Citi Announces Plans to Discontinue Overdraft Fees
Citigroup recently became the latest bank to announce plans to eliminate overdraft fees, overdraft protection fees, and returned item fees by this summer, making it the only top five U.S. bank in assets to entirely eliminate these penalties. Overdraft fees have faced more scrutiny from bank regulators in the past year, and Citi has collected the lowest overdraft revenue among its competitors.
“This latest enhancement is a significant step for Citi as a leader in the banking industry offering the most consumer-friendly overdraft practices,” said Gonzalo Luchetti, CEO of U.S. Personal Banking at Citi, in a press release. “We are continuously looking for ways to utilize our industry-leading capabilities to make the financial system easier and more equitable for communities who have little or no financial buffer.
In its coverage of the move, the New York Times noted that Citi followed smaller lenders like Capital One and Ally Financial in eliminating overdraft fees. Among the nation’s largest banks, Bank of America announced it would cut overdraft fees from $35 to $10 this year, while Wells Fargo and JPMorgan Chase have adjusted their overdraft services for struggling customers.
A recent regulatory filing found that overdraft fee revenue at Citi makes up less than 1 percent of total fee income, according to American Banker, compared to 2.3 percent at JPMorgan Chase and about 5 percent at Bank of America and Wells Fargo. Rohit Chopra, Consumer Financial Protection Bureau Director, has targeted overdraft practices at these banking giants.
“Many American families pay large banks large fees for the privilege of holding their money,” he told reporters in December. “Big banks’ overdraft fees are still the steady, reliable, predictable, easy revenue that their shareholders love. The market will not solve this on its own.”
Along with the upcoming overdraft enhancements, Citi also offers consumers Safety Check transfers to cover overdrafts, Checking Plus lines of credit to automatically transfer funds from credit lines to cover overdrafts, and low balance alerts via consumers’ online or mobile accounts.