(Reuters) – Capital One Financial Corp said on Wednesday it would eliminate all overdraft and non-sufficient funds fees for consumers, ending a practice that drew the ire of U.S. lawmakers at a Senate hearing earlier this year.
Customers will have to choose if they want to opt for the free overdraft protection service, Chief Executive Officer Richard Fairbank said in a memo, and have to show a pattern of steady deposits to be eligible for it.
The bank estimates the decision will cost it around $150 million a year in revenue, a spokesperson for the bank said.
In May, the heads of major Wall Street banks faced heat from Democratic Senators, in particular Senator Elizabeth Warren, who said these institutions should not have charged Americans billions of dollars in overdraft and other fees during the pandemic.
On Wednesday, a report from the U.S. Consumer Financial Protection Bureau (CFPB) showed banks earned around $15.47 billion from overdraft and non-sufficient funds in 2019.
Major Wall Street banks JPMorgan Chase & Co, Wells Fargo and Co and Bank of America Corp brought in 44% of the total revenue from such fees in 2019, the report said.
“Many in the market are anticipating that other large banks will also call it quits (on overdraft fees). The CFPB is not holding out hope that this will happen quickly,” said CFPB Director Rohit Chopra.
“The (consumer watchdog) is considering a range of regulatory interventions to help restore meaningful competition in this part of the checking market, rather than allowing large institutions to rely on overdraft and non-sufficient revenue fees forever,” Chopra added.
The CFPB report added banks are on pace to surpass their pre-pandemic profitability from such revenues.
(Reporting by Niket Nishant in Bengaluru, Elizabeth Dilts Marshall and Katanga Johnson in New York; Editing by Amy Caren Daniel)
