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Democrats set to go after another set of 'greedy corporate actors' amid soaring inflation

Yahoo Finance US logo Yahoo Finance US 5/11/2022 Ben Werschkul

Democrats in Washington like Sen. Raphael Warnock of Georgia have tried to dodge the wrath of midterm voters by taking an "all of the above" approach in response to continued high inflation

The senator faces a tough re-election fight in the fall and has introduced a bevy of bills to try to save his constituents money as they confront inflation that decelerated only slightly in April. He's proposed cutting insulin prices, instituting a sales tax holiday, capping prescription drugs costs, and taxing the profits of shipping carriers and oil companies.

He also has plans to elevate another issue as high as he can in the coming months — bank overdraft fees that can cost consumers more than $35 every time they go over their balance.

“I've been focused on lowering costs,” Warnock told Yahoo Finance in a recent interview. “When you look at these overdraft fees, this is yet another example of greedy corporate actors behaving badly and exploiting the most vulnerable families.”

Senator Raphael Warnock in Atlanta earlier this month. (REUTERS/Elijah Nouvelage) © Provided by Yahoo Finance US Senator Raphael Warnock in Atlanta earlier this month. (REUTERS/Elijah Nouvelage)

On Wednesday, the Labor Department reported overall costs for U.S. consumers rose at a slightly slower pace in April compared to March, though price increases remained near their highest level in 40 years.

Of course, overdraft fees constitute what many consider an unnecessary expense for consumers. Warnock chairs a Senate subcommittee on consumer protection and promised during a hearing a recent hearing that getting rid of the fees is “something I will keep pushing for, through collaborating with financial institutions and, when necessary, through legislation.”

And he and his colleagues plan to keep the heat on banks on a variety of fronts.

Alongside Senate Banking Chairman Sherrod Brown (D-OH), Warnock recently sent letters to seven major banks urging them to lower or eliminate the fees. And many expect the bank CEOs themselves to be brought before Congress soon to answer questions on overdraft fees and other issues. 

The CEOs last appeared before Brown and Warnock’s committee last May for what was called an “annual” oversight of Wall Street firms. 

In a statement to Yahoo Finance, Brown noted that “many banks are taking steps to eliminate overdraft fees — the rest of the banking industry should follow suit." He added: "I will continue working to eliminate these costly fees and ensure more people are served by — rather than pushed out of — our banking system.”

‘There's been some change, but not enough’

One of the attendees at last week's hearing was the CEO of The Mark Cuban-backed company went public earlier this year and is aimed at helping Americans avoid overdraft fees. In a recent Yahoo Finance interview, CEO Jason Wilk called the fees “the biggest pain point that we found for customers in this country.”

Overdraft fees became especially controversial during the coronavirus pandemic when reports found that big banks made billions from them during the lockdowns — roughly $33 billion just in 2021.

The Consumer Financial Protection Bureau recently found that overdraft fees hit Americans who can least afford to pay them the hardest. Frequent over-drafters sometimes pay more than 10 such fees a year, accounting for three-quarters of all overdraft fees collected.

In recent months, Capital One (COF) and Ally (ALLY) bank have announced plans to get rid of the fees completely. In February, Citi (C) said it too would eliminate overdraft fees. Likewise, companies like Bank of America (BAC) and Wells Fargo (WFC) have announced plans to drop some but not all their overdraft fees.

A sign outside a Bank of America branch New York City from April 2020, the early months of the coronavirus pandemic. (REUTERS/Eduardo Munoz) © Provided by Yahoo Finance US A sign outside a Bank of America branch New York City from April 2020, the early months of the coronavirus pandemic. (REUTERS/Eduardo Munoz)

“There's been some change, but not enough,” Warnock says. "You literally have banks whose whole business model is built on overdraft fees. I think that's outrageous.”

Democrats across Capitol Hill echo this message. Sen. Elizabeth Warren (D-Ma.), Sen. Cory Booker (D-NJ), and Rep. Caroline Maloney (D-NY) recently sent letters to three banks they say are the worst offenders: JPMorgan Chase (JPM); Bank of America; and Wells Fargo. 

“It is now time for the industry as a whole” to move away from overdraft fees, the letters said. The Biden administration — through its relevant agencies — is also openly pressuring the banks to scale back what they see as an over-reliance on these fees.

‘Congress has a moral obligation to respond’

Less than two years after coming to the Senate as a Georgia Democrat, Warnock is already facing reelection in one of the highest profile races in the country this year.

He appears set to face off against Herschel Walker, a former football star who raised millions after getting an early endorsement from former president Donald Trump. Both Walker and Warnock are clear front-runners ahead of their respective May 24 primary elections.

Walker has accused Warnock and other Democrats of blaming inflation on others instead of looking at their own policies; he also promised to bring more business investment to Georgia. A Super-PAC supporting Walker has also gone after Warnock over inflation and gas prices.

Sen. Catherine Cortez Masto (D-NV), another vulnerable Democrat, also participated in last week’s overdraft hearing. “Any financial institution that survives on overdraft fees has a very cruel and I think troubling business model that needs to change,” she said. 

Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.

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