Capital One said it would stop charging retail customers overdraft fees on Wednesday, becoming the largest bank to end the practice, which will cost the company $150 million in lost revenue.
There is a Capital One Bank branch. New York City has re-opened Phase 4 following restrictions imposed to slow the spread of coronaviruses. John Nacion is the photographer.
John Nacion is a star MAX.
According to an email from the company, Capital One will completely eliminate overdraft and non-sufficient funds fees in early 2019.
All customers who have signed up for overdraft protection will be automatically converted to the no-fee service, and those who have not will have their transactions declined with no fee.
Capital One CEO Rich Fairbank said in a news release that eliminating fees is another step in the company's effort to bring "humanity to banking."
Critics have called for the abolition of overdraft fees, saying they disproportionately impact people of color and people living paycheck to paycheck.
The company charged $35 in overdraft fees up to four times a day, totaling $140 in potential charges daily, CNBC reports.
The value is $15.47 billion. According to a report from the Consumer Financial Protection Bureau, the U.S. banks earned about $65 million from overdraft fees and non-sufficient funds in 2019. Bank of America, Wells Fargo and JP Morgan Chase made up 42% of the total.
Critics say the practice disproportionately affects low-income customers who are working to make ends meet. The National Consumer Law Center has called for banks to eliminate overdraft fees for a long time, and the Capital One announcement is a landmark moment. Sen. Elizabeth Warren has been an advocate of eliminating the fees. The senator criticized the CEO of the bank on CNBC for collecting over $1 billion in overdraft fees in 2020.
There is a structure called the Tangent.
Ally Bank announced earlier this year that it would be ending its $25 overdraft fee, and other banks have created features to help customers from overdrawing their accounts, while they haven't eliminated the charges completely.
Capital One is the largest bank.
Here is why overdraft fees matter.
