A capital letter ( made the announcement on Wednesday, saying it is waiving all fees for overdrafts and insufficient funds. It will also continue to allow customers to obtain overdraft protection on their accounts free of charge. )
This makes Capital One, which is the sixth largest retail bank in the United States, the first in the top ten to stop penalizing customers for withdrawing more money or issuing checks for more money than they. do not have any on their account.
Small banks like Ally and digital-only finance company Alliant have also recently eliminated overdraft fees.
“The bank account is the lifeblood of a person’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 ”.
“This move by Capital One will have huge benefits for the most vulnerable consumers,” Lauren Saunders, associate director of the National Consumer Law Center, said in the Capital One statement. “It is essential that we continue to work to make the banking system more inclusive and fair for all. “
Many lawmakers and regulators have criticized banks for penalizing already cash-strapped customers with onerous overdraft fees that have generated billions of dollars in revenue for financial institutions. Capital One had more than $ 425 billion in assets in the third quarter and reported a profit of $ 3.1 billion in the three months ending in September.
Senator Elizabeth Warren castigated JPMorgan Chase ( CEO Jamie Dimon earlier this year called him a “star of the overdraft show.” )
The Consumer Financial Protection Bureau said in a statement Wednesday that banks pocketed nearly $ 15.5 billion in overdraft fees in 2019.
The CFPB added that over 40% of the fees generated by the big banks were contributed by JPMorgan Chase, Wells Fargo ( and )Bank of America (. )
“Rather than competing for quality service and attractive interest rates, many banks have become addicted to overdraft fees to fuel their profit model,” said Rohit Chopra, director of CFPB, in a statement. “We will take steps to restore meaningful competition in this market. “
A prominent analyst wrote that other banks may soon follow Capital One’s lead – or risk regulators imposing even tighter restrictions.
“We expect more banks to try to avoid CFPB enforcement action,” Jaret Seiberg of the Cowen Washington Research Group said in a report.
“Enforcement measures will likely begin next spring. Enforcement is the fastest way for the CFPB to try to change the behavior of the banking industry, ”he added.
– Jeanne Sahadi of CNN Business contributed to this report.