clearn.png
Tuesday January 25th, 2022 3:38AM

Bank of America slashes fees for account overdrafts

By The Associated Press
Related Articles
  Contact Editor

NEW YORK (AP) — Bank of America slashed the amount it charges customers when they spend more than they have in their accounts and plans to eliminate entirely its fees for bounced checks.

It's the latest move by the nation's biggest banks to roll back the overdraft fees they long charged customers, fees that often amount to hundreds of dollars a year for frequent overdraft users.

The bank based in Charlotte, North Carolina, will cut the overdraft fees it charges customers to $10 from $35 starting in May. It will also stop charging fees for non-sufficient funds — which are levied when it rejects a transaction — better known as bouncing a check.

While checks are no longer widely used, NSF fees can come from automated payments like utility bills. Bank of America, the nation’s second-largest bank, says roughly 25% of its overdraft/NSF fee revenue each year came from NSF fees. Overdraft fees typically come when someone makes a purchase on a debit card that exceeds the available cash in their account.

Altogether, Bank of America estimates the steps will cut its overdraft-fee revenues by 97% from where they were in 2009, the year before it started taking incremental steps toward reining in overdraft-fee revenues.

“This is the final step in the journey we've been on," said Holly O’Neill, president of retail banking at BofA, in an interview. "We have good financial solutions for clients without them having to rely on overdraft, but we will still have overdraft if it is needed.”

Consumer groups and politicians applauded the measure, particularly with Bank of America's size as the largest consumer banking franchise in the country.

“I've been working to reduce or eliminate overdraft fees for 20 years and to give them credit, they really did listen,” said Martin Eakes, CEO of the Center for Responsible Lending. “This could potentially hundreds of millions of dollars staying in customers' accounts instead of going toward fees.”

It remains to be seen whether the decision by BofA — a leader in the retail banking industry — to cut overdraft fees will pressure other banks to take similar measures.

“Banks are going to take different approaches. Some are going to eliminate them, reduce them, others will remain in denial about how damaging these fees are. But now they have competitive pressure" said Lauren Saunders, associate director for the National Consumer Law Center. "Any bank that is not seriously considering reforming their overdraft practices is just hurting themselves in the long term.”

The bank is also eliminating two smaller fees as well. It will no longer allow customers to overdraft their accounts at the ATM and will eliminate a $12 fee it charged customers when the bank automatically moved money from one account to another to avoid an overdraft, often moving money from a long-term savings account into the customers' primary checking.

Overdraft has its origins in banks providing a service for a fee to customers who may have not balanced their checkbook correctly and wanted a bank to honor a purchase. But the widespread use of debit cards changed this courtesy into a routine source of revenue for banks. If a customer lacked funds in their account, a $5 coffee could end up costing $35 because of overdraft fees.

Overdraft fees became lucrative for the industry but at the same time made banks a target for consumer advocates and regulators. After the financial crisis, Democrats put the Consumer Financial Protection Bureau and other regulators in charge of reining in overdraft fee revenue. The CFPB under President Biden has decided to take another look at overdraft fee practices.

"For many big banks, overdraft fees are still the steady, reliable, predictable, easy revenue that shareholders love,” said Rohit Chopra, the CFPB's director, in December.

Sen. Elizabeth Warren, D-Massachusetts and a long-time critic of banking practices like overdraft fees, called BofA's announcement “a step in the right direction” on Twitter.

“Big banks should eliminate these fees altogether,” Warren said.

Sen. Sherrod Brown, D-Ohio and the chairman of the Senate Banking Committee, called BofA's decision a “good first step toward banks eliminating overdraft fees altogether.”

For years, BofA has slowly cut back on its overdraft fee practices. It got rid of overdraft fees tied to debit card purchases in 2010 and created a checking account in 2014 that did not allow customers to overdraft. The SafeBalance account is now the bank's most commonly opened account.

But BofA and the broader industry were not ready to get rid of overdraft fees altogether until recently. Many banks froze the fees they charged customers during the first year of the pandemic and industry still booked record profits. While overdraft fees fell for the first time in six years in 2020, the industry still collected over $30 billion in fees from such practices that year.

So starting in 2021, some larger banks started announcing they were dropping overdraft fees entirely. Ally Bank, PNC, Santander and Capital One were among the bigger regional banks to effectively eliminate overdraft fees. JPMorgan Chase also eased its overdraft practicing, giving customers more leeway to go negative in their accounts before fees would be charged.

Bank of America will report its fourth-quarter results on Jan. 19, which will give investors and the public a full-year view on how much the bank is still bringing in from fees like overdraft.

____

Ken Sweet covers banking and consumer financial issues for The Associated Press. Follow him on Twitter at @kensweet.

_____

This story has been corrected to show that Lauren Saunders is the associate, not executive, director for the National Consumer Law Center.

  • Associated Categories: Associated Press (AP), AP Online Headlines - Washington, AP Online Congress News, AP Business, AP Business - Consumer News, AP Business - Economy, AP Business - Financial Markets, AP Business - Industries, AP Business - Financial Services, AP Business - Personal Finance
© Copyright 2022 AccessWDUN.com
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Bank of America slashes fees for account overdrafts
Bank of America is slashing the amount it charges customers when they spend more than they have in their accounts and plans to eliminate entirely its fees for bounced checks
7:36AM ( 12 minutes ago )
Kazakh leader: Russia-led security group to pull out troops
The president of Kazakhstan has announced that a Russia-led security alliance will start pulling out its troops from the country in two days after completing its mission
7:27AM ( 20 minutes ago )
European Parliament President David Sassoli dies at age 65
David Sassoli, the Italian journalist who worked his way up in politics and became president of the European Union’s parliament, has died at a hospital in Italy
7:05AM ( 43 minutes ago )
Associated Press (AP)
World Economic Forum warns cyber risks add to climate threat
The World Economic Forum says cybersecurity and space are emerging risks to the global economy, on top of existing challenges posed by climate change and the coronavirus pandemic
6:19AM ( 1 hour ago )
Bulgaria's leaders self-isolate after speaker COVID-positive
Bulgaria's health authorities say the country's top leaders are self-isolating after being in contact with the parliamentary speaker who tested positive for the coronavirus
6:17AM ( 1 hour ago )
China locks down 3rd city, raising affected to 20 million
A third Chinese city has locked down its residents because of a COVID-19 outbreak, raising the number confined to their homes in China to about 20 million people
6:10AM ( 1 hour ago )
AP Business
Federal Reserve's Powell: High inflation 'exacts a toll'
High inflation is taking a toll on American families
12:01AM ( 7 hours ago )
Asian stocks fall as markets eye Fed, China omicron cases
Asian shares are sinking in cautious trading following a decline on Wall Street amid continuing worries about the omicron coronavirus variant, especially rising cases in China
9:20PM ( 10 hours ago )
Fed vice chair is latest official to quit in trading scandal
Federal Reserve Vice Chair Richard Clarida said he will step down on Friday, the third Fed official to resign in the wake of a trading scandal at the central bank
5:53PM ( 13 hours ago )
AP Business - Economy
Global stocks mixed after Wall St falls on rate hike worries
Global stocks are mixed after Wall Street fell on worries the Federal Reserve will raise interest rates as soon as March
4:27AM ( 1 day ago )
Asian stocks mixed after Wall St falls on rate hike worries
Asian stock markets are mixed after Wall Street fell on worries the Federal Reserve will raise interest rates as soon as March
11:04PM ( 1 day ago )
Sri Lanka seeks Chinese debt restructuring amid crisis
The president of debt-ridden Sri Lanka has asked China for the restructuring of its loans and access to preferential credit for imports of essential goods, as the island nation struggles in the throes of its worst economic crisis
12:32PM ( 1 day ago )
AP Business - Financial Markets
Home COVID tests to be covered by insurers starting Saturday
Starting Saturday, private health insurers will be required to cover up to eight home COVID-19 tests per month for those on their plans
9:46PM ( 10 hours ago )
California governor proposes tax cuts, expanded health care
Gov. Gavin Newsom wants to make California the first state to cover all low-income state residents under its Medicaid plan regardless of their immigration status
8:46PM ( 11 hours ago )
India starts booster shots for vulnerable amid omicron surge
Healthcare and front-line workers along with people above age 60 with health problems are lining up at vaccination centers across India to receive booster shots as infections linked to the omicron variant surge
8:25AM ( 23 hours ago )
AP Business - Industries
EXPLAINER: What does record inflation mean for the eurozone?
Inflation in the 19 countries that use the euro currency hit its highest level on record, led by surging food and energy costs
10:43AM ( 3 days ago )
Nations using euro see record inflation. What does it mean?
Inflation in the 19 countries that use the euro currency hit its highest level on record, led by surging food and energy costs
8:24AM ( 3 days ago )
Asian shares mixed after tech-led decline on Wall St
Asian markets are mixed after more declines in big technology stocks pulled major indexes lower on Wall Street
2:22AM ( 4 days ago )
AP Business - Financial Services
California's Newsom wants health coverage for all immigrants
Gov. Gavin Newsom wants to make California the first state to cover all low-income state residents under its Medicaid plan regardless of their immigration status
4:58PM ( 14 hours ago )
Tax season begins two weeks early due to virus, IRS funding
This year’s tax filing season will begin on Jan. 24, 17 days earlier than last year
1:52PM ( 17 hours ago )
US average long-term mortgage rates rise; 30-year at 3.22%
Average long-term U.S. mortgage rates rose in the past week to start the new year
12:57PM ( 4 days ago )
AP Business - Personal Finance
Kazakh leader: Russia-led security group to pull out troops
The president of Kazakhstan has announced that a Russia-led security alliance will start pulling out its troops from the country in two days after completing its mission
7:27AM ( 20 minutes ago )
European Parliament President David Sassoli dies at age 65
David Sassoli, the Italian journalist who worked his way up in politics and became president of the European Union’s parliament, has died at a hospital in Italy
7:05AM ( 43 minutes ago )
Trade data: Myanmar teak exports helping fund military rule
A report based on U.S. trade data shows American companies are still importing teak from Myanmar despite sanctions imposed after the military seized power
6:43AM ( 1 hour ago )
UK's Johnson faces lockdown-breach claims over garden party
British Prime Minister Boris Johnson is facing more allegations that he and his staff flouted lockdown rules, this time by holding a garden party in 2020 while Britons were barred by law from mingling outside the home
6:41AM ( 1 hour ago )
Germany faces 'gigantic' task meeting energy, climate goals
Germany’s new climate minister says the country faces a “gigantic” task if it wants to achieve its goals for reducing greenhouse gas emissions while ensuring sufficient energy for its energy-hungry industry
6:37AM ( 1 hour ago )