The Washington Post and several news outlets reported on Capital One’s announcement to eliminate overdraft and NSF fees for its checking account customers beginning early next year. Their customers can choose not to have overdraft protection in which case any transaction that would overdraw the account would be returned, or they can select to overdraw their account so items will be paid, but they won’t be charged a fee. That sounds like free money. While neither the article nor the company release was clear, it seems likely that there will be some limit on how much or how long a consumer can allow their account to be overdrawn. I can’t imagine they will allow a consumer to take their account negative by thousands of dollars for an unlimited period of time. It was no coincidence that the CFPB also issued a statement to warn financial institutions that they will be considering new regulations around the practice of fees for overdrafts.
Here’s an excerpt from the Post’s article:
Capital One says it will no longer charge customers a fee when their account balances dip below zero, making it the nation’s largest bank to phase out a practice that the regulators and advocates have termed “exploitative.”
Capital One chief executive Richard Fairbank said the move would help bring “simplicity and humanity” to banking, according to the company’s announcement Wednesday. The new policy takes effect in 2022 for customers who are currently enrolled in overdraft protection.
“The bank account is a cornerstone of a person’s financial life,” Fairbank said in a statement. “It is how people receive their paycheck, pay their bills and manage their finances. Overdraft protection is a valuable and convenient feature and can be an important safety net for families. We are excited to offer this service for free.”
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group