BofA Drops Non-Sufficient Funds Charge, Cuts Overdraft Fees
BofA Drops Non-Sufficient Funds Charge, Cuts Overdraft Fees
(Bloomberg) -- Bank of America Corp. and Wells Fargo & Co. are ditching non-sufficient funds fees and easing off on overdraft charges, in measures analysts said may heap pressure on other lenders to follow suit amid heightened scrutiny on the penalties.
Both banks will eliminate charges for non-sufficient funds in customer accounts, they announced on Tuesday. Bank of America will also reduce overdraft fees to $10 from $35 beginning in May while Wells Fargo will give customers a 24-hour grace period before incurring such costs, starting in the third quarter.
Overdraft fees have come under fire from regulators and lawmakers, with Democratic Senator Elizabeth Warren saying late last year that such charges “snatch billions from struggling families” and that “big banks raked in billions from this abusive practice” during the Covid-19 pandemic. Companies including Capital One Financial Corp. and Ally Financial Inc. have cut overdraft fees in recent months, and the latest efforts may spur others to do likewise.
“This will ratchet the pressure up on other large national and regional banks to take similar steps,” Bankrate.com chief financial analyst Greg McBride said of Bank of America’s measures. “You can bet this topic will come up on quarterly bank earnings calls.”
Bank of America will scrap non-sufficient funds fees starting next month, the Charlotte, North Carolina-based company said. The bank will also eliminate the transfer fee associated with its Balance Connect for overdraft protection service in May.
“These latest steps will further support our clients and empower them to create long-term financial wellness,” Holly O’Neill, president of retail banking at Bank of America, said in the company’s statement. “We remain committed to taking actions that will further bring down overdraft fees in the future.”
Wells Fargo said that by the end of the first quarter, customers will no longer pay a returned item fee if they don’t have enough funds in deposit accounts to cover a check or electronic transaction. The bank will also cut transfer fees for customers enrolled in overdraft protection and allow account holders to access direct deposits up to two days earlier than scheduled -- a measure it said would reduce the potential for going overdrawn.
“Core to Wells Fargo’s evolution is making sure we stay focused on our customers, first and foremost,” said Mary Mack, CEO of Wells Fargo consumer and small business banking. The changes “give our customers more choice and flexibility in meeting their needs.”
Neither lender went so far as competitors such as McLean, Virginia-based Capital One, which has eliminated overdraft fees entirely.
A typical overdraft fee is around $35 across banks. The charges, which generated roughly $15 billion a year for U.S. banks before the pandemic, are levied when customers spend more than they have in their checking accounts and the bank temporarily covers the difference.
Across the banking industry, revenue from overdraft fees has fallen after a period of steady growth before the pandemic. In 2020, the amount plummeted as consumers cut back on spending while stuck at home because of Covid-19 and banks offered waivers on the fees for customers hurt by the pandemic.
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