Over the last year or two, many major banks have reduced or eliminated overdraft fees: In 2019 banks collected $12.6 billion in overdraft fees compared to $9 billion annually more recently. This week, we hear that the Consumer Financial Protection Bureau (CFPB) is pushing for even more reform when it comes to overdrafting. Will the reforms work? 

Banking

• CFPB posits that overdraft is effectively a loan and therefore should be required to abide by the Truth in Lending Act, making terms of the overdraft loan more transparent. CNN describes other proposed solutions from CFPB as well. 
• This CFPB initiative is part of a wider wave of policies trying to reduce junk fees. Nerdwallet does an extremely thorough job of providing examples and updates on where specific industries, states, and companies are already making changes. 

This is a story to watch: If the government succeeds in reducing big banks’ ability to collect overdraft fees, these companies will likely find other ways to generate revenue. Will new fee structures work their way in to replace overdraft? 

To use with your students: Yanely tackled overdraft fees in a Jan 2022 FinCap Friday: Competition Drives Change. Plus, that Nerdwallet article from up above contains a 9-min audio clip elaborating on junk fees, including those charged by airlines and concert ticket sites. 

Taxes

• If you live in one of 12 states participating in the pilot program and meet particular income thresholds without doing gig work or earning substantial interest, you might be able to file taxes, electronically, free, directly through the IRS. The NY Times outlines how this is different from other filing options and how tax prep software companies feel about this option. Spoiler alert: They don’t love it.

Why this matters: It’s about to be tax season, so students will want to know all their options for filing. If you live in Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington State or Wyoming, you might already be hearing about the opportunity from local news sources. 

Insurance & Budgeting

• If you love getting super deep in the weeds, this McKinsey & Company study discusses health-related social needs (childcare, transportation, community safety, housing, education, etc...) and who reports having 2 or more of these unmet needs, with data and graphs by income level, health insurance type, race, etc.

Why this matters: Jessica of NGPF has started writing these Weekend Reads and LOVES meaty insurance topics, so I couldn’t resist sharing. Also, I think it’s meaningful to have perspective on how your community might have these unmet health-related needs and their potential impact to students and their families. It makes me thoughtful about how we talk about and teach budgeting.

About the Author

Jessica Endlich

When I started working at Next Gen Personal Finance, it's as though my undergraduate degree in finance, followed by ten years as an educator in an NYC public high school, suddenly all made sense.