Some intended COVID-19 stimulus beneficiaries won’t see any money the federal government sends them through direct deposits because unpaid overdraft fees will more than consume newly injected funds, The New York Times reports.
The Times reports that many larger banks have pledged to temporarily “zero-out” customers’ in-the-red accounts for around 30 days so the customers can withdraw or spend the full amount of any stimulus payment. Many stimulus payments are expected to begin landing in customers’ accounts this coming week. Among the banks listed by the Times as having adopted such policies are: Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, Truist, PNC Financial Services and US Bank.
But some smaller banks and credit unions either are not offering such concessions or are dealing with requests for overdraft fee relief on a case-by-case basis, the Times reports. The paper told the stories of several individuals who are in dire financial circumstances due to the pandemic yet are at risk of not receiving any of the stimulus dollars allocated for them by the government.
The stakes for banks are substantial.
The Center for Responsible Banking, a group that among other things promotes policies favorable to financially struggling borrowers, estimates that in calendar 2019 U.S. banks collected more than $11 billion in “overdraft-related fees.”
The center’s report on the topic states, in part: “The large majority of these fees are shouldered by banks’ most vulnerable customers, often driving them out of the banking system altogether. Bank overdraft fees cause particular harm to low-income consumers and communities of color, who are already disproportionately excluded from the banking mainstream.”
The latest stimulus checks are slated to be about $600 per family member, reduced on a sliding scale as incomes rise. The $600 figure followed a protracted dispute between President Donald Trump and Congressional Democrats who wanted the payments to be $2,000 per individual and some Congressional Republicans who sought a lower figure.