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Capital One says it’s ditching all consumer overdraft fees

Richard Fairbank, Capital One Chairman and CEO.

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Capital OneRetail banking customers will be exempted from overdraft fees

The bank, which is based in McLean Virginia, claims it has the largest U.S. branch that has not ended an industry practice charging customers for transactions exceeding their customer’s balance. This fee ranges from $25 to $35.

A spokesperson for the company said that this move would result in revenue losses of $150 million annually.

“We will completely eliminate overdraft and non-sufficient funds (NSF) fees for all Capital One consumer bank customers,” CEO Rich Fairbank told the bank’s employees Wednesday in a memo, calling it a “first for major banks in the U.S.”

Since long, banks have been under pressureConsumer advocates urge the elimination of overdraft fees. They often penalize those who cannot afford them. This includes Americans trying to survive. Rapid growth has led to surging valuationsThe industry has seen a rise in fintech-enabled banks that offer no-fee options.

This is June Ally BankThey said it was droppingThe punitive charges. Additional banks include PNC BankAnd Bank of AmericaIntroduced features to make it less likely that a customer will go into overdraft without completely eliminating revenue.

Ally, an online bank, does not have physical branches. Capital One has about 350 locations in New York and Texas and over 70,000 ATMs throughout the country, including Maryland, Virginia, Texas and Maryland.

The industry’s overdraft fees have been a huge revenue stream and are difficult to reduce for large banks. Fairbank stated in an employee memo that the industry earned more than $14 billion from overdraft fees. Capital One raked in $131 Million in service fees and other customer fees during the first nine months in 2021 according to Fairbank. disclosures.

Sen. Elizabeth WarrenIt has lambastedThis industry includes and JPMorgan ChaseThe CEO Jamie DimonEspecially on unpopular fees. Warren confronted Dimon this year about the subject and Dimon declined to stop the practice.

Capital One had previously charged $35 overdraft fees to customers before the January policy change. These fees were capped at four per day and could reach $140 each. Industry advocates claim that customers who take out overdrafts often trigger multiple fees. This can compound the financial loss.

“This move by Capital One will have tremendous benefits for the most vulnerable consumers,” Lauren Saunders, associate director of the National Consumer Law Center, said in a statement. It is vital that we continue to work towards making the banking system more fair and inclusive for everyone.

Capital One said that customers who attempt to make transactions exceeding their bank balances will mainly use the free overdraft service. The bank stated that customers who have paid fees for the service will automatically be rolled into it in the early part of next year. Customers who choose to opt out will have their overdrawn transactions reduced at no cost.

Like fintech companies like Chime pioneeredCapital One customers must have steady deposits in order to be eligible for this feature, which provides up to $200 of no-fee excess protection.

Fairbank stated that “we expect the vast majority” of bank customers to qualify for overdraft protection. “The same is true for our low and moderate income customers.”

Fairbank co-founded Capital One. It started as a creditcard company in 1990, before expanding into deposits and auto loans. The company has total assets of $425.4 billion, which is good for about a top ten rankThere are many U.S. retailers banks.

Mike Robinson
Mike covers the financial, utilities and biotechnology sectors for Street Register. He has been writing about investment and personal finance topics for almost 12 years. Mike has an MBA in Finance from Wake Forest University.