Pedestrians walk past a branch of JPMorgan Chase bank in New York.
Michael Nagle | Bloomberg | Getty Images
The three largest U.S. retail banks collected 25% less overdraft revenue last year as the companies, under pressure from regulators to cap fees, created new ways for customers to avoid penalties .
JPMorgan Chase, Wells Fargo And Bank of America reported a total of $2.2 billion in overdraft fees in 2023, about $700 million less than the previous year, according to regulators. deposits.
Discovered costs are triggered when a customer attempts to spend more than their checking account balance. At about $35 per transaction at many banks, the fees are a lucrative item for the industry, generating $280 billion in revenue since 2000, according to the Consumer Financial Protection Bureau.
The industry is belting engaged in a battle over overdraft fees after the CFPB unveiled a proposal in January to limit fees to just $3 per transaction. Banks claim that overdraft services are a safety rope it helps users avoid worse options like payday loans, while critics including President Joe Biden say the fees exploit struggling Americans.
This practice has brought unwanted attention to the big banks. At a 2021 hearing, Senator Elizabeth Warren needled JPMorgan CEO Jamie Dimon on fees. Dimon then refused his call for reimbursement of $1.5 billion to customers.
But even before recent efforts made by regulators, the reduction in bank overdrafts has been declining. decline. Pandemic stimulus money helped Americans trigger fewer fees starting in 2020, then companies like Capital One, Citi Group and Ally voluntarily ended the practice.
Those that kept the fees, including JPMorgan, limited the types of transactions that carry penalties, removed fees for bounced checks and introduced grace for a day periods and $50 cushions to reduce their frequency.
Bank of America cut fees drop from $35 to $10 in 2022.
“Whether people have eliminated some fees or significantly reduced the cost of others, there have been very significant changes here,” said Jennifer Tescher, CEO of the nonprofit Financial Health Network. “Banks aren't just getting rid of overdrafts, they're trying to find more customer-friendly ways to meet their liquidity needs while ensuring they're not overburdened.”
Industrywide overdraft revenue totaled $7.7 billion in 2022, 35% below the 2019 level, according to a May CFPB report. report this included all U.S. banks with at least $1 billion in assets.
Recent regulatory filings show the steady decline continued last year, although JPMorgan and Wells Fargo remain by far the biggest players in overdrafting.
JPMorgan reported $1.1 billion in overdraft revenue last year, about 12% less than in 2022. Wells Fargo saw a 27% decline to $937 million. Bank of America saw a 64% decline to $140 million.
More than 70% of overdraft transactions no longer carry fees, and customers can choose accounts that don't allow penalties, a JPMorgan spokesperson told CNBC. Wells Fargo and Bank of America declined to comment.
“Our customers continue to tell us they want and need access to overdraft protection, which helps them when they are temporarily strapped for cash,” the JPMorgan spokesperson said.
Don't miss these stories from CNBC PRO: