PETERBOROUGH, N.H.–New approaches to overdrafts being taken by banks has started to earn some national attention.
Highlighting the story of one woman, Keri Fitzpatrick, 29, a cafeteria worker who was hit with $175 in overdraft charges in less than a week by TD Bank, the New York Times noted how the “tide may be changing” on overdraft protections, which have become known as an aggressive way to siphon fees from consumers, the Times said.
“An increasing number of banks are introducing services including grace periods and small short-term loans that provide less-punitive alternatives — if users qualify,” the report stated. “Generally, that means having a consistent deposit history, like regular paychecks, or other qualifications that may include a longstanding account.”
As CUToday.info reported, earlier (including an analysis of how other FIs might respond), Ally Bank said it would eliminate its $25 overdraft fee altogether, giving customers six days to get in the black again before it potentially limits how they use their accounts.
Ally Bank isn’t alone, the Times pointed out. PNC Bank has introduced a “low-cash mode” service that alerts customers when their balance drops to $50, and again when it goes negative. If that happens, they have at least 24 hours to make it right before they are hit with a $36 fee, capped at one a day, the Times reported.
New & Changed Offers
Other institutions making similar moves have included:
- Bank of America, which introduced a credit line called Balance Assist in October. For a $5 fee, customers can borrow up to $500 that they must repay in equal installments over the next three months.
- The fintech Chime, which has increased the limit of its SpotMe overdraft service to $200, which is recouped from the customer’s next paycheck.
- The fintech Aspiration, which doesn’t charge for an accidental overdraft, giving users 60 days to make it up.
‘Meaningful Shift’
“Together, these changes are a meaningful shift in the way banks deal with customers who can least afford these fees, including a disproportionate number of Black and Latino households,” the Times stated.
The report cited Consumer Financial Protection Bureau data that found frequent overdrafters — those with 10 or more annual occurrences — made up only 9% of all bank accounts but paid 79% of all overdraft and nonsufficient-fund fees, according to a 2017 analysis that studied data from several large banks.
All financial institution may be forced to make changes, as lawmakers have taken notice, the Times reported. It cited Democrats in both chambers of Congress who plan to reintroduce bills that would create more overdraft protections, banning overdraft fees on debit transactions while adding other safeguards.