NCL statement on settlement with BBUSA Bakeries USA – National Consumers League

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April 20, 2016

Contact: NCL’s Cindy Hoang, cindyh@nclnet.org, (202) 835-3323

Washington, DC–The National Consumers League (“NCL”) and BBUSA Bakeries USA (“BBUSA”) are pleased to announce that they have resolved consumer-related litigation pending in the Superior Court of the District of Columbia, NCL v. BBUSA Bakeries USA, Case No. 2013 CA 006548 B. NCL and BBUSA recognize the importance of a focus on nutritional content in bread product offerings and ensuring that customers have nutritious options.  Without admitting liability, BBUSA has agreed to provide additional disclosures on the back of product packaging and on the Thomas’® and Sara Lee® websites and to make a donation to Feeding America.

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About the National Consumers League

The National Consumers League, founded in 1899, is America’s pioneer consumer organization. Our mission is to protect and promote social and economic justice for consumers and workers in the United States and abroad. For more information, visit www.nclnet.org.

The impact of overdraft fees on consumers – National Consumers League

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By Hannah Rudder, NCL Intern

More than three quarters of the largest U.S. banks allow their customers to overdraw their accounts when they lack sufficient funds in order to cover the transaction for a fee of $35, on average. The Consumer Financial Protection Bureau (CFPB) found the median transaction amount of purchases that resulted in an overdraft fee was only $24. Additionally, the CFPB study revealed that 18 percent of account holders pay the vast majority of all overdraft fees triggered by debit cards, checks, and automated clearing house electronic charges.  

The banks’ overdraft fees cause financially vulnerable consumers to leave the banking system. Thirty-one percent of consumers without a bank account reported high or unpredictable account fees as one reason for not having an account, while 13 percent cited it as the primary reason for not having a bank account. Overdraft fees are unexpected and unpredictable because most banks do not give their customers notice of an overdraft until two or three days after the incident. In the meantime, the consumer continues to overdraw his or her account, incurring more overdraft fees. The CFPB study found that more than two-thirds of consumers would prefer that the bank decline the transaction rather than assess an overdraft fee. 

The Pew Charitable Trusts recently released the findings of a study conducted on “heavy overdrafters,” those who incur over $100 in overdraft and non-sufficient funds fees. Pew conducted this survey out of concern for consumers because overdraft is high risk, in that it lacks the consumer protections that accompany other credit products. It found that most heavy overdrafters are:  Millennials or members of Generation X; renters rather than homeowners; and those with low incomes. See below. Furthermore, overdraft fees consumed nearly a full week’s household income of heavy overdrafters. 

Half of the heavy overdrafters incur six or more overdraft fees annually and 42 percent paid seven or more overdraft fees. Heavy overdrafters tend to have lower incomes than the rest of the U.S. population, with most reporting an annual household income of under $50,000. This means that overdrafts hit those who can least afford these predatory fees. Debit cards are the most common transaction method for heavy overdrafters, with the actual value of the debit card transaction being relatively low, around $24.  Seventy percent of heavy overdrafters are employed. 

Younger consumers in the Millennial generation may be more affected by these overdraft fees because they are more likely to use debit cards. Additionally, they may be more vulnerable to overdraft fees because many are managing finances independently for the first time. For example, many college students are opening their first accounts for financial aid refunds, and the outside companies that distribute these funds promote their own cards. The Department of Education has adopted rules banning the charging of overdraft fees on accounts used for student aid, which will go into effect this month. 

The results of the Pew survey show that overdraft now serves as a form of short-term credit for many consumers. However, overdraft lacks the requirements that financial institutions use to verify customers’ ability to repay debt before extending credit and provide a reasonable time to repay, as well as limits on late fees. 

Pew urges the CFPB to write new rules to ensure that overdraft programs are safe and designed only for infrequent and accidental occurrences. This could be achieved by limiting: the size of overdraft fees, the frequency with which they can be incurred, and overall cost. A limit of six overdrafts a year would save the 42 percent of heavy overdrafters, who incurred seven or more fees in the past year, a median of $210 annually. The Federal Deposit Insurance Corporation (FDIC) published guidance suggesting that banks should give customers a reasonable opportunity to choose a less costly alternative and decide whether to continue with fee-based overdraft coverage. 

Frequent overdrafts are a financial burden, especially because the fees are oftentimes hidden and unpredictable. These fees cause many consumers to leave the banking system, with 13 percent of consumers without banking accounts citing overdraft fees as the primary reason, and forces them to use cash other alternatives, like payday loans with predatory interest rates. 

Pew also suggests that the CFPB enact rules to limit the negative effects of overdraft fees and ensure that overdraft is not being used as short-term credit. It suggests that overdraft fees be reasonable and proportional to banks’ cost of covering overdrafts or to the overdraft amount. Financial institutions should charge no more than six small overdraft fees in any 12-month period that are proportional either to the banks’ cost of covering overdrafts or to the overdraft amount, and these fees should be limited to one per negative-balanced episode. If that limit is reached, then any further overdrafts should be covered under the rules for credit. Additionally, banks should post deposits and withdrawals in a fully disclosed, objective, and neutral manner that does not maximize overdraft fees. 

NCL applauds Pew’s report and accompanying recommendations. Imposing these predatory fees on lower income Americans and Millennials who are just beginning to manage their own finances is unacceptable. We hope the CFPB takes action to minimize the impact of these odious charges. 

In the meantime, we support the following strategies to avoid these exorbitant overdraft fees, or at least their frequency:

  • Set up text or email notifications that alert you when your balances are below a certain level.
  • Avoid opting out of overdraft coverage and simply have the card declined if there are insufficient funds.
  • Most banks offer to link a checking account to a savings or money market account, so that money transfers from the savings account to the checking account when there is not enough money in the checking account to cover the transaction. Opt in for this option if possible.
  • Finally, the last, and perhaps the easiest: Carefully monitor the balances in the accounts as well as individual transactions.  

Reflections on the RNC and DNC – National Consumers League

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Last week I attended the Democratic National Convention in Philadelphia. What a contrast with the Republican convention in Cleveland, which I also attended, the previous week. The RNC was overwhelmingly white (there were approximately 18 black delegates at the Republican National Convention.

Yes, eighteen, or roughly 0.7 percent of the 2,472 national delegates in Cleveland, the lowest percent since 1912, according to Daily Kos) – by contrast, the DNC was 50 percent people of color. At the RNC, I attended some great programs during the days. However, the activities on the street were, at times, downright scary. I blogged and posted photos on Facebook of the demonstrations and characters on the streets around the convention. I like to think that Diane Arbus[1] would have envied some of those photos.

Many of the speeches at the RNC were also dark and foreboding, describing the U.S. military as a “disaster,” claims that United States is on a dangerous path toward tyranny and violence, the Democratic candidate is a “Lucifer” and chants aimed at Hillary of “guilty” and “lock her up.”

Last week’s DNC was decidedly different in spirit and mood: upbeat, optimistic, diverse, and joyful. It featured a far more diverse crowd, a huge millennial presence – female and male – with young folks exuding a palpable excitement about the first woman ever nominated to be President. Thankfully for people like me, I saw none of the misogyny or hate so much in evidence the week before.

And we can be very grateful for one more thing: there was no violence at either the RNC and DNC. This wasn’t an accident; both cities avoided violence because of meticulous planning by law enforcement. The fact that both conventions were peaceful is a miracle given the nastiness of this Presidential race, and in the RNC’s case, the white supremacists threatening to come to Ohio, and the state law permitting gun owners to sling AK15 lightweight assault rifles over their shoulders like out of Gunsmoke.

We can’t discount the anger of Bernie-or-bust supporters at the DNC, who continue to cling to the notion that the nomination was stolen from them. For the record, Sanders received 3 million fewer votes than Clinton and had around 970 fewer pledged delegates. Even so, every Democrat I talked to, including elected officials, embraced much of Bernie Sanders’ platform: higher minimum wage, repeal of Citizens United, adjusting the growing gap in wealth.

In any event, huge kudos should go to officials in each city for their careful planning and for keeping attendees safe. 

During the daytime at both conventions, I attended events sponsored by NCL donors on women in politics and health care, and including one in Philadelphia we co-hosted, underwritten by Eli Lilly on fighting Alzheimer’s. Senators Debbie Stabenow (D-MI) and Ed Markey (D-MA) spoke. Stabenow is working in Congress to increase research and funding for Alzheimer’s, and Markey talked about his brilliant mother’s descent into the illness, and how we must demand that NIH more robustly set a timetable for finding a cure. B. Smith, the glamorous and successful restaurant owner who suffers from the illness, came with her husband, who spoke eloquently about her determination to beat the disease. She stood stoically by his side as he noted that communities of color and women are more likely to get Alzheimer’s and more research is needed to understand why.

NCL has many friends in Congress. Janette Fennell, who runs KidsandCars.org, and I drove to Wells Fargo Field on Wednesday to hear President Obama, Vice President Biden and his wife Jill Biden, VP Nominee Tim Caine and many others speak. We rode with Congresswoman Jan Schakowsky (D-IL), the democratic House co-sponsor of The Cameron Gulbransen Kids Transportation Safety Act of 2008. When I was Senior Product Safety Counsel at Consumers Union, Janette and I worked together on this bill to require that all cars have rearview cameras so toddlers don’t get backed over and killed because they cannot be seen behind the vehicle.

Then-New York Senator Hillary Clinton was our Senate Democratic co-sponsor. Schakowsky and Clinton came to know one another well in the course of trying to get this bill passed. I enjoyed watching Schakowsky’s TV interview the next day describing Hillary Clinton as a wonderfully generous colleague and ally in Congress. Senator John Sununu (R-NH) and Rep Peter King (R-NY) were our Republican co-sponsors for that bill, and they were key to getting it enacted and signed into law by President George Bush. Though a Republican, Congressman King also speaks highly of working with Senator Clinton and her staff on the legislation.

This bill was enacted eight years ago, but full implementation won’t happen by in 2018. By then, every car should have a rearview camera.

So back to the convention. It’s hard to fully capture the excitement and energy in the hall throughout the week. The young women and men cheering wildly for Hillary … the “I’m With Her” buttons, bumper stickers, hats and t-shirts … the African American and Hispanic women and men chanting in support of their candidate … the disability rights activists, the full embrace of LGBT members, the union presence … I ran into Randi Weingarten, President of the American Federation of Teachers, at the Emily’s List event; her union of teachers has for decades famously deployed its millions of members door-to-door for candidates.

Indeed, attendees at the DNC understood this is a turning point in American history. For the first time in 240 years, the United States has a woman running for President who has been endorsed by a major party. As a life-long feminist and head of a women-founded pioneering organization like NCL, being in the hall when Hillary came to the podium to accept the nomination felt like a fulfillment of the wishes and hopes of so many American women throughout our nation’s history. I have to believe that NCL’s founders and leaders—towering figures in their own right, each of them enormously talented—Florence Kelley, Josephine Goldmark, Francis Perkins, Eleanor Roosevelt—would have savored the moment.

What is particularly vindicating for feminists is hearing the most powerful men in the world, President Obama, former President Bill Clinton, VP Joe Biden, billionaire and former NYC Mayor Michael Bloomberg, Senator Tim Kaine, endorse a woman to be our next President. American women have been waiting generations for this moment. No, sexism and misogyny won’t disappear if we have a woman president. Women still earn less than men and sexual harassment, sexual assault on campuses, and discrimination in the workplace will be with us for a long time. But this is a transformative moment for women in America and around the world.

I remember a friend telling me she attended college and law school with Hillary Clinton. While they were at Wellesley together, Hillary was regarded as so very talented that her classmates believed she would be the first woman president of the United States. They were dismayed when she decided to follow her hayseed boyfriend to Arkansas! They were sure she’d be lost to them forever. Well, I guess their instincts were right.

This will be a difficult and long few months until the November election. But it will be full of firsts. Our daughters and sons are watching the glass ceiling be broken; and just as we watched Barack Obama make history as the first successful African American candidate for the presidency, we at NCL will be in the front row watching with awe and excitement the first woman nominated by a major party running for the highest office in the land.

[1] Diane Arbus, as her Wiki page notes: was an American photographer and writer noted for photographs of marginalized people—dwarfs, giants, transgender people, nudists, circus performers – and others whose normality was perceived by the general populace as ugly or surreal.