Capital One is the first major bank to get rid of overdraft fees

Capital one (MEMORY) announced Wednesday, saying it is getting rid of all fees for overdrafts and inadequate funds. It will also continue to allow customers to get free overdraft protection on their accounts.

This makes Capital One, the sixth largest retail bank in the United States, the first top-ten bank to stop penalizing customers for withdrawing more money or writing checks for more money than they have in their account.

Smaller banks such as Ally and the digital finance company Alliant have also recently eliminated overdraft fees.

“The bank account is a cornerstone of a person̵[ads1]7;s financial life,” Capital One CEO Richard Fairbank said in a press release, adding that “overdraft protection is a valuable and convenient feature and can be an important safety net for families.”

Lawyers’ groups hope that other banks will follow Capital One’s management to eliminate these fees, which have been money makers for companies that demand them.

“This move from Capital One will have huge benefits for the most vulnerable consumers,” said Lauren Saunders, assistant director of the National Consumer Law Center, in Capital One’s release. “It is crucial that we continue to work to make the banking system more inclusive and fair to all.”

Democrats are relaunching the crackdown on bank credit fees
Many lawmakers and regulators have criticized banks for penalizing customers who already have cash with burdensome overdraft fees that have generated billions of dollars in revenue for financial institutions. Capital One had more than $ 425 billion in assets as of the third quarter and reported a profit of $ 3.1 billion in the three months ended September.
Senator Elizabeth Warren paralyzed JPMorgan Chase (JPM) CEO Jamie Dimon earlier this year, referring to him as “the star of the overdraft show.”
The Consumer Financial Protection Bureau said in a statement on Wednesday that banks had invested almost $ 15.5 billion in overdraft facilities in 2019.
The CFPB added that more than 40% of the fees generated by large banks were collected by JPMorgan Chase, Wells Fargo (WFC) and Bank of America (BAC).

“Instead of competing for quality services and attractive interest rates, many banks have been hooked on overdraft facilities to feed their profit model,” CFPB director Rohit Chopra said in a press release. “We will take steps to restore meaningful competition to this market.”

A prominent analyst wrote that other banks may soon follow Capital One’s management – otherwise there is a risk that regulators will impose even tougher restrictions.

“Our expectation is that more banks will try to avoid CFPB enforcement actions,” Cowen Washington Research Groups Jaret Seiberg said in a report.

“Enforcement actions are likely to start next spring. Enforcement is the fastest way for the CFPB to try to change the behavior of the banking industry,” he added.

– CNN Business’ Jeanne Sahadi contributed to this report.

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