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Wells Fargo, Citi Pause Overdraft Collections as Stimulus Payments Hit

Wells Fargo, Citi Pause Overdraft Collections as Stimulus Payments Hit

(Bloomberg) -- The country’s largest banks said they’re making adjustments to ensure stimulus payments are received in full by checking-account customers with negative balances.

Wells Fargo & Co., Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. said they will temporarily stop collecting on negative balances to give customers full access to their payments. The firms are deviating from the typical practice of deducting a negative balance from incoming payments.

“The goal is to get money in consumers’ hands as easily and quickly as possible,” Ed Kadletz, Wells Fargo’s head of the deposit products group, said in an interview.

This week, millions of Americans began receiving payments of as much as $1,200 through government efforts to help an economy devastated by the coronavirus pandemic. For many, payments were automatically deposited into checking accounts. Banks had faced criticism amid speculation that those with overdrawn accounts would lose part or all of their payments.

The moves by the biggest U.S. banks differ from those of regional lenders including Citizens Financial Group Inc. The company said it would use the stimulus payments to cover negative balances, but is working with customers on a case-by-case basis to waive certain fees.

“Protections are needed to address bank overdraft charges,” said Lisa Stifler, director of state policy at the Center for Responsible Lending. “A bank could take $1,000 in overdraft charges out of a $1,200 check even if the individual thought the account was closed.”

Overdrawn Customers

While U.S. Bancorp customers who received their stimulus disbursements on Wednesday may have had a different experience, the bank is working to provide a temporary credit to all overdrawn clients to ensure they have full access to the payments, spokesman Evan Lapiska said. USAA, which earlier had a policy to use the payments to make up for negative balances, said it would pause collections for 90 days.

Wells Fargo gathered a record amount of deposits on Wednesday as customers received the payments and tax refunds from the Internal Revenue Service, Kadletz said. The San Francisco-based lender said it will also cash stimulus checks for people without Wells Fargo accounts -- and won’t charge them fees -- at its sprawling network of bank branches.

Consumers can also receive stimulus payments through a prepaid card, or in their PayPal Holdings Inc. and Square Inc. digital wallets. Using a prepaid card could help consumers save “on significant cashier-check fees,” Kathryn Cleary, senior vice president of U.S. business development at Mastercard Inc., said in an emailed statement.

“The No. 1 preferred method is direct deposit into a current banking account,” said Kim Bynan, head of prepaid and government solutions at financial-technology firm FIS. “But it doesn’t hit on all of the individuals in America. There are individuals that are under-banked or unbanked. From a prepaid perspective, we’ve pushed the need for another disbursement tool.”

©2020 Bloomberg L.P.