Banks Slowly Supply Alternate options to Overdraft Charges, a Bane of Struggling Spenders


“The most egregious practices are largely the same as they have been for nearly 20 years,” said Rebecca BornĂ©, senior policy counsel at the Center for Responsible Lending, an advocacy group. “To charge an average of $ 35 apiece for things that cost the bank very little, overdraft fees for small debit transactions, charge up to $ 140 in fees in a single day, and call that a limit.”

It’s not clear if the Consumer Financial Protection Bureau or other regulators will make changes. “Overdrafts can be very costly for consumers,” said an office spokeswoman, “and we continue to monitor market activity in this area.”

But the legislature noticed. The Democrats in both houses of Congress plan to reintroduce laws that will provide more protection against overdrafts, ban overdraft fees on direct debit transactions, while adding other protections.

And during a hearing last month, Massachusetts Democrat Senator Elizabeth Warren reprimanded major bank executives for continuing to charge overdrafts from troubled consumers during a pandemic.

Ms. Warren called Jamie Dimon, CEO of JPMorgan Chase, “the star of the overdraft show,” noting that his bank collected nearly $ 1.5 billion in overdraft fees last year. (A JPMorgan spokeswoman said that more than $ 430 million in overdraft fees were waived at customer request from January 2020 to March 2021.)

Many large and regional banks offer no overdraft accounts that simply reject overdrafts, but some have only recently started offering such an account: Chase started offering such an account in 2019, and Wells Fargo started last year. The top 20 banks still collected about $ 6 billion in overdraft fees in 2020, 32 percent less than in 2019, while the top three banks, Bank of America, JPMorgan and Wells Fargo, accounted for $ 4 billion of that, said Cassidy of RBC Capital.

In many cases, however, it was smaller banks that charged excessive fees. Aaron Klein, a senior fellow at the Brookings Institution, recently noted that several small banks have become “overdraft giants that rely on overdraft fees as their primary source of income.” At six banks, current account revenues made up more than half of their profits, he said.