Bank of America to Cut Overdraft Fees to $10 From $35

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Regulators, politicians have been pressurizing banks for fees; JPMorgan, Ally Financial have already announced changes

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Wells Fargo said on Tuesday it plans changes in the near future to reduce overdraft fees, including getting rid of fees for insufficient funds. The bank also announced several changes, which it said will help customers avoid overdraft charges. The bank said Wells Fargo will give customers 24 hours to cover the overdrafted amount and allow them to make direct deposits first. By the end of 2022, Wells Fargo plans to offer short-term loans of up to $500 to consumers, including some customers who might otherwise incur overdraft fees.

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JPMorgan recently made changes to limit the cost of overdrafting. Customers can now overdraw up to $50 before charging fees instead of just $5, and the bank said last month that it would give customers who overdraw by the end of the next business day to refill their bank accounts. Huh.

“It’s a smart political risk-management strategy,” said Karen Petro, head of Federal Financial Analytics, a regulatory advisory firm. “It pays to get ahead of Reaper, and it seems certain that the CFPB will change to regulate overdraft fees.”

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Bank of America collected $1.11 billion in overdraft fees in 2020, which is about 1.3% of its total revenue. Ken Usdin, a bank analyst at Jefferies, estimated in a report last month that overdraft fees and other related fees averaged 1.4% of banks’ revenue in the third quarter.

Black families and those with low to middle incomes nearly twice as likely To collect overdraft fee As do white families or those with higher incomes, according to a report from the Financial Health Network, a research firm partially funded by financial institutions.

“Bank of America’s decision will provide much-needed relief for customers who can at least bear the burden of overdraft fees and should lead other financial institutions to waive these charges for those with low-income, black and Latino Americans.” disproportionately affect the U.S.,” Mike Calhoun, president of the Center for Responsible Lending, said in a statement.

Bank of America also said it would eliminate insufficient-funds fees from next month. It also plans to eliminate transfer fees for its overdraft-protection service in May.

The bank said these and other changes made in recent years would reduce overdraft-fee revenue by 97% from 2009 levels.

Other large banks have already adjusted their policies. Capital One Financial Corporation

Completely eliminating your $35 overdraft fee. Allied Financial Inc.

Last June it said it would get rid of its $25 overdraft fee. Ally decided to phase out the fee after positive customer feedback, when it temporarily suspended the fee in the early months of the COVID-19 pandemic, Diane Morris, president of consumer and commercial banking at Ally Bank, said at the time.

Other banks have made it easier for customers to avoid the charges, but have not got rid of them completely. PNC Financial Services Group Inc.

Last year it gave customers the option to receive an alert when their balance dropped below $50. Customers are notified again when their balance turns negative, after which they have 24 hours to make a deposit before being charged. Fifth Third Bancorp also said it would provide additional time to cover overdrafts with deposits. Huntington Bankshares Inc.

When an account is withdrawn by more than $50 or less, there is no overdraft fee. US Bank this month eliminated non-sufficient funds fees and said it plans more changes to help customers avoid overdraft fees.

“Dominoes started falling months ago, and I think it would be very difficult for any major bank to maintain the old fee structure,” Cowen Inc.

Analyst Jarrett Seeberg said.

Many large banks became more generous on overdraft fees when the pandemic hit, waiving most of the fees when customers asked for help. Financial-data firm Moebs Services Inc. In 2020, banks’ overdraft revenue fell for the first time in six years. Still, firms collected $31.3 billion in fees in 2020, Moebs calculated.

Write Orla McCaffrey [email protected] Feather

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