NEW YORK—Facing increasing pressure from lawmakers and President Barack Obama, the nation’s two largest banks by deposits—JPMorgan Chase & Co. and Bank of America Corp.—announced that they would overhaul overdraft fee policies.
Overdraft fees are charged when customers overdraft their checking or savings accounts. Currently, both Bank of American (BofA) and Chase enroll all checking accounts in overdraft protection service.
On Wednesday, Chase announced that it would eliminate some overdraft fees and cut other fees. Fees would be waived if a customer’s account is less than $5 overdrawn. BofA said that all accounts overdrawn by less than $10 would incur no fee.
Both banks will let customers opt-out of overdraft protection service to avoid paying fees altogether. Check and debit card transactions made on zero-balance accounts will not be able to be processed.
“Customers will be given the opportunity to decide whether they want to participate in Chase’s debit-card overdraft services,” said Charlie Scharf, head of Retail Financial Services at JPMorgan Chase, in a statement. “We believe it’s important to give all 25 million existing debit card customers, as well as new customers, the ability to decide whether to opt in. We expect many of our customers will continue to find these services very useful.”
Congressional Ire Over Overdraft Fees
Overdraft fees have irked lawmakers in recent months as more Americans grapple with job losses and late payments on various debts. Banks have often charged such fees without notifying its customers.
Both the House and the Senate are eyeing bills requiring banks to request permission from customers prior to charging overdraft fees.
“People out there are getting whacked,” Senate Banking Committee Chairman Christopher Dodd said in an interview with the Washington Post. “They should have the right to say, ‘Deny me the transaction.’ The Post estimates that banks will receive more than $38 billion in extra revenues from such fees.
But banks argue that consumers are ultimately responsible for monitoring their checking accounts and should not authorize transactions that they do not have money to cover. By approving such transactions, consumers imply that they intend to pay for them and if there are not enough funds in the account, overdraft protection—and any related fees—should kick in.
The possible new legislation comes after President Obama signed a new credit card bill to limit fees and interest rates levied by card issuers. Some analysts say that under the Democrat-led administration, the balance of power has shifted from the banking industry to consumers.
