Bank of America slashes its overdraft fees
Financial regulators have grown increasingly critical of ‘abusive overdraft fees’
Bank of America announced that starting in May, it will cut its overdraft fees — the charge a customer pays when their bank account has reached a negative balance — from $35 down to $10.
The bank will also eliminate its transfer fee associated with its Balance Connect for overdraft protection service, according to the Jan. 11 press release. It said with these adjustments, there will be a 97% reduction of Bank of America's overdraft fee revenues since 2009.
"Over the last decade, we have made significant changes to our overdraft services and solutions, reducing clients’ reliance on overdraft, and providing resources to help clients manage their deposit accounts and overall finances responsibly," Holly O’Neill, Bank of America president of retail banking, said. "Throughout the process, we have engaged our National Community Advisory Council (NCAC) for their guidance and feedback on our changes. These latest steps will further support our clients and empower them to create long-term financial wellness."
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CAPITAL ONE ELIMINATES OVERDRAFT FEES, CFPB INVESTIGATES UNIVERSALLY ENDING THESE ‘ABUSIVE’ CHARGES
More banks should follow suit to eliminate overdraft fees, expert says
Bank of America isn’t the first bank to make this kind of change to its overdraft policy. In December, Capital One became the first top-10 bank and the sixth retail bank in the U.S. to not charge overdraft fees. And one expert says he hopes this encourages other banks to follow suit.
"The cost of processing NSFs [non-sufficient funds] has decreased dramatically in recent years, and banks that use the high cost of repeat overdraft fees to increase their profits contribute to pushing low-income and working Americans out of the banking system," Mike Calhoun, president of the Center for Responsible Lending (CRL), said. "Bank of America’s decision should spur more banks to take this important step to remove customers’ anxiety that an inadvertent overdraft of their account will result in excessive overdraft or NSF fees that further threaten their economic stability."
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Regulators crack down on overdraft fees
These banks' decisions come as the Consumer Financial Protection Bureau (CFPB) has become increasingly critical of overdraft fees, calling them "abusive." The bureau released a report on Dec. 1, which showed that banks have become increasingly reliant on overdraft revenue. In 2019, it said that total overdraft revenue reached an estimated $15.47 billion. That year, JPMorgan Chase, Wells Fargo and Bank of America brought in 44% of the total.
"CRL urges all financial institutions to eliminate bank overdraft fees," Calhoun said. "We also urge federal financial regulators – the Consumer Bureau, OCC, FDIC, Federal Reserve Board, and NCUA – to take action to protect consumers from harmful overdraft practices. It would be unrealistic and unacceptable for financial regulators to assume financial institutions by themselves will address the systemic problem of harmful overdraft practices."
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