North Texas Daily

Disciplinary fees hurt those who are most vulnerable

Disciplinary fees hurt those who are most vulnerable

Disciplinary fees hurt those who are most vulnerable
December 02
12:00 2022

In the United States, the average overdraft fee in 2022 is $29.80. It’s the lowest the average has been in the past decade, but it’s still a ruinous charge for those who are in desperate financial situations.

Junk fees are defined as “unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value,” according to the Federal Trade Commission. Many of these fees are kept a secret from the consumer, therefore are hard to dispute before the charges take place.

Some companies will charge a fee for paying a bill by phone, with a credit card or online — these are often referred to as maintenance fees. Options are endless when it comes to companies finding a way to drain the consumer of every extra penny they have. The issue is most junk fees are completely hidden.

Disciplinary fees were once addressed when Congress enacted the Credit Card Accountability Responsibility and Disclosure Act of 2009, which cut down on junk fees credit card companies were placing on users. While this act was a step towards helping Americans, it did not eliminate all the pesky fees. In 2020, credit card companies charged $12 billion in late fees.

The fees may feel like nothing but a few extra dollars for some, but for others, the extra charges may be detrimental to their financial situation. It is impossible to get ahead in an economy that pushes the less privileged back. 

These fees unreasonably affect the less privileged. Of the late fees revenue made by credit card companies, it was found that a disproportionate amount came from low-income and majority-Black neighborhoods, according to the Consumer Finance Protection Bureau.

Black and Hispanic households were also found to have been charged higher rates of overdraft fees than white households, according to the Financial Health Network. This survey also found that low to moderate-class households had twice the rate of overdraft fees in comparison to high-income households.  Junk fees are a problem for Americans in general, but there is an obvious target toward lower income individuals.

Junk fees permeate customers and the economy. The markets are affected because hidden fees added to products remove consumers’ ability to compare prices and pick the best deal for them. If they cannot see the full price until after the transaction has taken place, then they no longer have the ability to shop comparatively.

“The Biden-Harris Administration is taking action on junk fees that hurt Americans’ pocketbooks and the economy,” according to The White House website. The U.S. is already facing the difficulties of inflation and “junk fees are hitting families at a time when they can’t afford it,” President Biden said.

Many Americans have been left vulnerable due to inflation, and extra fees tacked on to living is like a slap in the face. Credit card companies appear to be greedy based on their relentless overdraft and late fees. They leave their customers in a precarious situation: if they pay their bill and overdraft they owe a fee, yet if they wait to pay their bill then they will owe a different fee. It is an impossible battle to overcome.

Slowly, progress is being made. In 2019, Discover eliminated insufficient fund fees for all of its bank accounts. Bank of America and Wells Fargo have promised changes this year that seem to benefit the customer.

Bank of America eliminated non-sufficient fund fees and lowered overdraft fees from $35 to $10. Wells Fargo followed a similar path by eliminating NSF and said it will provide a 24-hour grace period before overdraft fees begin.

A press release from the White House addresses steps the Consumer Financial Protection Bureau is taking to manage the junk fees situation. Overdraft fees are on track to be down a total of $3 billion in 2022, compared to the total in pre-pandemic years.

The Biden Administration and banks working to eliminate many of these unfair fees is a step in the right direction, but we need to focus more attention on systems that target less privileged individuals for the profit of others.

Featured Illustration by Erika Sevilla

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Madelynn Todd

Madelynn Todd

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