Financial fairness threatened by proposed merger between TD Bank and First Horizon

By Charlene Crowell

As banks grow through mergers and focus on growing online and mobile services, serious concerns are emerging about the fairness and accessibility of banking services for traditionally underserved Black and Latino communities. In most cases, consumers and small businesses view the accessibility and convenience of bank branches as essential to serving their communities.

Consumer advocates are now urging banking regulators to thoroughly review a proposed TD Bank merger, particularly in light of the lender’s track record on home loans and overdraft fees.

Earlier this year, TD Bank announced plans to acquire First Horizon Bank and its $85 billion in assets and 417 locations, mostly in the South. If approved by federal regulators, the merger would create America’s sixth-largest bank.

TD Bank already has more than $1.3 trillion in , 27 million customers and more than 1,100 locations in 15 states and the District of Columbia. In Atlanta and Dallas, the bank operates as TD Ameritrade. Its largest number of branches by state is located in New York (367), Florida (355) and New Jersey (367).

According to its website, “Black experiences, in all their diversity, are central to our drive for positive and lasting change.”

But as Sportin’ Life, a character from the immortal popular opera Porgy and Bess, put it: “That’s not necessarily the case.” Indeed, TD’s business case sends a different message.

Earlier this year, WHYY, the national public radio station serving the Philadelphia metro area, reported that in its area between 2018 and 2020, “TD Bank was more likely to approve a mortgage for a low-income white applicant. income than a high-income candidate. Black candidate….”

TD Bank had the lowest mortgage approval rate for black applicants in its entire metro area. Meanwhile, “the institution declined 20% of all purchase mortgages, but declined nearly 40% of all black applicants,” according to the data, which was extracted from Home Mortgage Disclosure Act data. . By comparison, the rejection rate among white applicants was 20%.

A similar conclusion emerged in a 2018 investigative article from Reveal News: “African American and Latino borrowers are more likely to be turned down by TD Bank than any other major mortgage lender. The bank turned down 54% of black buyers and 45% of Latino buyers, more than three times the industry average. »

Then there’s TD Bank’s poor record on overdraft fees.

Just two years ago, the Consumer Financial Protection Bureau (CFPB) entered into a consent order with TD Bank which provided $97 million in restitution to 1.42 million consumers, and the CFPB imposed the company a civil penalty of $25 million. The bank had illegally charged overdraft fees to its customers without first obtaining their consent before registering them for its optional overdraft.

Overdraft fees often exploit consumers’ short-term cash flow needs. The vast majority of overdraft fee income comes from people whose average account balance is less than $350.

TD Bank’s business model relies much more on overdraft fees than other major banks. While some of its peer institutions have eliminated overdraft fees, TD charges overdraft fees of $35 up to three times a day.

Fortunately, consumer advocates are registering their serious concerns with federal regulators.

“TD Bank cannot meet the needs of low-income communities while insisting on maintaining this important source of income which, by definition, depends on cash-strapped consumers,” said Nadine Chabrier, Senior Policy Counsel. and litigation at the Center for Responsible Lending (CRL), during a recent hearing on the proposed merger. She noted that in deciding whether to approve a merger, government regulators, by law, must consider whether the needs of the community would be met.

In a joint Aug. 23 letter to the Office of the Comptroller of the Currency (OCC) and the Federal Reserve, agencies whose approval of the deal is required, consumer advocates made their opposition clear.

“This merger will result in a significant presence in the Southeast, in states like Tennessee, Texas, Arkansas and Florida, among others, where there is a concentration of black and Latino communities and poverty, which often overlap. These communities bear the acute and disproportionate burden of overdraft fees, raising questions as to whether the needs and convenience of the community will be met,” the advocates wrote. Elsewhere, they note, “Many people hit by relentless overdraft fees end up having their current account closed, and re-entry into the banking system is difficult.”

Signatories to the letter included: Americans for Financial Reform Education Fund, California Reinvestment Coalition, Demos and CRL.

Federal regulators, appointed by the Biden administration, have signaled that merger review is a renewed priority.

Michael Barr, the new vice president in charge of overseeing the Federal Reserve system, affirmed the post in a high-profile September 7 speech titled “Making the Financial System Safer and Fairer.”

“Fairness is fundamental to financial oversight, and I am committed to using the tools of regulation, supervision and enforcement so that businesses and households have access to the services they need, the information needed to take financial decisions and protection from unfair treatment,” Barr noted.

Let’s hope Mr. Barr and the other regulators keep their word.


Charlene Crowell is a senior researcher at the Center for Responsible Lending. She can be reached at [email protected]

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