Bank of America claims that since cutting its overdraft costs from $35 to $10 and eliminating fees for rejected checks, the amount of money it receives from overdrafts has decreased by 90% from the previous year.
Bank of America claims that overdraft revenue has decreased by 90% from a year earlier as a result of the bank’s elimination of bounced check fees and reduction of overdraft costs to $10 from $35.
After years of public criticism, the biggest banks in the country are giving up the practice of charging high fees on what are primarily small-dollar purchases. Brian Moynihan, CEO of Bank of America, told The Associated Press that he anticipates small companies would be the primary source of whatever residual money the bank derives from overdraft fees.
After years of public criticism, the biggest banks in the country are giving up the practice of charging high fees on what are primarily small-dollar purchases. Brian Moynihan, CEO of Bank of America, told The Associated Press that he anticipates small companies would be the primary source of whatever residual money the bank derives from overdraft fees.
The remaining individuals (who are assessed overdraft fees) are business owners who transfer funds, according to Moynihan. Frankly, it’s not people anymore.
Regional banks including PNC and Capital One, as well as the online bank Ally, announced plans to do away with overdraft fees altogether or drastically reduce them beginning in the middle of 2021. Most banks used the fact that costs disproportionately affected the poor and racial minorities to justify their choice, or they used the epidemic as evidence that fees weren’t necessary to generate significant profits.
Despite their importance, consumer groups viewed these pronouncements as symbolic victories rather than significant changes for the sector. However, the industry is said to have been shaken by Bank of America’s move in January to eliminate non-sufficient money penalties, also known as bounced check fees, and reduce overdraft costs to $10. BofA has consistently been listed as one of the top collectors of overdraft fees and still made just over $1 billion from them in 2017. Soon following BofA’s announcement, other significant banking institutions like Wells Fargo, JPMorgan Chase, and Trust likewise modified their overdraft fee policies.
BofA has seen a decline in overdraft charge income for some time as a result of the bank taking several little actions to reduce its reliance on fees. Approximately 50 percent of new accounts at BofA are currently non-overdraft accounts. In 2015, the first year banks were compelled to declare overdraft fee receipts to regulators publicly, the bank earned $1.63 billion in overdraft fee income.
“What Wells and Chase have done is far behind what (BofA) has done. Both of them implemented adjustments, which we praise, but they continue to impose the $35 cost, according to Mike Calhoun, executive director of the Center for Responsible Lending and a longtime opponent of overdraft fee practices. Calhoun is a member of a committee that advises BofA on modifications and includes several other consumer protection organizations.
The general industry-wide fall in overdraft fee revenues since the epidemic, however, has been noted by regulators and experts. According to a report published in July by the Consumer Financial Protection Bureau, “industry changes in overdraft program settings and other checking account regulations are meaningfully affecting the amount consumers incur in various fees.”
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