Bank of America joins the ranks of financial institutions slashing overdraft fees
This decision comes after increased scrutiny from consumer advocacy groups and lawmakers.
Bank of America announced Tuesday that it would reduce overdraft fees for its 66 million consumer and small business clients. Beginning next month, the banking giant will no longer allow customers to overdraw funds at ATMs and will eliminate nonsufficient funds (NSF) fees for bounced checks and other similar transactions.
Starting in May, overdraft fees will also be reduced from $35 to $10 on transactions covered by the bank when an account's balance is overdrawn, including via recurring or automatic payment transactions. The bank will also eliminate the $12 Balance Connect™ service charge to transfer funds from linked accounts to overdrawn accounts.
"Over the last decade, we have made significant changes to our overdraft services and solutions, reducing clients' reliance on overdraft and providing resources to help clients manage their deposit accounts and overall finances responsibly," Holly O'Neill, the bank's President of Retail Banking, said in a statement.
The move comes after increased scrutiny from consumer advocacy groups and lawmakers speaking out against overdraft fees and how they have unfairly impacted consumers. Overdraft and NSF fees are a significant revenue source for US banks, bringing in an estimated $15.47 billion in 2019, according to a December report by the Consumer Financial Protection Bureau. Among banks with more than $1 billion in assets, Bank of America, JP Morgan and Wells Fargo brought in 44% of the fees that year. According to the CFPB, these "fee harvesting practices" have persisted throughout the COVID-19 pandemic, with just under 9% of consumer accounts paying 10 or more overdrafts per year.
Other financial institutions, including Capital One, Discover and Ally Financial announced in 2021 that they would drop overdraft fees, while others introduced less-punitive alternatives like grace periods or short-term loans.
Consumers seeking help dealing with overdraft and NSF fees can submit a complaint to the CFPB. Advice on managing bank accounts and avoiding fees is available on the CFPB's website.