Bank of America announced Tuesday that it will slash overdraft fees -- the fines consumers pay when they make a purchase with their debit card but don't have enough money in their account -- from $35 to $10 starting this May.
The changes come in the wake of pressure from consumer advocacy groups that say these fees disproportionately impact vulnerable and low-income Americans.
A report released last month by the Consumer Finance Protection Bureau found that overdraft and non-sufficient funds fees remain lucrative for banks, reaching an estimated $15.5 billion in 2019. The CFPB also said fewer than 9% of consumer accounts pay 10 or more overdrafts per year, accounting for close to 80% of all overdraft revenue.
Moreover, despite a drop in fees collected, the CFPB said "many of the fee harvesting practices persisted during the COVID-19 pandemic."
In addition to reducing overdraft fees, Bank of America also announced Tuesday that it was entirely eliminating "non-sufficient funds fees," or the charges for a rejected transaction or bounced check.
The bank, which has 66 million consumer and small business clients, said it will have reduced overdraft fees by 97% from 2009 levels with these new changes.
Other major financial institutions including JP Morgan Chase and Capital One have cut or eliminated these fees that can seemingly catch customers by surprise at times, when something they think they are purchasing for only a few dollars can end up being closer to $40.
"Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model" CFPB Director Rohit Chopra said in a statement last month. "We will be taking action to restore meaningful competition to this market."
Bank of America's president of retail banking, Holly O'Neill, said the company has made significant changes to overdraft services over the last decade and now provides resources to help clients manage accounts.
"Throughout the process we have engaged our National Community Advisory Council (NCAC) for their guidance and feedback on our changes," O'Neill said. "These latest steps will further support our clients and empower them to create long-term financial wellness."
"We remain committed to taking actions that will further bring down overdraft fees in the future and continue to empower clients to drive positive changes to behavior pertaining to overdraft," she added.