The Center for Responsible Lending and 11 other progressive groups urged U.S. regulators to reject Toronto-Dominion Bank's proposed acquisition of First Horizon Corp., arguing that the $13.4 billion deal would harm low-income communities and reduce small- business lending.
In a letter to the Federal Reserve and the Office of the Comptroller of the Currency, the groups also cited the bank's overdraft-fee practices and made the case that large bank consolidation adds to systemic risk.
"Unfettered bank mergers contributed to the rise in megabanks and systemic fragility that led to the 2008 financial crisis, which imposed widespread and long-lasting economic costs on everyone, but especially lower-income people and people of color," the groups wrote.
Signatories of the letter, which was sent Tuesday, include the Woodstock Institute, Demos, the California Reinvestment Coalition and the Americans for Financial Reform Education Fund, in addition to the Center for Responsible Lending.
In a written statement Wednesday, TD responded to the groups' criticisms by pointing to various changes it has made.
Those actions include the launch of a program meant to increase homeownership opportunities in communities of color, the introduction of an overdraft-free bank account, plans to open branches in underserved areas and the establishment of a fund to support minority-owned small businesses in the United States.
"TD is committed to meeting the needs of the diverse communities that we proudly serve," the bank said in its statement.
Community groups have typically conditioned their support for large bank mergers on agreements to make specified investments in local communities. And various community groups took that approach last week during a public hearing on the TD-First Horizon deal, asking regulators to hold off approving the merger unless the banks
But the TD-First Horizon deal faces more outright opposition than most recent large bank mergers. If approved, the acquisition would make TD the sixth-largest bank in the United States.
In June, Sen. Elizabeth Warren, D-Mass., urged the OCC to reject the deal after a Capitol Forum report found that TD used similar tactics as Wells Fargo to
Federal bank regulators have not formally rejected a bank merger in more than 15 years, and the number of U.S. banks has dropped over the last four decades from around 18,000 to less than 5,000 today, according to the progressive groups' letter.
The letter's signatories argued that TD's account practices and overdraft fee policies "pose a risk to safety and soundness through increased reputational risk."
In 2019, TD generated 33% of its noninterest income from overdraft and nonsufficient-funds fees, compared with 7% for Bank of America and Wells Fargo, and 4% for JPMorgan Chase, according to the groups' letter.
"The majority of these fees are shouldered by banks' most vulnerable customers, often driving them out of the banking system altogether," the letter states.
As regulators mull the Toronto bank's deal for First Horizon and broader guidelines around bank combinations, community groups called for stronger investment commitments from the two banks before they are allowed to merge.
In 2020, TD agreed to pay the Consumer Financial Protection Bureau $122 million in a
TD said in its statement Wednesday that it has introduced a $50 cushion before customers get charged overdraft fees, and it has eliminated the transfer fee for customers who enroll in savings overdraft protection.
Later this year, TD is also planning to eliminate NSF fees, which get charged when customers do not have enough money in their account to make a purchase that gets rejected. Numerous large banks
