MCLEAN, Virginia: Capital One bank has announced plans to cancel overdraft fees early next year, and becoming the largest bank to cancel the fees which cost Americans, especially those financially vulnerable, billions of dollars per year.
The move came as the head of the U.S. government's consumer watchdog promised to focus on fees, which make up two-thirds of bank fee revenues.
Capital One, the sixth largest bank in the U.S., is the only bank among the ten largest to cancel overdraft fees, while smaller banks have led the overdraft movement this year by changing their policies or canceling fees altogether.
In June, Ally Bank announced it was removing overdraft fees, while Synovus Financial said it aimed to rely less on overdraft fees from checking accounts.
Earlier this year, PNC, TD Bank, Fifth Third, Huntington Bancshares and Regions Financial all reduced their overdraft fees while others, such as digital bank Dave, are offering no-fee accounts to attract customers.
"We are going after the biggest pain point we found for customers in this country, which are overdrafts. We decided they are completely unfair for customers," said Dave CEO Jason Wilk, as reported by Yahoo Finance Live.
Capital One's announcement coincides with a report released by the Consumer Financial Protection Bureau (CFPB), which revealed banks heavily rely on revenue from overdrafts and non-sufficient funds, totaling some $15.47 billion in 2019.
JPMorgan Chase, Wells Fargo, and Bank of America accounted for 34 percent of that total and 44 percent of the $5.3 billion brought in by banks with assets over $1 billion in 2019.
In a statement, CFPB Director Rohit Chopra said, "Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model."
In terms of legislation, Democrats are promoting the Overdraft Protection Act, which could ban institutions from reordering transactions to increase fees and limit overdraft charges to one a month or six a year.