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U.S. NEWS Wednesday 12 January 2022
Bank of America slashes fees for account overdrafts

By KEN SWEET industry — to cut overdraft 2010 and created a check-
AP Business Writer fees will pressure other ing account in 2014 that
NEW YORK (AP) — Bank banks to take similar mea- did not allow customers to
of America is slashing the sures. overdraft. The SafeBalance
amount it charges custom- The bank is also eliminat- account is now the bank's
ers when they spend more ing two smaller fees as most commonly opened
than they have in their ac- well. It will no longer allow account.
counts and plans to elimi- customers to overdraft But BofA and the broader
nate entirely its fees for their accounts at the ATM industry were not ready
bounced checks. and will eliminate a $12 to get rid of overdraft fees
It's the latest move by the fee it charged customers altogether until recently.
nation's biggest banks to when the bank automati- Many banks froze the fees
roll back the overdraft fees cally moved money from they charged customers
they long charged custom- one account to another during the first year of the
ers, fees that often amount to avoid an overdraft, of- pandemic and industry
to hundreds of dollars a ten moving money from a still booked record profits. Associated Press
year for frequent overdraft long-term savings account While overdraft fees fell for
users. into the customers' primary the first time in six years in Ally Bank, PNC, Santander counts before fees would
The bank based in Char- checking. 2020, the industry still col- and Capital One were be charged.
lotte, North Carolina, will Overdraft has its origins in lected over $30 billion in among the bigger regional Bank of America will report
cut the overdraft fees it banks providing a service fees from such practices banks to effectively elimi- its fourth-quarter results on
charges customers to $10 for a fee to customers who that year. nate overdraft fees. JPM- Jan. 19, which will give in-
from $35 starting in May. may have not balanced So starting in 2021, some organ Chase also eased its vestors and the public a
It will also stop charging their checkbook correctly larger banks started an- overdraft practicing, giving full-year view on how much
fees for non-sufficient funds and wanted a bank to nouncing they were drop- customers more leeway the bank is still bringing in
— which are levied when honor a purchase. But the ping overdraft fees entirely. to go negative in their ac- from fees like overdraft.q
it rejects a transaction — widespread use of debit
better known as bouncing cards changed this cour-
a check. tesy into a routine source
While checks are no longer of revenue for banks.
widely used, NSF fees can If a customer lacked funds
come from automated in their account, a $5 cof-
payments like utility bills. fee could end up costing
Bank of America, the na- $35 because of overdraft
tion's second-largest bank, fees.
says roughly 25% of its Overdraft fees became lu-
overdraft/NSF fee revenue crative for the industry but
each year came from NSF at the same time made
fees. Overdraft fees typi- banks a target for consum-
cally come when some- er advocates and regula-
one makes a purchase on tors. After the financial cri-
a debit card that exceeds sis, Democrats put the Con-
the available cash in their sumer Financial Protection
account. Bureau and other regula-
Altogether, Bank of Ameri- tors in charge of reining in
ca estimates the steps will overdraft fee revenue. The
cut its overdraft-fee rev- CFPB under President Biden
enues by 97% from where has decided to take an-
they were in 2009, the year other look at overdraft fee
before it started taking in- practices.
cremental steps toward "For many big banks,
reining in overdraft-fee rev- overdraft fees are still the
enues. steady, reliable, predict-
"This is the final step in the able, easy revenue that
journey we've been on," shareholders love," said Ro-
said Holly O'Neill, president hit Chopra, the CFPB's di-
of retail banking at BofA, rector, in December.
in an interview. "We have Sen. Elizabeth Warren, D-
good financial solutions for Massachusetts and a long-
clients without them having time critic of banking prac-
to rely on overdraft, but we tices like overdraft fees,
will still have overdraft if it is called BofA's announce-
needed." ment "a step in the right di-
For years, it was com- rection" on Twitter.
mon that one large bank "Big banks should eliminate
would increase the fee it these fees altogether,"
was charging for overdraft, Warren said.
which would cause other For years, BofA has slowly
banks to respond in kind. It cut back on its overdraft
remains to be seen wheth- fee practices. It got rid
er the decision by BofA — a of overdraft fees tied to
leader in the retail banking debit card purchases in