Ally Bank is eliminating overdraft fees, which disproportionately affect poor households and people of color
Ally Bankis eliminating overdraft feeson all accounts.
- People of color made up 95% of the $12.4 billion in overdraft fees paid in 2020.
- During the pandemic, four big Wall Street banks collected nearly $4 billion in overdraft fees.
Ally Bank, the largest digital bank in the US, announced Wednesday that it would eliminate overdraft fees on all accounts.
All Ally customers are eligible and "there are no requirements or restrictions," the firm said in a press release.
"This is a significant advancement for consumers as we live out our mission and live up to our name - being a true ally," CEO Jeffrey Brown said in the release. "Overdraft fees are a pain point for many consumers but are particularly onerous for some. It is time to end them."
"Nationwide, more than 80% of overdraft fees are paid by consumers living paycheck to paycheck or with consistently low balances - precisely the people who need help stabilizing their finances," Brown added. "Eliminating these fees helps keep people from falling further behind and feeling penalized as they catch up."
According to an April 2021 report from FinHealth, 95% of the consumers who paid $12.4 billion in overdraft fees in 2020 were "disproportionately Black and Latinx" and considered financially vulnerable. The report says, "among those financially vulnerable households with checking accounts, 43% averaged 9.6 overdrafts during 2020, resulting in annual overdraft fees of hundreds of dollars per household on average."
Other data from the Consumer Financial Protection Bureau shows just 8% of account holders are responsible for three-quarters of all overdraft fees.
Insider previously reported that JP Morgan, Citibank, Bank of America, and Wells Fargo collectively accumulated nearly $4 billion in overdraft fees during the pandemic. Sen. Elizabeth Warren grilled executives including JPMorgan CEO Jamie Dimon about the practice in May.
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