Overdrafts

Cullen/Frost Bankers will allow customers to access deposits two days early as traditional lenders look to drum up business by mimicking their financial-technology rivals.

Pressure is mounting on banks to rein in overdraft fees. The behavioral psychologist Wei Ke says there are programs they can put in place that would be fairer to account holders and still generate income.

Andrew Harmening, who took the helm of the Wisconsin company in April, pointed to an economy emerging from the pandemic and waning loan deferrals, saying that loan growth could resume by the end of the third quarter.

Rep. Carolyn Maloney of New York, the No. 2 Democrat on the House Financial Services Committee, is trying again to bar banks from charging customers more than once per month for overdrawing, and to set other limits.

Executives at Citizens Financial and Regions Financial said they plan to make policy changes that will reduce their reliance on the controversial but already dwindling charges.

Dave, a banking startup that’s been backed by investors including Mark Cuban and Capital One Financial, agreed to go public in a deal with a blank-check firm that values the company at $4 billion.

Capital One and a few others are emulating upstarts like Chime and Varo, which let customers access their paychecks two days before payday. But loss of overdraft income and potential liability for errors dissuade many banks from changing their ways.

Ally and Huntington are the latest banks to take steps that will reduce revenue from customers who spend money they don’t have. The moves come at a time when technological, regulatory and social forces are converging to encourage change.

The online bank's decision to stop charging the fees is part of a broader reassessment across the industry. Ally had waived overdraft fees early in the pandemic and has historically been less reliant on them than many other institutions.

The heads of the six largest banks endured a second day of testimony as House members quizzed them on overdraft fees, investments in minority businesses and other issues. Meanwhile, the executives pushed back on Democrats’ proposal to raise the corporate tax rate.

The National Credit Union Administration changed course late last year and proposed changes that would in effect give members more time to resolve overdrafts. However, consumer activists and even some credit unions say the proposal falls short.

The feature has become popular during the coronavirus pandemic, providing a quick and simple way for credit unions to confirm users' identities as well as promote products and services.

The Cincinnati company's new Momentum checking and savings will give customers extra time to avoid overdraft fees, quicker access to paychecks and the option for advances on future direct deposits.

Some institutions for more than a year have reduced or eliminated overdraft and funds transfer fees to help members hard hit by the economic downturn, but it's unclear how much longer they can keep coasting on other sources of noninterest income.

The San Antonio company will no longer charge fees on transactions of $100 or less that take checking account balances into negative territory, as long as the customer has a $500 monthly direct deposit set up.

The company will give retail account holders 24 hours to cancel upcoming payments that would put them in the red. The move addresses customers’ top gripe and will have benefits that offset the lost income, executives say.

The Cities for Financial Empowerment Fund, a nonprofit that seeks to improve financial stability of low- and moderate-income households, validated the account under its Bank On initiative.

More banks are discussing the status of overdraft practices, and the industry is bracing for the potential of new regulations under President-elect Joe Biden.

The bank disclosed in a regulatory filing that it is in the process of responding to a civil subpoena from the Consumer Financial Protection Bureau. It is the latest bank to come under regulatory scrutiny for the fees charged to consumers who overdraw their accounts.

Deposits have piled up, curtailing overdrafts and other fees. The trend could force lenders to find other ways to make money — or start cutting to the bone.