JPMorgan Chase, Wells Fargo cut overdraft revenue to $2 billion in 2023

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Pedestrians pass the JPMorgan Chase bank branch in New York.

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America’s three largest retail banks collected 25% less overdraft revenue last year as the companies, under pressure from regulators to end the fees, created new ways to customers to avoid the penalties.

JPMorgan Chase, Wells Fargo and Bank of America They reported a combined $2.2 billion in overdraft fees in 2023, about $700 million less than the previous year, according to regulatory filings.

Overdraft fees are triggered when a customer tries to spend more than their checking account balance. At about $35 per transaction at many banks, the fees have been a boon for the industry, generating $280 billion in revenue since 2000, according to the Consumer Financial Protection Bureau.

The industry is bracing for a battle over overdraft fees after the CFPB in January unveiled a proposal to limit fees to as little as $3 per transaction. Banks say overdraft services are a way of life that help consumers avoid worse options like payday loans, and critics including President Joe Biden say that the taxes take advantage of struggling Americans.

The practice has brought unwanted attention to big banks. At a hearing in 2021, Sen. Elizabeth Warren pressed JPMorgan CEO Jamie Dimon on the taxes. Dimon at the time refused her call to pay $1.5 billion in refunds to customers.

But even before recent efforts by regulators, banks’ attraction to overdrafts has been declining. Pandemic stimulus money helped Americans to pay less taxes starting in 2020, and then companies including Capital One, Citigroup and Ally voluntarily ended the practice.

Those who retained the fees, including JPMorgan, limited the types of transactions that trigger penalties, got rid of fees for bounced checks and introduced one-day grace periods and $50 cushions to reduce their frequency.

Bank of America cut the fees to $10 from $35 in 2022.

“Whether people eliminated some taxes or significantly reduced the cost of others, there have been big shifts,” said Jennifer Tescher, CEO of the nonprofit Financial Health Network. “Not only are banks getting rid of overdrafts, they are trying to find easier ways for customers to meet their liquidity needs while ensuring they are not overextended.”

Steady decline

Industry-wide overdraft revenue totaled $7.7 billion in 2022, 35% below the 2019 level, according to a May CFPB report that included all U.S. banks with at least $1 billion in assets.

Recent regulatory filings show that last year’s steady decline continued, although JPMorgan and Wells Fargo remain the biggest players in overdrafts.

JPMorgan had $1.1 billion in overdraft revenue last year, about 12% lower than in 2022. Wells Fargo saw a 27% decline to $937 million. Bank of America dropped 64% to $140 million.

More than 70% of overdraft transactions no longer incur fees, and customers can choose accounts that don’t allow the penalties, a JPMorgan spokesperson told CNBC. Wells Fargo and Bank of America declined to comment.

“Our customers continue to tell us that they want and need access to overdraft protection, which can help them when they’re temporarily short on cash,” a JPMorgan spokeswoman said.

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