Bank officials: Overdraft fees will drop from $35 to $10 starting in May.
NEW YORK — 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.
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.
Consumer groups and politicians applauded the measure, particularly with Bank of America’s size as the largest consumer banking franchise in the country. “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.
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 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.
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