Capital One Becomes Latest Bank to Eliminate Overdraft Fees
Capital One Financial has announced it will be the latest bank getting rid of overdraft and non-sufficient funds (NSF) fees for all customers, joining a growing list of other financial institutions to do so. Overdraft and NSF fees have come under attack in recent months, with consumer advocates and regulators decrying them as “exploitative”. With Capital One’s announcement, it becomes the biggest bank to scrap these fees.
“The bank account is a cornerstone of a person’s financial life,“ said Richard Fairbank, Capital One’s Founder and CEO, in a press release. “It is how people receive their paycheck, pay their bills and manage their finances. Overdraft protection is a valuable and convenient feature and can be an important safety net for families. We are excited to offer this service for free.”
“Long ago, we set our sights on reimagining banking,” Fairbank continued. “Our award-winning checking accounts already feature no monthly fees and no minimum balance requirements. Eliminating overdraft fees is another step in our effort to bring ingenuity, simplicity and humanity to banking.”
Recent reports from the Consumer Financial Protection Bureau (CFPB) found that large banks rely heavily on overdraft and insufficient fund fees, which reached nearly $15.47 billion in 2019. Eliminating the fees will cost Capital One an estimated $150 million in annual fee revenue, according to the Washington Post.
The CFPB commended Capital One for phasing out overdraft fees, though it is holding back hope that other big banks will do the same.
“We will be considering a range of regulatory interventions to help restore meaningful competition in this market, rather than allowing large institutions to rely on junk fees forever,” said the Bureau’s Director Rohit Chopra.
Additionally, the Consumer Bankers Association (CBA) noted that financial institutions are finding ways to help consumers avoid fees, such as real-time alerts and payment updates. If consumers are not offered overdraft protection, the CBA is concerned that some might look to high-interest payday lenders for quick cash.
“Outside of overdraft, few options remain for consumers to meet their short-term liquidity needs within the well-regulated, well-supervised banking system,” said Richard Hunt, CBA chief executive.