BRIEF: Extortionate Bank Fees Block Millions From Economic Participation

New Roosevelt Institute report examines history of traditional banking fee schemes

June 5, 2024
Meredith MacKenzie de Silva
(202) 412-4270

NEW YORK – The financial costs of banking lock out millions of Americans from full economic participation. Nearly 5 percent of households in the United States—disproportionately Black, brown, and/or low-income—have no bank account at all, and another 14 percent must still rely on costly, nonbank alternatives. Fees, especially on basic products like checking accounts, are a multibillion-dollar business for banks and other financial institutions, but they’re one of the primary reasons un- and under-banked households can’t enjoy full economic participation. Released today, “The Business of Bank Fees” offers a historical analysis of the extortionate fee practices of traditional banks by Emily DiVito, deputy director of the Democratizing Finance program at the Roosevelt Institute. 

Looking at the history and growth of bank fees, the brief explains how the wave of bank deregulation and decline in industry competition in and around the 1980s allowed banks to begin levying aggressive fines and fees on basic banking products. 

The brief underscores the need for government action to create affordable banking access, including postal banking at the federal level and state initiatives such as CalAccount, a banking option managed by the state that would offer every Californian a zero-fee debit account. By ensuring a no-cost option is available to anyone who wants it, CalAccount would help millions of families access the formal financial system and inhibit the power that banks could exert by raising other types of fines and fees on consumers. 

“I have a checking account at Bank of America, and they charge me $12 per month in fees,” said Guillermina Calvo of San Jose, California, who works at McDonald’s. “That is $144 per year. At one point, the bank told me that if I did all my banking on my phone and only used the ATM, then they wouldn’t charge me, but then they charged me anyway. CalAccount would save us a lot of money, and it would be safer than keeping all our money in our pockets or under the mattress.”

Due in part to recent enforcement actions by the Biden administration and new proposed rules from the Consumer Financial Protection Bureau (CFPB), banks’ reliance on overdraft and other fees has declined over the last several years. However, the banking industry is strongly resisting limits on their profits. 

“History—and explicit statements from bank executives—suggests that financial institutions might try to offset fee limitations to overdraft revenue by attempting to increase revenue from other sources,” said DiVito. “Given the lack of sufficient competition from public-interest financial firms like mutuals or public banks, we need a policy intervention that guarantees access to no-cost basic banking products. That’s the only way to ensure every American has the full and free financial system access that they deserve and that our economy needs to thrive.”

Please contact to speak to DiVito or to connect with more depositors who would benefit from public banking options.