Banks Look to Curtail Overdraft Fees

Bank of America and JP Morgan, under pressure from Congress and regulators, will revamp unpopular fees and policies on debit cards that have raised the ire of consumers.

The New York Times reports Bank of America says it will allow customers the ability to stop spending on their debit cards when their accounts hit zero, beginning Oct. 19. It will start next June limiting the number of times in a year consumers can overdraw their accounts using debit cards in stores. And new customers will get to choose whether they want overdraft protection when they open their accounts.

J.P. Morgan Chase plans to eliminate the practice of lumping a day’s debit card transactions together and processing the biggest purchases first, causing customers to slip into overdrafts. The bank will instead process transactions chronologically, beginning by the first quarter of next year. Chase will also let customers opt out of overdraft protection.

The moves are geared toward cutting back the lucrative overdraft business for the banks. Banks collect billions of dollars in revenue on overdraft fees every year. But regulators and lawmakers are pushing reforms to limit the practice.

The banks aren’t exactly acting out of altruism. They’re under pressure.

Last week, Senate Banking Committee Chairman Christopher Dodd said he was drawing up legislation to require banks to cover overdrafts when consumers ask for the coverage, and only when consumers ask for it.

But Bank of America claims the action in Washington isn’t what prompted its change in policy. “We made the decision that we had to help customers now and help those most stretched by the economy,” Brian T. Moynihan, president of Bank of America’s consumer and small-business banking operations, told the Times. “They found themselves getting hit by too many fees, and they said, ‘Help us out.’ ”