By Jon Hill

Law360 (May 27, 2021, 8:03 PM EDT ) Democratic lawmakers pressed the CEOs of the nation's six largest banks on overdraft fees and pandemic response efforts on Thursday at a House Financial Services Committee hearing that the ranking Republican called "the sequel that nobody asked for."

At a second day of congressional testimony for the chief executives, Committee Chairwoman Maxine Waters, D-Calif., said she's concerned their banks "raked in billions in overdraft fees during the pandemic," while Rep. Carolyn Maloney, D-N.Y., argued legislation is needed to "crack down on unfair, predatory overdraft fees."

"Bank overdraft fees are outrageously priced, predatory and beyond the scale of what a reasonable charge should be for the service," Maloney said, noting that a typical per-item fee can add about $35 to the cost of even a small purchase for a cash-strapped consumer.

"Everyone likes a good sandwich and a cup of coffee, but not at a cost of $40 or $50," Maloney said. "I feel that these fees are unfair, unaffordable and unreasonable for all Americans, plain and simple."

Maloney's comments came as she questioned Wells Fargo & Co. CEO Charles Scharf on his bank's overdraft practices, only to be seemingly caught off-guard when Scharf said Wells Fargo has actually offered an account since 2020 that has no overdraft fees.

"It's probably our most popular account since we've introduced it," Scharf said, adding that the bank also gives customers other options for avoiding such charges. "These are things that we've added where we're looking to become more consumer-friendly, but it's certainly something that we will continue to look at."

Scharf testified Thursday alongside Jamie Dimon of JPMorgan Chase & Co., Brian Moynihan of Bank of America Corp., Jane Fraser of Citigroup Inc., David Solomon of the Goldman Sachs Group Inc. and James Gorman of Morgan Stanley, the leaders of the six largest U.S. banks in terms of total assets.

Their appearance at the five-hour House hearing on "Holding Megabanks Accountable" followed a round of testimony on Wednesday before the Senate Banking Committee, where the overdraft issue was also raised by Sen. Sen. Elizabeth Warren, D-Mass., to argue that the biggest banks should have automatically waived the fees to help struggling customers once the pandemic hit.

House Democrats on Thursday also faulted the banks over their implementation of the Paycheck Protection Program, arguing that more should have been done to help minority-owned small businesses and other underserved borrowers access the pandemic relief loans doled out through the program.

Looking ahead, Waters questioned the bank leaders on whether they plan to proactively offer loan modifications to pandemic-affected homeowners who could have trouble resuming regular mortgage payments in the coming months and may not know what longer-term relief options are available as forbearance programs wind down. 

"Are you going to deal with them in ways that will help save their homes and avoid foreclosure?" Waters asked JPMorgan's Dimon. "Can you tell me whether or not you are going to employ the kind of operation that we won't have to get into a confrontation about, that we don't have to try and do something in law?"

Dimon said JPMorgan will "bend over backward to help those folks stay in their homes," though he left open the possibility that the bank might still pursue foreclosure in certain situations, such as when abandoned properties or vacation homes are involved.

"We don't like foreclosing on people. We give modifications. We have plans," Dimon said. "We'll work with everyone and, where appropriate, we will not be foreclosing on people."

Citi's Fraser said that her bank will make sure its servicing partners proactively offer modification options to affected borrowers, and Bank of America's Moynihan said his bank has "already modified a bunch of these loans."

"We will continue to modify them because, as Mr. Dimon said, the last thing we like to do is to take someone who can pay us through foreclosure," Moynihan said.

Republicans, meanwhile, praised the bank executives for their institutions' resilience during the pandemic, crediting them with keeping capital and liquidity flowing and serving as a source of strength to the economy in one of its darkest moments.

Rep. Patrick McHenry, R-N.C., who is the ranking member of the House banking panel, went so far as to question why the hearing was even being held, saying that he doubted much was learned when many of the same bank CEOs last appeared jointly before the committee in 2019.

"We're here today for the sequel that nobody asked for," McHenry said.

But McHenry and his Republican colleagues nevertheless used the opportunity to caution the big banks against bowing to "political activism" on climate change, gun control and other progressive causes, echoing concerns voiced on Wednesday by their Senate colleagues about encroaching "woke-ism" distorting the allocation of capital.

By withdrawing or reducing financing for certain businesses, particularly in carbon-intensive sectors, for example, banks are just trying to "pacify political activists" and are arguably "no longer supporting our economy but actively working against it," said Rep. Blaine Luetkemeyer, R-M.O.

Luetkemeyer went on to grill Goldman's Solomon and JPMorgan's Dimon on whether their banks would pull back from investing in China over human rights concerns, suggesting it would be hypocritical not do so while simultaneously talking up lofty environmental and social responsibility ideals.  

Both executives demurred, with Solomon observing that the "bilateral relationship between the U.S. and China is incredibly complex."

"There are places where obviously we cooperate and there places where we're confrontational," Solomon said. "We try to navigate that in an appropriate way and stay engaged with our clients around the globe."

Dimon said JPMorgan has operations in more than 100 countries but complies with U.S. foreign policy mandates when conducting business around the world.

"When you tell us not to [do business], we don't, like Cuba," Dimon said. "We follow exactly what you tell us to do because we are patriots just like the rest of you."

House lawmakers brought up a wide range of other topics during Thursday's marathon hearing, touching on everything from Biden administration tax proposals to retail investor margin requirements to the banking industry's historical ties to slavery in the U.S.

But Rep. Brad Sherman, D-Calif., served up what turned out to be a softball in asking the CEOs if they believe federal legislation is needed to help certain hard-to-update financial instruments weather the industry-wide transition away from the London Interbank Offered Rate.

"Yes," each of the executives answered without hesitation, joining the federal financial regulators who have already endorsed the idea.

--Editing by Amy Rowe.

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