Banks Made Millions Off Of Long Islanders In Fees During COVID
New Yorkers have paid over $1.6 billion in bank fees since the start of the pandemic. A group of progressive groups said the fees have exacerbated the financial hardships of low-income residents and slowed their post-pandemic recovery.
The fees collected by banks on Long Island exceeded $120 million, according to a report released by the New York State Community Equity Agenda.
"We need to build community wealth on Long Island to ensure all people have a say in the issues that impact their lives,” said Lisa Tyson, the director of the Long Island Progressive Coalition, a member of the agenda group.
Long Islanders were tapped for $70 million in overdraft costs, which tend to affect account holders who have less than $350 cash on hand and produce low monthly deposits. They were also hit with over $36 million in maintenance fees and about $14 million in ATM fees.
In March 2020, Governor Andrew Cuomo issued an executive order at the start of the pandemic ordering state-regulated banks to suspend fees for the use of ATMs, overdrafts and credit card late fees. The Federal Reserve and Federal Deposit Insurance Corporation issued similar guidance for banks to be flexible with customers.
JP Morgan Chase, which has over 100 locations on Long Island, waived fees on over 1 million customer accounts, a spokesperson said.
However, advocates said those federal and state recommendations did not come with penalties or regulatory teeth.
“Despite the Federal Reserve requesting that banks waive these fees on consumers during the extraordinary circumstances of the pandemic, the banks ignored the call to be good corporate citizens,” said Ian Wilder, executive director of Long Island Housing Services.
Before the legislative session ended Thursday, a bill was introduced in New York by a bipartisan group of lawmakers, including Fred Thiele, Steve Englebright, Kimberly Jean-Pierre, Michael Montesano in the Assembly, to lay the groundwork for local governments to create publicly owned financial institutions.
“The establishment of public banking by municipalities would keep funds within the community to be used for infrastructure, encourage economic development and allow for lower debt costs for local governments,” Thiele said in a statement. “We need a banking system that is accountable to the people and not to private corporations. New York should join the growing number of states that have created, or are exploring the creation of, public banking systems and I will continue to work toward that end.”
Tyson called the legislation “a crucial part of this by combatting the extractive nature of commercial banks.” She said public banks would better meet the needs of communities.
The bill would require these public banks to hold municipal funds, rather than counties, towns and villages investing in corporate banks. Proponents said the public bands would then reinvest the money in the community through economic development credit unions and other local financial institutions.
New Yorkers could then go to the financial institutions for loans for affordable housing, small businesses, social services and other initiatives. These community-based institutions generally do not charge overdraft fees.
David Sprintzen, a professor emeritus of philosophy at Long Island University Post and social action coordinator at the Ethical Humanist Society of Long Island, said the community investment would give customers an increased benefit compared to the current system.
“Sometimes those investments are worthwhile. Sometimes they are environmentally, socially or culturally destructive,” Sprintzen said, referring to investment in fossil fuels in the face of climate change. “We have no control over that, but they don't necessarily or very rarely go right back into the communities from which that money has been taken.”
Wilder said the system would not directly compete with big banks, but would target where funds go and how they are spent.
“It would improve how capitalism works,” he said. “There’s really not enough pressure on the corporate banks to serve people and if local municipal banks came in they would not provide all the same services, and would not compete directly but they would provide some pressure in the market for corporate banks to serve people better.”
A similar public banking system has been in place in North Dakota since 1919 to protect farmers from high fees charged by big banks.