Charging low-income consumers exorbitant overdraft fees is big business for small banks

An op-ed by senior Brookings fellow Aaron Klein highlights the role of overdraft fees as a primary revenue source for some banks, arguing that regulators are failing their duties by allowing banks to rely on a fee levied only upon customers without money as a cornerstone of their business model. Klein also notes that the smallest banks are not even required to report on overdraft revenue, so reliance on overdraft revenue among those institutions is unknown. This point is especially alarming given earlier research from New America that finds that small banks implement more “punishing” fee structures in Black and Latinx communities than in white communities, regardless of socioeconomic characteristics and the presence of competing banks. #racialequity