Citibank announced its plans to eliminate overdraft fees this summer, becoming the largest bank to make this policy change.
The bank will stop charging its overdraft fees, returned item fees and overdraft protection fees, according to a Feb. 24 press release. Citi said it is the only top-5 U.S. bank to completely eliminate these fees, a move it said will help increase financial inclusion in underserved communities.
"This latest enhancement is a significant step for Citi as a leader in the banking industry offering the most consumer-friendly overdraft practices," Gonzalo Luchetti, Citi CEO of U.S. personal banking, said. "We are continuously looking for ways to utilize our industry-leading capabilities to make the financial system easier and more equitable for communities who have little or no financial buffer."
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Expert says eliminating fees will help underserved communities
Citi offers two overdraft protection services that cover negative balance transactions. Neither of these will have fees beginning this summer:
- Safety Check - automatically moves funds over from a linked Citi savings account to cover a negative balance
- Checking Plus - a line of credit that automatically transfers funds to cover a negative balance
Beyond these, Citi will continue to not authorize ATM or point-of-sale transactions when there are not funds available. And the bank will allow consumers to enroll in low-balance alerts.
One expert applauded Citibank's announcement, saying that eliminating these fees will help underserved communities.
"Overdraft fees kick people when they are down," Nadine Chabrier, policy and litigation counsel for the Center for Responsible Lending (CRL), said. "Their costs are borne by financially vulnerable consumers. These fees disproportionately harm Black and Latino Americans with a bank account. Overdraft fees are also one of the most common reasons people lose their bank accounts.
"Citi’s decision to eliminate overdraft fees is a victory for financial fairness for its many customers," she continued. "Families that bank with Citi will be more financially secure because of this action."
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CFPB grows increasingly critical of overdraft fees
Citibank's announcement comes as the Consumer Financial Protection Bureau (CFPB) has grown increasingly critical of what it called "abusive overdraft fees" in a recently-released report.
"Abusive overdraft practices remain a systemic problem," Chabrier said. "The Consumer Financial Protection Bureau, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, National Credit Union Administration, and Federal Reserve Board have the authority and obligation to protect consumers, as well as to safeguard safety and soundness, by reining in these fees. Absent meaningful regulatory action, financially vulnerable families will continue to be dragged into the quicksand of relentless overdraft fees."
But some experts disagree with this stance, saying that the CFPB universally cutting overdraft fees could actually hurt consumers since it would also limit overdraft protection options.
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