With Pressure From Congress, Big Banks Move to Curb Overdraft Fees
For months, Congress has had its eyes on reining in the overdraft fees tacked on by many banks when consumers — often unbeknownest to them — exceed their balances with debit card purchases. Rep. Carolyn Maloney (D-N.Y.) introduced a consumer protection bill earlier in the year, and Sen. Chris Dodd (D-Conn.) has vowed to follow suit later this fall.
Yesterday, that threat paid dividends, as two of the nation’s largest banks — Bank of America and JP Morgan Chase — announced plans to revamp their debit card policies voluntarily to add some of the consumer protections being pushed by the lawmakers. From The New York Times:
Bank of America said it would allow current customers to turn off the ability to spend when their account hits zero, starting Oct. 19. Next June, the bank plans to limit the number of times each year that current customers can overdraw their accounts when using a debit card at a store. It will let new customers choose whether they want overdraft protection when they are opening their account.
Chase would eliminate another controversial practice by which the banks reorder a customer’s debit purchases according to amount, rather than chronology — a scheme that creates more overdraft fees, which currently average upwards of $30 a pop.
The moves are not insignificant. Overdraft fees, which have grown steadily in recent years, are estimated to bring in more than $38 billion to the banks in this year alone, according to Moebs Services, an Illinois-based financial research firm.
Still, you can bet that Democrats will want to mandate the consumer protections, rather than leaving them to the discretion of the banks to install.