Pedestrians pass a JPMorgan Chase bank branch in Recent York.
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The three biggest American retail banks collected 25% less overdraft revenue last 12 months as the businesses, under pressure from regulators to cap the fees, created latest ways for purchasers to avoid the penalties.
JPMorgan Chase, Wells Fargo and Bank of America reported a combined $2.2 billion in overdraft fees in 2023, roughly $700 million lower than in the previous 12 months, according to regulatory filings.
Overdraft fees are triggered when a customer attempts to spend greater than the balance in their checking accounts. At around $35 per transaction at many banks, the fees have been a lucrative line item for the industry, generating $280 billion in revenue since 2000, according to the Consumer Financial Protection Bureau.
The industry is girding itself for a battle over overdraft fees after the CFPB in January unveiled a proposal to limit charges to as little as $3 per transaction. Banks say overdraft services are a lifeline that helps users avoid worse options akin to payday loans, while critics including President Joe Biden say the fees exploit struggling Americans.
The practice has brought unwelcome attention to big banks. During a 2021 hearing, Sen. Elizabeth Warren needled JPMorgan CEO Jamie Dimon on the fees. Dimon on the time refused her call to refund $1.5 billion to customers.
But even before recent efforts by regulators, banks’ haul from overdraft has been on the decline. Pandemic stimulus money helped Americans trigger fewer of the fees starting in 2020, after which firms including Capital One, Citigroup and Ally voluntarily ended the practice.
Those that kept the fees, including JPMorgan, limited the sorts of transactions that trigger penalties, removed fees for bounced checks and introduced one-day grace periods and $50 cushions to reduce their frequency.
Bank of America cut the fees to $10 from $35 in 2022.
“Whether folks eliminated some fees or dramatically reduced the fee of others, there’s been very significant shifts here,” said Jennifer Tescher, CEO of nonprofit group Financial Health Network. “Banks aren’t just eliminating overdraft, they’re trying to find more customer-friendly ways of meeting their liquidity needs while ensuring they are not overextended.”
Regular decline
Industrywide overdraft revenue totaled $7.7 billion in 2022, 35% below the 2019 level, according to a May CFPB report that included all U.S. banks with a minimum of $1 billion in assets.
Recent regulatory filings show that the regular decline continued last 12 months, though JPMorgan and Wells Fargo remain by far the most important players in overdraft.
JPMorgan had $1.1 billion in overdraft revenue last 12 months, about 12% lower than in 2022. Wells Fargo saw a 27% decline to $937 million. Bank of America posted a 64% decline to $140 million.
Greater than 70% of overdraft transactions not incur fees, and customers can select accounts that do not allow the penalties, a JPMorgan spokesman told CNBC.
“Our customers proceed to tell us they need and want access to overdraft protection, which helps them once they are temporarily short on money,” the JPMorgan spokesman said.
Wells Fargo declined to comment. A Bank of America spokesman noted that after the corporate voluntarily modified its overdraft policies in 2022, revenue from the practice fell greater than 90%, they usually now collect lower than smaller banks.
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