People hate overdraft fees. Banks are ditching or reducing them

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People hate overdraft¹ fees. Banks are ditching or reducing them

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Bank of America, the nation's second-largest bank, says it's drastically reducing overdraft fees. Capital One is going a step further and getting rid of the fees altogether. The moves come as federal regulators are taking a tougher stance with banks charging these often hefty fees.

People get hit with overdraft fees when they overspend the balance in their checking account and the bank fronts the money for a few days.

The fees can seem unfair: You might buy a $2 cup of coffee and get hit with a $35 fee. And if you don't realize your account is empty and make a series of small purchases, you can quickly end up owing hundreds of dollars.

"Overdraft fees are really one of the most abusive forms of lending the banks engage in," says Lauren Saunders with the National Consumer Law Center. She says when it comes to regular loans, most banks don't charge people outrageously³ high interest rates. "But they do it hidden from view through overdraft fees."

Banks make billions from these fees

"We're the sixth-largest retail⁴ bank in the U.S. and this will affect every checking customer that we have," says Peter Boyer, a senior vice⁵ president at Capital One. He says the bank's millions of customers who already have what's known as overdraft protection will keep getting it, but it will be free.

"We recognize that customers have unexpected expenses and needs at times where their cash flows don't quite line up between expenses and income," Boyer says. "We really want to get our consumers to a place where they're living healthy financial lives."

Bank of America said it will reduce overdraft fees from $35 to $10 starting in May. Both banks are also eliminating so-called non-sufficient funds, or NSF fees, charged when people overspend with a transaction that isn't covered by overdraft protection.

All U.S. banks together make about $15 billion a year on overdraft and NSF fees, according to the federal Consumer Financial Protection Bureau. But the CFPB says about 80% of that comes from just 9% of customers who keep getting hit over and over again with upwards⁶ of 10 overdrafts⁷ a year.

'These are people who have low balances or are struggling paycheck to paycheck," says Saunders. "So in other words, the overdraft fees fall most heavily on the most vulnerable consumers."

By ending the fees, the banks will be taking a hit to their bottom line. Boyer says, "On an annual basis, Capital One is going to forego about $150 million." To put that in perspective, Capital One had $28.5 billion in revenue last year. On the plus side for Capital One, the move might bring in some more customers.

Overdraft fees are under scrutiny⁸ by regulators

Capital One says free overdraft protection should go into effect within three weeks. To get it, customers will have to make regular deposits. There are limits to how much money a customer can overspend. But there is no limit on the number of overdrafts.

Of course, paying a hefty overdraft fee can discourage overspending. So after the fees go away, if some customers start overspending regularly Capital One might tweak the rules.

Overdraft fees are being reconsidered throughout the industry. A smaller online bank, Ally Bank, recently ditched the fees. Some other banks have reduced them.

"It's an area of focus for many of the banks because of the increased regulatory scrutiny on overdraft fees," says Gerard Cassidy, an analyst⁹ with RBC Capital Markets.

The CFPB has recently signaled that it's going to be taking a hard look at banks charging these fees. So tougher regulation might be on the way. And Cassidy says more banks could decide to get out in front of that by voluntarily ending or reducing the fees. "That would not surprise me if you do see other banks follow suit."

Cassidy says overdraft fees account for only about 1% of revenue for most larger banks. "Generally speaking, it's not a major source of revenue for the banks," Cassidy says.

Lauren Saunders sits on an unpaid¹⁰ consumer advisory¹¹ board for Capital One. She says Capital One probably makes more from these fees than many other banks because it has a lot of customers living paycheck to paycheck. So, she says, if Capital One can do this, other banks can afford to do it too.

Bank of America and Capital One both provide financial support to NPR. We report on them the same way we do on all other companies.

1 overdraft   

n.透支，透支额

参考例句：

• Her bank warned that unless she repaid the overdraft she could face legal action.银行警告她如果不偿还透支钱款，她将面临诉讼。
• An overdraft results when a note discounted at a bank is not met when due.银行贴现的支票到期而未能支付就成为透支。

2 transcript   

n.抄本，誊本，副本，肄业证书

参考例句：

• A transcript of the tapes was presented as evidence in court.一份录音带的文字本作为证据被呈交法庭。
• They wouldn't let me have a transcript of the interview.他们拒绝给我一份采访的文字整理稿。

3 outrageously   

凶残地； 肆无忌惮地； 令人不能容忍地； 不寻常地

参考例句：

• Leila kept smiling her outrageously cute smile. 莱拉脸上始终挂着非常可爱的笑容。
• He flirts outrageously. 他肆无忌惮地调情。

4 retail   

v./n.零售；adv.以零售价格

参考例句：

• In this shop they retail tobacco and sweets.这家铺子零售香烟和糖果。
• These shoes retail at 10 yuan a pair.这些鞋子零卖10元一双。

5 vice   

n.坏事；恶习；[pl.]台钳，老虎钳；adj.副的

参考例句：

• He guarded himself against vice.他避免染上坏习惯。
• They are sunk in the depth of vice.他们堕入了罪恶的深渊。

6 upwards   

adv.向上，在更高处...以上

参考例句：

• The trend of prices is still upwards.物价的趋向是仍在上涨。
• The smoke rose straight upwards.烟一直向上升。

7 overdrafts   

透支，透支额( overdraft的名词复数 )

参考例句：

• Can the Direct Deposit Advance Service be used to prevent overdrafts? 直接存款预支服务可用来防止透支？
• Debt represents bank loans and overdrafts less cash and deposits with banks. 债项指银行贷款及透支减现金及银行存款。

8 scrutiny   

n.详细检查，仔细观察

参考例句：

• His work looks all right,but it will not bear scrutiny.他的工作似乎很好，但是经不起仔细检查。
• Few wives in their forties can weather such a scrutiny.很少年过四十的妻子经得起这么仔细的观察。

9 analyst   

n.分析家，化验员；心理分析学家

参考例句：

• What can you contribute to the position of a market analyst?你有什么技能可有助于市场分析员的职务？
• The analyst is required to interpolate values between standards.分析人员需要在这些标准中插入一些值。

10 unpaid   

adj.未付款的，无报酬的

参考例句：

• Doctors work excessive unpaid overtime.医生过度加班却无报酬。
• He's doing a month's unpaid work experience with an engineering firm.他正在一家工程公司无偿工作一个月以获得工作经验。

11 advisory   

adj.劝告的，忠告的，顾问的，提供咨询

参考例句：

• I have worked in an advisory capacity with many hospitals.我曾在多家医院做过顾问工作。
• He was appointed to the advisory committee last month.他上个月获任命为顾问委员会委员。