Overdrafts

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.