by PAM MARTENS & RUSS MARTENS
Yesterday, during a Senate Banking Committee hearing, Senator Chris Van Hollen of Maryland caught our attention when he said that there are three U.S. banks that “make 100 percent of their profits on overdraft fees.” He named the three banks as First Texas, Academy Bank and Woodforest National Bank. Van Hollen explained that most folks paying these fees are living paycheck to paycheck and many don’t even know that they’ve over-drafted their account because many banks provide no warning at the time the overdraft is occurring.
The Consumer Financial Protection Bureau (CFPB) issued a report on overdraft fees in 2017, finding the following:
“A small group of consumers pay most of these fees. In a given year, only 30% of consumers overdraw their checking account. The 8% of consumers who overdraft more than 10 times per year pay 74% of overdraft fees. These consumers are charged $380 in overdraft fees on average annually.”
Senator Van Hollen also caught our attention when he said that one of the three banks making 100 percent of their profits from overdraft fees, Woodforest National Bank, had 12 of their branches in his state of Maryland located in local Walmart stores. We decided to check out that bank.
It turns out that the vast majority of Woodforest National Bank’s 769 branches in 17 states are in local Walmart stores – more than 700 in fact, according to information on its website. In 2020 and 2021, the bank has continued opening new branches in Walmart stores.
According to the Federal Deposit Insurance Corporation (FDIC), the 17 states Woodforest National Bank is located in are: Alabama, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Maryland, Mississippi, New York, North Carolina, Ohio, Pennsylvania, South Carolina, Texas, Virginia and West Virginia.
One of the witnesses giving testimony at yesterday’s Senate Banking hearing was the acting head of the federal regulator that supervises “national” banks, meaning those banks operating across state lines – Michael Hsu of the Office of the Comptroller of the Currency (OCC). Hsu told Van Hollen that the OCC has a review going on regarding overdraft fees.
We looked at regulatory databases for previous charges brought against Woodforest. It turns out that the OCC charged Woodforest 11 years ago with “unfair or deceptive practices” regarding its overdraft fees. The OCC forced the bank to return $32 million to customers “who were harmed by the bank’s overdraft program,” and pay a $1 million fine to the U.S. Treasury. The OCC wrote this about the conduct of the bank:
“Specifically, the bank assessed excessive amounts of overdraft fees and improperly assessed recurring fees, or ‘continuous overdraft fees’ against certain consumers. In addition, in its marketing brochures the bank emphasized the free or low cost features of certain accounts while omitting information about costly features such as overdraft protection. The bank’s marketing also suggested that certain accounts were well-suited for consumers who had previous difficulty in managing their bank accounts, while omitting information about the high-cost features of its overdraft protection.”
The OCC remains the “primary regulator” of Woodforest National Bank today according to federal records. The OCC has, apparently, placed no curbs on its ability to expand into more and more Walmart stores.
Wall Street on Parade for more