The United States Senate Subcommittee on Financial Institutions and Consumer Protection met on Wednesday, May 4 to discuss overdraft fees and their effects on working families.

Chairman for the subcommittee, Senator Raphael Warnock (D-GA), kicked off the hearing by describing overdraft fees as “onerous” and that “keep people within cycles of debt and poverty.” He added that fees such as these are what keeps the unbanked from joining the financial services committee as to do so would be too expensive.

Warnock continued by saying “As a pastor and a senator, I see my work as grounded in serving others and my community, and I want to extend this call to our nation’s banks, credit unions, FinTechs, and other financial institutions. I believe Congress and this subcommittee in particular have an important role to play in ensuring that the financial institutions that support our communities and our small businesses and working families have the resources, tools and support to continue their important work. Nevertheless, at the same time we must hold financial institutions accountable when they juice their profits off the backs of struggling, vulnerable Americans, and ensure that they are not looking at these customers as easy marks to be taken advantage of with onerous or opaque fees.”

Minority member Senator Thom Tillis (R-NC) applauded the steps some banks and credit unions have taken to reduce or remove fees altogether, but also opposed the idea of Congress getting further involved in regulating financial institutions when competition was already working in consumers’ favor.

“The financial services industry has worked to tailor its products and create new ones, all while responding to changes in government regulation, financial innovation, and obviously the needs and preferences of the American consumer,” said Tillis. “While there have been voices in Congress and Federal regulators advocating for further action in this space, I believe it is clear the financial services industry have through the market powers of competition and innovation already adopted consumer friendly policies and products regarding overdraft.”

Thanks to the changes in 2010 that required consumers to opt in to overdraft programs, Tillis cited studies showing consumers often intentionally take advantage of the programs.

Tillis also urged Congress not to issue a blanket statement over the entire industry. “There’s no doubt in my mind that some people may get caught up in a bad practice. But let’s not cast the entire industry as being bad actors. I think the industry’s moving in the right direction, consumer choice and competition is producing viable products, so let’s narrow our focus in Congress to not add more burdens to the majority of the industry that in my opinion is doing a good job.”

The subcommittee also heard testimony from three experts: Aaron Klein, a Senior Fellow in Economic Studies at the Brookings Institution, Jason Wilk, Founder & CEO of digital banking FinTech Dave, and David Pommerehn, Senior Vice President and General Counsel for the Consumer Bankers Association.

Klein in particular spoke heatedly on the topic, and recommended policy solutions to address the problems that harm working families, including having credit unions disclose data on overdraft just like banks. Per Klein, “Currently all banks over a billion dollars in size must tell us how much overdraft revenue they have, credit unions should do the same.”

He also advocated for stopping overdraft giants with new regulation, meant to limit institutions that he labeled as check cashers and payday lenders with a banking charter that derive the majority of their income from predatory overdraft policies.

Perhaps the biggest topic of discussion that ran parallel to that of overdraft fees was on real time payments. “If a subset of banks making payments faster can result in billions of savings for families living paycheck to paycheck, consider the impact of a full transition to real time payments,” asserted Klein. “The Federal Reserve could solve some of this problem today using regulatory authority it was given but it hasn’t in twenty years and it will not as long as it prioritizes operating its own payment system above regulating the nation’s payment systems.”

Klein blasted the Federal Reserve for its inability to roll out instant payments, stating that in 2012 the Fed created a task force called “Faster Payments 2020” giving themselves eight years to get instant payments. Meanwhile, in 2007 the Bank of England decided it would institute faster payments and had it 18 months later. Mexico implemented them in 2004, Brazil in 2005.

After finally committing to creating the FedNow system, the Federal Reserve said it would take five years to implement. Klein wondered why so long, and asserted that had instant payments been implemented in the U.S. when the Bank of England had, American consumers would have saved $100 billion in overdraft, check cashing, and payday lending fees. “It is a structural conflict of interest for the Fed to regulate payments and operate its own system.”

It’s the delay in payment systems that force consumers to turn to alternative means of creating short term liquidity, like with overdraft programs. Not only does it hurt small businesses that are forced to send payroll days earlier, but it also hurts consumers who wait days from when the company sends the payment.

Senator Warnock concluded the hearing by thanking the witnesses, and while he expressed gratitude for the incremental steps some banks and credit unions have taken, he added that additional legislation is still needed to prevent the bad actors from harming those in most need of protection.