People behind on accounts fear banks will keep stimulus

Overdraft, other fees set aside may be collected when $600 is deposited

As 2021 begins, the $600 stimulus being paid by the federal government is welcome news to millions of Americans whose finances have been devastated after nine months of economic crisis wrought by the coronavirus pandemic.

But for people whose bank accounts are overdrawn, whether they get their hands on the money depends on what the country’s banks decide to do. Banks hold this power because, for a vast majority of people, the stimulus money will be deposited in the same bank accounts in which they also receive tax refunds.

In the past week, the largest U.S. banks have pledged to temporarily zero out their customers’ negative balances, so they can get access to their stimulus money and put it toward whatever expense seems the most pressing. Negative balances typically include the various fees that banks tack on to customers’ accounts for letting the customers withdraw more money than they have.

Representatives of Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said that the banks would be crediting customers’ accounts for roughly a month after the money arrives. After that, the banks will revert the accounts to their previous overdrawn status. It was a reprisal of the relief they offered customers when the first round of stimulus money was distributed in April.

Large regional banks, including Fifth Third Bancorp, Truist (the institution formed by the combination of SunTrust and BB&T), PNC Financial Services and US Bank, are following suit.

However, some regional and community banks — which often serve areas where there is little competition, including poor neighborhoods and rural communities — are pursuing different approaches. Some smaller banks say they are considering customers’ requests on a case-by-case basis.

Citizens Bank, a regional bank catering to customers mostly in the Northeast, said it would temporarily zero out all customers’ accounts, but only if the customers called and specifically requested it. A Citizens spokesman said the bank would email customers a reminder that the option is available to them.

The disparate approaches of smaller banks often puts the onus on customers to figure out what options they have — at a time when many are already stressed out by the enormous financial challenges they face. Consumer income fell in November; layoffs continue, particularly in hard-hit industries like restaurants; and the unemployment rate remains high.

Bank fees are adding extra pain to some Americans’ pandemic-induced woes. In 2019, according to the Center for Responsible Lending, big banks collected more than $11 billion in overdraft fees from their customers, with 9 percent of customers paying more than 80 percent of the fees. For the first nine months of 2020, customers of big banks paid $6 billion in overdraft fees, according to Rebecca Borné, a researcher at the nonprofit, which advocates better treatment of consumers by financial institutions.

The total amount of penalty fees that bank customers paid in 2020 could end up being lower than last year, but because such a large amount of the penalties are paid by such a small subset of customers, the impact of those fees on their finances will most likely be far worse this year.

Aside from the temporary truces some banks have made with their customers around the stimulus checks, banks have not modified their overdraft policies during the pandemic, Borné said. “Charging unreasonably high fees, multiple fees per day, extended fees, and other practices that manipulate the charges to maximize the fees — those practices hurt those struggling the most,” she said.