It's an ironic fact of life that people who live on the financial edge must contend with certain expenses that more economically secure Americans don't face. Among them are bank overdraft fees. At first blush, these may look like a reasonable deterrent to discourage bank customers from letting their balances drop too low but, in fact, those fees are lucrative profit drivers for the banking industry, which structures them so that even responsible consumers can end up paying through the nose before they realize their accounts are overdrawn. Consumer advocates and some in Congress say regulatory changes are needed. They're right.

In most debit-card plans, if the card hits zero balance, the bank will continue to cover purchases, overdrawing the account, instead of declining further purchases as would happen with, say, a maxed-out credit card. Why is that? Is the bank just being nice? No. Typically, the system is set up so that, once the balance dips below zero, overdraft fees kick in — automatically and immediately — for as much as $35 per subsequent transaction. Depending on the timing of deposits and withdrawals, the cardholder might not even be aware of the overdrafts until the fees start piling up.

Banks make billions of dollars annually on those fees. JPMorgan Chase alone collected more than $2 billion in overdraft fees in 2019. Such fees actually provide the bulk of profit for some smaller banks.

The overdraft-fee trap worsens the financial situations of the people who can least afford it — and there's ample evidence that banks are doing it on purpose. As Brookings Institution economist Aaron Klein reported recently in Politico, the overdraft-fee business is so lucrative for some small banks that they put most of their branches near discount stores like Walmart or near military bases, aiming at lower-income customers who will be more apt to overdraw their accounts.

If it seems unlikely banks would be so calculating about garnering those fees, consider that a former chief executive of one bank named his boat "Overdraft." That's according to a 2017 lawsuit by the federal Consumer Financial Protection Bureau over the bank's predatory overdraft-fee practices.

Reform advocates are calling for changes to the system that should be seriously considered. The simplest solution would be to follow the model of credit cards and deny any debit-card spending on an overdrawn account. No overdraft, no fee. If that tough-love approach to already-beleaguered consumers doesn't sit right, banks could be required to give 24 hours' notice of an overdraft, providing the customer the opportunity to bring the account current to avoid the fee. The fees themselves could be limited to lower dollar amounts.

Whatever the solution, Congress should move on this. The high cost of being poor is already an intractable reality for too many Americans. They don't need to have their own banks digging them in deeper.

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