McCLEAN, Va.–Capital One has announced it will eliminate all overdraft fees and nonsufficient funds fees for consumer banking customers starting early 2022.
The bank said it is the “first U.S. bank of its size to completely drop these fees,” which it said cost consumers $12.4 billion last year alone, according to the Financial Health Network data.
Capital One said it will instead provide overdraft protection for free. In announcing the change, the bank said if a customer overdrafts it will cover the expense without assessing a fee.
Customers currently enrolled in overdraft protection will automatically be enrolled in "No-Fee Overdraft" protection next year, according to Capital One. Customers not currently enrolled may sign up for the service at any time, it added.
For customers who choose not to enroll, Capital One said transactions that would overdraw an account will be declined, but no fees will be assessed.
"This move is projected to cost us $150 million a year in revenue," a Capital One spokesperson said in a statement. "Just like our products with no monthly fees and no balance minimums, we are not making up this revenue in any other way. This is an action we are embarking on for the sake of our customers and furthering our Mission to Change Banking for Good."
Prior to the Capital One announcement, Ally Bank had been the largest bank to announce it was waiving NSF fees.
Praise from Consumer Group
Advocates at the National Consumer Law Center praised the decision, and said it is “calling on other banks and credit unions to follow suit.”
The NCLC also urged the Consumer Financial Protection Bureau (CFPB) to enact rules ending the use of overdraft fees as a “deceptive form of high-cost credit.”
“Capital One’s complete elimination of all overdraft and NSF fees is a game changer that should set the standard for the entire banking industry and encourage the CFPB to stop overdraft fees from being used as a high-cost form of credit that can reach or exceed the cost of triple-digit payday loans,” said Lauren Saunders, associate director of the National Consumer Law Center, in a statement. “Capital One is the first top-10 bank, the first with a real branch network, and the first with significant overdraft revenue to make the hard choice to eliminate overdraft and NSF fees that harm the most vulnerable consumers and push them out of the banking system.”
Billions Collected
The NCLC noted that prior to the COVID-19 pandemic, Capital One collected about $150 million annually in overdraft fees, and noted that in 2020 JPMorgan Chase earned $1.5 billion in overdraft fees, Bank of America made $1.1 billion, and Wells Fargo collected $1.3 billion.
As CUToday.info reported here, the CFPB has just announced it plans to bring greater oversight to overdraft practices.
CUToday.info has also compiled a list of credit unions that have reduced or eliminated their NSF/OD fees.