Pedestrians pass a JPMorgan Chase bank branch in New York.
Michael Nagle | Bloomberg | Getty Images
Overdraft revenue fell 25% last year at three major U.S. retail banks as they faced pressure from regulators to cap fees and created new ways for customers to avoid penalties.
JP Morgan Chase, wells fargo and american bank It reported overdraft fees totaling $2.2 billion in 2023, about $700 million less than the previous year, according to a regulatory filing.
Overdraft fees are incurred when a customer attempts to spend more than their checking account balance. Fees at many banks are about $35 per transaction, making them a lucrative item for the industry, which has generated $280 billion in revenue since 2000, according to the Consumer Financial Protection Bureau.
The industry has been bracing for a battle over overdrafts since the CFPB announced a proposal last month to cap fees at a minimum of $3 per transaction. While banks say overdraft services are a lifeline that helps customers avoid unscrupulous options like payday loans, critics, including President Biden, say the fees exploit struggling Americans. It is claimed that
This practice has drawn unwanted attention to large banks. During a 2021 hearing, Sen. Elizabeth Warren confronted JPMorgan CEO Jamie Dimon about fees. Dimon at the time rejected her calls to refund $1.5 billion to her clients.
But even before the regulator’s recent efforts, banks’ overdraft revenues were on the decline. Pandemic funding helped Americans collect fewer fees starting in 2020, and companies like Capital One, Citigroup and Ally have since voluntarily eliminated the practice.
Companies that maintain fees, including JPMorgan, have limited the types of transactions that can be fined, eliminated dishonored check fees and introduced a one-day grace period and a $50 cushion to reduce their frequency.
Bank of America lowered fees from $35 to $10 in 2022.
“Whether we eliminate some fees or significantly reduce others, there are significant implications here,” said Jennifer Tescher, CEO of the nonprofit Financial Health Network. There have been big changes.” “Banks are looking to not only eliminate overdrafts, but also find more customer-friendly ways to meet liquidity needs while avoiding overdrafts.”
steady decline
Industry-wide overdraft revenue totaled $7.7 billion in 2022, 35% below 2019 levels, according to a May CFPB report of all U.S. banks with assets of $1 billion or more.
That trend continued last year, even though JPMorgan and Wells Fargo remain the biggest overdraft providers, according to recent regulatory filings.
JPMorgan’s overdraft revenue last year was $1.1 billion, down about 12% from 2022. Wells Fargo’s sales fell 27% to $937 million. Bank of America’s sales fell 64% to $140 million.
A JPMorgan spokesperson told CNBC that more than 70% of overdraft transactions will be fee-free and customers can choose an account that does not allow penalties. Wells Fargo and Bank of America declined to comment.
“Our customers continue to tell us they want and need overdraft protection to help them when they are temporarily short on funds,” a JPMorgan spokesperson said.
