ 
additional restrictions or take away the right for them to have 
overdraft protection on a product?
    Mr. Zywicki. I don't know. They can opt in, they can opt 
out, and I think it is also significant, as I mentioned in my 
remarks, that people who overdraft frequently actually check 
their balances more often. They make more use of online banking 
and they kind of constantly know what is going through their 
accounts, and they know they are taking a chance, basically, 
when they make that payment.
    Mr. Kustoff. Thank you.
    I think, as we all know, we are experiencing the highest 
inflation we have experienced in 40 years due to the economic 
policies and the wild spending that the Federal Government has 
engaged in over the last 12 months. The Federal Reserve reports 
right now that half of the country couldn't cover a $400 
emergency expenditure. And obviously, few people have the 
resources to turn anywhere else to get help.
    In the past, we have had banks offer short-term liquidity 
products. Obviously, regulation has effectively taken a number 
of banks out of this space, which means that ultimately, 
consumers have fewer alternatives for emergency needs.
    I came from a community bank board. Hypothetically, if you 
were running a community bank, and overdraft protection were to 
completely go away, how would your community bank respond, and 
ultimately what would that mean for consumers?
    Mr. Zywicki. I don't know. It is very limited. As you said, 
every time you try to have a new product that adds more 
complexity, there are more compliance costs. The other thing we 
know is that post-Dodd-Frank, community banks have already 
stepped back from products they used to have, such as 
mortgages, because of the regulatory costs of compliance 
associated with that. So, I think it really puts community 
banks in a very difficult position.
    Mr. Kustoff. If you were a policymaker or you were in the 
financial services industry, what would you do to support or to 
create innovative products to try to help consumers with their 
short-term needs? What else can we do?
    Mr. Zywicki. As I mentioned, I think the answer here is 
more competition, more entry. As I said again, fintech 
industrial loan companies, earned wage access, direct deposit 
advance, all of these things I think are viable options for 
consumers that solve this.
    If I could say one last thing, the correlation here--and 
first, let me say, I never said it doesn't affect low-income 
consumers. Obviously, this affects all consumers who overdraft, 
but especially low-income consumers, because it is a fixed fee. 
But what drives this is credit score, and the Fed has shown 
that credit score is generally not correlated with income and 
it is not correlated with demographic factors such as race. It 
is a credit score issue, not a race or income issue, once you 
control for credit score in that sense. I am not talking about 
some of the things they are talking about. But I just wanted to 
make that very clear.
    Mr. Kustoff. Thank you.
    Mr. Chairman, I yield back.
    Chairman Perlmutter. The gentleman yields back.
    I think we have three more Members to ask questions, so I 
am going to go to Mr. Rose first, then Mrs. Maloney, and then, 
Mr. Timmons.
    The gentleman from Tennessee, Mr. Rose, is recognized for 5 
minutes.
    Mr. Rose. Thank you, Chairman Perlmutter and Ranking Member 
Luetkemeyer, for holding this hearing, and thank you to our 
witnesses for being with us today.
    The CFPB under Director Chopra continues to assert that the 
financial services industry is not competitive and is using 
this as a premise to justify an extremely aggressive rulemaking 
agenda.
    Yesterday, CFPB Program Manager Joe Valenti published a 
blog post stating that, ``Overdraft fees are among the kinds of 
junk fees that far exceed what it costs the institution to 
provide the associated product or service and do not appear to 
be subject to competitive forces.''
    Professor Zywicki, would you describe the market for 
overdraft products and other short-term credit as competitive? 
Or do you agree with this blog post from the CFPB?
    Mr. Zywicki. I think it is competitive. It could be more 
competitive. We know, for example, in States that outlawed 
payday loans, what happens is NSF fees go up, bounced checks go 
up, overdraft fees go up, right? When you take away competition 
from banks, they make more money off of overdraft fees and NSF 
fees. So, I think the corollary is more competition for banks. 
There is already competition, but more competition, I think, 
would be the path I would pursue here.
    Mr. Rose. The Biden Administration seems to think that 
regulation, not market forces, drives competition. This was 
made especially clear in President Biden's 2021 Executive Order 
on promoting competition in the American economy.
    Professor Zywicki, do you think more regulation from the 
CFPB is the solution to increasing market competition?
    Mr. Zywicki. No, unfortunately, regulations usually reduce 
competition rather than increasing it, at least the way that it 
has been transpiring.
    Mr. Rose. Professor, you previously served as the Chair of 
the CFPB's Task Force on Consumer Financial Law under Director 
Kraninger. The task force identified recommendations for 
improving competition, including studying ways to ease changing 
accounts between financial institutions, avoiding the anti-
competitive barriers to entry, and studying the cost of lending 
in key product markets. Could you describe some of the task 
force's work on these issues?
    Mr. Zywicki. Thank you, yes. We have a number of 
recommendations that go to this, one that was mentioned 
earlier. I really believe that faster payments should be 
something that we should push on, but also bank account 
portability, as you said, greater fintech. We also talked a lot 
about credit scores, and I think one opportunity is to make 
greater use of alternative financial data to look at other 
sources rather than traditional credit scores in determining 
who is a good risk and the like. So, I think there is a lot of 
room for innovation in this market to put more competitive 
pressure on banks to do better, to create bank account 
portability, open banking, and a lot of things that would cause 
them to be more responsive to consumer demands.
    Mr. Rose. Could you drill down a little on the banking 
account portability question and what sorts of approaches you 
would recommend or would like to see implemented there?
    Mr. Zywicki. The details of that, I think, still need to be 
worked out, but the model is obviously cell phone portability, 
which has been very popular. You can change your cell phone 
carrier while keeping your same number. Right now, it is very 
difficult to change bank accounts. It is really just a pain 
because you have to deal with trailing checks and that sort of 
thing. So, I think trying to work through the regulation and 
the process would facilitate bank accounts, because right now, 
people can change credit cards very easily, for example, which 
drives a lot of competition in the credit card market. But when 
it comes to bank accounts, they are very sticky, and banks make 
them more sticky. Rather than facilitating competition, if a 
bank wants new accounts, rather than trying to track them, it 
seems like they just buy another bank, right? So, we 
consolidate the industry, we are getting more, and the like. I 
think that would be something that would be worthy of study by 
the Fed and others for how to improve bank accounts, and make 
it easier to switch bank accounts.
    Mr. Rose. Thank you.
    In the last seconds I have, I want to just relay an 
anecdote from one of my bankers back in my district whom I was 
having dinner with a few weeks ago, and he related to me that 
one of his customers--and this is kind of following on what 
Representative Barr said earlier--an elderly lady, on a limited 
income, perpetually came up short at the end of the month, and 
so essentially, once a month, she overdrafted.
    She came to the bank and she said, ``Please, whatever you 
do, don't take away my overdraft capability.'' And I think it 
underscores that this oftentimes provides a needed outlet for 
many banking customers.
    Thank you, Mr. Chairman. I yield back.
    Chairman Perlmutter. The gentleman yields back.
    I was mistaken. Mr. Timmons, you are going next. So, I am 
going to yield to the gentleman from South Carolina, and then 
we will close with Mrs. Maloney from New York.
    The gentleman is recognized for 5 minutes.
    Mr. Timmons. Thank you, Mr. Chairman.
    Professor Zywicki, since Dodd-Frank passed, how have 
community banks across the country generally fared?
    Mr. Zywicki. They have not fared well. As you know, the 
banking industry has become more consolidated, and community 
banks have shrunk.
    Mr. Timmons. What about the regional banks?
    Mr. Zywicki. The regional banks have tended to constrict 
also. The big banks have gotten bigger. The too-big-to-fail 
banks have gotten even bigger.
    Mr. Timmons. Generally, who bears the brunt of proposals 
such as the Maloney overdraft bill, what types of institutions?
    Mr. Zywicki. In the short run, small banks bear most of the 
brunt, for the reasons we have talked about.
    Mr. Timmons. And Federal requirements, Federal regulations 
are largely more challenging to comply with when you are a 
smaller bank. Is that fair?
    Mr. Zywicki. That is right. To hire another 150 lawyers at 
Citi is a rounding error. To hire one more compliance officer 
at some small bank could be the difference between 
profitability and not.
    Mr. Timmons. And they are already struggling with things 
like cyber security, where they are trying to invest 
appropriately, and that is a huge line on their balance sheet. 
So, it is fair to say that if you are a small bank in this 
country post-Dodd-Frank, it has been challenging, and you are 
barely getting by?
    Mr. Zywicki. That is an understatement.
    Mr. Timmons. Thank you.
    I am confused about what exactly we think we are 
accomplishing with this hearing and the Maloney bill. It is 
obvious to me that this is just another onerous mandate for 
smaller financial institutions like community banks and credit 
unions, especially given that consumers already have to opt in 
for overdraft protection and can opt out at any time. On top of 
this, a recent survey from Morning Consult shows that 89 
percent of consumers value their bank's overdraft protection, 
and even 74 percent of individuals who have been subject to an 
overdraft fee over the last year were glad their bank covered 
the payment.
    Professor, if consumers no longer had access to overdraft 
protection through their financial institutions, what recourse 
would they have?
    Mr. Zywicki. They would either be forced to not be able to 
purchase things that they need, or they would have to turn to 
some less attractive alternative, usually payday loans, 
because, as we talked about, credit cards aren't available for 
these people.
    The other thing we know is that occasional overdrafters and 
frequent overdrafters are different categories. You can get a 
fee waiver, especially if you are an occasional overdrafter. An 
important point that Michael Flores found is that low-income 
consumers are more likely to get fee waivers than people with 
higher levels of deposits. There are other things going on in 
people's relationships with banks if they are occasional 
overdrafters versus frequent overdrafters.
    Mr. Timmons. I remember long ago, I had challenges with 
this. My first debit card didn't really--I wasn't very good 
with my money at a certain point in my life, my entire life. 
But my question is this, how often do people get the benefit of 
overdraft protection and it changes their day and their week, 
instead of the alternative, which is to be declined and be 
unable to do something at gas stations or grocery stores? There 
are oftentimes when if you are not able to get the benefit of 
your overdraft protection, it could be very problematic.
    Mr. Zywicki. And that is the fundamental problem here, 
Congressman Timmons, which is taking away people's options 
isn't going to resolve the problem, right? Taking away the 
supply of overdraft protection isn't going to take away the 
demand, because people still have a lot of bills they need to 
pay, a lot of necessities that they need to pay for, and that 
is the fundamental problem here, or the fundamental difficulty, 
which is, what happens to these people if you take it away? And 
based on what I can tell, the options are even less attractive 
than the ones they have now, especially given that they seem to 
be using it--heavy overdrafters at least--knowingly. They have 
opted in, they are monitoring their balances, and they 
understand basically what they are doing here, but they don't 
have better options available to them.
    Mr. Timmons. Thank you.
    This hearing's proposal is just another example of my 
colleagues across the aisle thinking that they know what is 
best for the American people. They want to run our lives 
because they don't think that we are capable of making correct 
decisions. This proposal removes choice and options for 
consumers in the name of protection, but it is really just 
another way to impose the will of my colleagues across the 
aisle on the American people.
    Thank you, Mr. Chairman. I yield back.
    Chairman Perlmutter. The gentleman yields back.
    I was mistaken again. Mr. Foster has arrived, and we will 
let him ask his questions for 5 minutes, and then Mrs. Maloney 
will close.
    Mr. Foster is recognized for 5 minutes.
    Mr. Foster. Thank you, Mr. Chairman.
    I find it interesting that many banks and credit unions are 
already making changes to overdraft policies. According to the 
CFPB, since September 2021, nearly half of the 20 banks that 
collect the most overdraft fees have announced that they will 
eliminate the fees altogether. I think this sort of behavior is 
likely to continue as we move to a high-interest-rate 
environment where you actually have alternate sources of income 
for banks and they won't depend on reordering things and so on 
to generate overdraft fees.
    Several of these have already eliminated, as I mentioned, 
the overdraft fee programs in place. Chris Leonard, the CEO of 
Velocity Solutions, an overdraft and compliance management 
company, has asserted that overdraft fees should not be 
jettisoned completely, saying that many consumers actually like 
having the option, although I imagine very few like having the 
things reordered to maximize those fees.
    In reality, most of these fees are incurred because people 
are simply unaware that their account is too low and that they 
are about to incur a charge. Then, unfortunately, they get 
their cup of coffee or pay for parking and they are handed a 
$30 or $40 fee to complete the $5 transaction.
    And seeing as most accounts are rectified very quickly, the 
short-term financing option seems wildly unappealing from a 
consumer financial standpoint.
    I am personally very glad to see that competition among the 
banks has driven this trend to modify or eliminate these fee 
arrangements. So my question, I guess to all of the witnesses, 
is that someone has to be the first to eliminate overdraft fees 
in their checking products. Is this just a reaction to a wildly 
popular consumer idea, or are there other factors influencing 
the change across the industry, such as, for example, moving to 
a higher interest rate environment?
    Mr. Greer. Congressman, we have been talking about 
protection, and we have been talking about fees. Those two are 
different things. People can opt into protection, get an 
expense covered through credit, and then also charged a fee. 
There are banks that do that. Wells Fargo is one of them, for 
example. Then there are people who can opt out, and then what 
they get is an insufficient funds fee even though the 
transaction [inaudible]. There has been a lot of conversation 
about protection and fees, and I just want to say that those 
things are two different things in the financial sector.
    As far as industry-wide, again, I think we have to 
recognize that particularly people of color are low wealth, and 
not having access to credit is one of the things that drives 
low wealth. Not having access to predictable income that allows 
them to build assets is another. And to strip that money out of 
their accounts through things like fees has implications beyond 
whether or not they are able to buy a cup of coffee.
    Mr. Sueiro. To your question, Congressman, about what has 
caused some banks to make these changes, in the middle of last 
year, around the middle of last year, Ally Bank and Chime, 
which are online banks, made announcements that they would 
eliminate fees or reduce overdraft fees, so that has put 
pressure on other banks to follow suit. And then late last 
year, Director Chopra of the CFPB also made an announcement 
that the CFPB would focus more on junk fees and on overdraft 
fees specifically. So, I think the combination of the two 
things also, in addition to consumers saying that they want 
overdraft protection and overdraft fees reduced, has led to 
these changes.
    Mr. Foster. Ms. Crawford-Hicks, do you have any comments 
about what is driving this and how much we can expect it to 
continue without more intervention by the government?
    Ms. Crawford-Hicks. I think my colleagues summed it up 
beautifully in terms of what is driving it, and I just wanted 
to home in on the point that fees and protection are different 
things. We are not saying to end overdraft protection. We are 
just saying that these fees, as Representative Maloney points 
out in her bill, should be reasonable and proportional to what 
it costs the banks to actually take care of the overdraft.
    Mr. Foster. Mr. Kundert, can you talk about how your credit 
union was involved in this process?
    Mr. Kundert. Yes. In my written testimony, I covered it in 
great detail, but we reformed our practices in 2010 in response 
to the Regulation E update, and then, last year, reduced our 
fee to $5.
    Definitely, there is change happening in the industry. 
Prior to 2020, you might have questioned, is there competition? 
There wasn't much evidence of it, but things are changing now. 
They changed in the last year. How much of it is concern over 
regulatory scrutiny, and how much is competition, I couldn't 
sort out right now. I think time will reveal that.
    Chairman Perlmutter. Mr. Kundert, I am going to interrupt 
you this time. The gentleman from Illinois' time has expired.
    I will now recognize the gentlelady from New York, Mrs. 
Maloney, for 5 minutes for her questions.
    Mrs. Maloney. Thank you, Chairman Perlmutter. And may I 
express how sad I am that you have decided to retire. Today's 
hearing shows your focus on protecting consumers, and your 
focus on affordable housing. You will be deeply missed. I thank 
you for having this hearing, as well as the ranking member.
    There was a report that came out from the CFPB which showed 
that in 2019, consumers paid over $15 billion in overdraft 
fees. Granted, some people opted in, and I am not trying to 
take away an opt-in. I think an opt-in should be there if they 
want it. But too often, people are caught in tricks and 
gimmicks and unfair, deceptive practices that force them, 
really, into overdraft fees, such as reordering the priority of 
your fees so that your rent check comes first. I know 
constituents, some of whom pay $200 in overdraft fees they 
didn't even know they had overdrafted. They didn't know that 
the bank took their rent check and put it before their coffee 
or their sandwich, and it racks up. So, my bill tries to cut 
down on these unfair and deceptive practices.
    I have here a report from the CFPB that I requested, and 
there are many, many people who have taken steps to change the 
overdraft fees, to eliminate them in some cases, or to lower 
them in some cases. But I have been studying this since 2009, 
when I put my bill in, and it is confusing to me because 
everybody is doing something different. Everybody is doing 
something different, and I applaud their efforts. But if I were 
a consumer, and I am a consumer, it is very confusing.
    So, my question to Mr. Greer, Ms. Crawford-Hicks, Mr. 
Kundert, and Mr. Sueiro, is, do you think consumers would 
benefit by at least, at minimum, having some baseline level of 
protections for overdraft practices such as my bill?
    Let's start with you, Ms. Crawford-Hicks, yes or no?
    Ms. Crawford-Hicks. Absolutely.
    Mrs. Maloney. Thank you.
    Mr. Kundert?
    Mr. Kundert. Yes, I do.
    Mrs. Maloney. Okay. Mr. Sueiro?
    Mr. Sueiro. Yes.
    Mrs. Maloney. Mr. Greer?
    Mr. Greer. Yes.
    Mrs. Maloney. Okay. That's great; you all agree on that.
    Do you think those protections should include common-sense 
limits on the number of overdrafts that are allowed per month, 
improved transparency so people understand what is happening, 
and banning banks from reordering transactions to maximize the 
number of overdraft fees for people?
    Let's start with you, Mr. Greer.
    Mr. Greer. Yes, I think it should.
    Mrs. Maloney. And let's just go down the line. Ms. 
Crawford-Hicks?
    Ms. Crawford-Hicks. Yes.
    Mrs. Maloney. Mr. Sueiro?
    Mr. Sueiro. Yes. It depends on what that looks like, and we 
agree that some people would definitely want overdraft 
protection. But, yes, we agree with that.
    Mrs. Maloney. That is exactly what my bill does. It allows 
people, if they want the overdraft protection, to opt in. That 
is one of the requirements of the bill, that people be notified 
that if you want this protection, you opt in. But too often, I 
hear from my constituents that they bought a loaf of bread, 
$35; a cup of coffee, $35; a newspaper, $35; and some, at the 
end of the weekend, because they didn't know they had 
overdrafted, will have $200 in fees. I would say that is unfair 
and deceptive and extremely hard on some of the most-vulnerable 
in our society.
    Now, from your perspective, Ms. Crawford-Hicks, do you 
think someone should be charged $35 for a $2 cup of coffee?
    Ms. Crawford-Hicks. No, especially if they didn't know they 
overdrafted.
    Mrs. Maloney. Right.
    Mr. Sueiro?
    Mr. Sueiro. I agree, 100 percent.
    Mrs. Maloney. Okay.
    And Mr. Greer and Mr. Kundert?
    Mr. Greer. No.
    Mr. Kundert. No.
    Mrs. Maloney. Okay, a no. You have gone down to a $5 cup of 
coffee, and that is a movement in the right direction. But 
everybody has something different here.
    Mr. Kundert. Actually, no. We have a de minimis so that no 
overdraft would be incurred for anything less than $10, and we 
don't permit overdrafts from debit card use.
    Mrs. Maloney. But as you see, everybody has a different 
proposal. I would like to suggest, since the CFPB was 
referenced several times during this hearing, that we invite 
the Director of the CFPB to come in for some clarification on 
this. I do have a bill that I have had in for a number of 
years, the Overdraft Protection Act, which is common sense. 
Some of the panelists today have endorsed it. It has common-
sense practices that protect the consumer. I, for one, would 
like to see that $15 billion kept in the pockets of some of our 
most-needy residents, and not going to unfair, deceptive, and 
manipulative overdraft fees.
    My time has expired.
    Chairman Perlmutter. The gentlelady's time has expired.
    CFPB Director Chopra is going to testify in front of the 
Full Committee next month, so we will have an opportunity to 
discuss this with him then.
    Do you want to introduce that chart into the record?
    Mrs. Maloney. I would like to introduce it into the record, 
and I am going to have it up on my website, and I think we 
should put it up on the website of the committee.
    Chairman Perlmutter. Without objection, it is so ordered.
    Mrs. Maloney. It is very confusing, but I applaud Wells 
Fargo, JPMorgan Chase, Bank of America, TD Bank, Citi Bank--
    Chairman Perlmutter. Okay, it is in the record.
    [laughter]
    Mrs. Maloney. There are about 13 banks that have come out 
and curbed them in some way or another, but each one has done 
it differently. No one has done it the same way.
    Chairman Perlmutter. Okay, we got it. The gentlelady's time 
has expired. We will introduce your chart into the record.
    I want to thank the witnesses, and I want to thank all of 
you. The discussion about fees versus protection is very 
important, to be able to make that distinction. I appreciate 
everybody's testimony here today.
    The Chair notes that some Members may have additional 
questions for these witnesses, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to these witnesses and to place their responses in the record. 
Also, without objection, Members will have 5 legislative days 
to submit extraneous materials to the Chair for inclusion in 
the record.
    Thank you all very much for your time, for your testimony, 
and for your patience with us.
    With that, this hearing is adjourned.
    [Whereupon, at 12:03 p.m., the hearing was adjourned.]

                            A P P E N D I X


                             March 31, 2022
                             
                             
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