NEW YORK – Bank of America customers will soon be unable to spend more than they have in the accounts linked to their debit cards. It’s a step that may become a common move ahead of new regulations limiting overdraft fees.
In this July 17, 2009 file photo, a customer uses a Bank of America ATM in Charlotte, N.C. The Treasury Department has received a record $1.54 billion from the sale of warrants it received from Bank of America Thursday, March 4, 2010, as part of the support it provided during the financial crisis. (AP Photo/Chuck Burton, file)
Rules set by the Federal Reserve that will ban banks from charging such fees, without first getting permission from the customer, are set to take effect July 1.
But Bank of America is going a step further than the regulations require. It will simply no longer allow debit card purchases to go through if there isn’t enough money in the account.
For ATM transactions, customers who try to withdraw more than their balance will have to agree to pay a $35 overdraft fee before they can get the money.
“The majority of our customers who overdraw their account do so with everyday debit purchases,” said Susan Faulkner, senior vice president of consumer banking for Charlotte, N.C.-based Bank of America. “They’re doing this unknowingly, because they aren’t aware that they are about to overdraft.”
Since the bank doesn’t have the ability to notify the customer when they’re at the register and give them the chance to agree to a fee, it will simply reject such transactions.
Consumers have demonstrated a willingness to pay overdrafts for covering the mortgage and the car payment, said Greg McBride, who follows the banking industry for Bankrate.com. “But not if it’s things like covering a latte and a scone.”
The bank’s new policy will kick in on June 19 for new accounts, and in early August for existing accounts. It will replace the bank’s current terms, which allow overdrafts to go through but only charge a fee if the deficit is greater than $10.
Bank of America likely won’t be the last to make the change. That’s because while the new rules will save consumers from surprising dings on their accounts, they will also cut deeply into the more than $1.77 billion annual revenue overdraft fees generate for the banking industry.
Faulkner would not estimate how much such fees pulled in for Bank of America in the past.
The Federal Deposit Insurance Corp. estimates about 41 percent of that total is from point-of-sale debit transactions. About 8 percent was from ATM transactions. The rest were from bad checks and online bill payments, which are not addressed in the regulation.
What’s more, 93 percent of overdraft fees are generated by just 14 percent of customers.
Because most of the fees were paid by what Robert Meara, a banking analyst with the consultant Celent, called “serial overdrafters,” the rules may not save the average consumer much money. In fact, because banks will look to make up that lost revenue, it may actually cost most individuals more.
“What this may do really is produce the unintended consequence of creating the demise of free checking,” said Meara. Banks jumped into free checking in the last decade because of competition, but at the same time started allowing overdrafts that generated huge sums. If they can’t charge those fees, it’s likely they won’t offer the free products anymore either.
Or, he suggested, consumers might start seeing deals advertised where free checking kicks in after a certain number of transactions, or if a customer has several accounts linked together.
“I think banks will use this as an opportunity to be creative and differentiate themselves in ways that was really hard to do when everybody had a free checking account,” Meara said. “There’s a way this can be a win-win for everybody, but in the short term I think it’s going to be challenging for banks to make up for that lost revenue.”
Grammy-award winning rapper Lil Wayne has been sentenced to a year in jail for carrying a loaded gun on his tour bus.
The U.S. star, born Dwayne Carter, was taken away in handcuffs to begin his term immediately after sentencing in New York yesterday.
He pleaded guilty in October to attempted criminal possession of a weapon after admitting having the loaded .40-caliber semiautomatic gun on his tour bus in 2007.
Eric Massa of New York, facing a House sexual harassment probe, resigns his seat – but he has slammed fellow Democrats, claiming they want him out because he opposed their healthcare reform bill. He’ll speak out again Tuesday on TV talk shows, perhaps with more choice words.
Eric Massa is seen in this 2005 file photo. The Democratic House Representative resigns his seat while under investigation for sexual harassment over comments he made to a male staffer. Newscom/File
Representative Eric J. Massa, an outspoken freshman Democrat from upstate New York, announced Wednesday that he would retire from Congress after his first term for health reasons, leaving Democrats with a difficult challenge in maintaining their hold on a hard-won seat.
Addressing a report that he had been accused of sexual harassment by a male aide, Mr. Massa denied it, though he acknowledged having “used salty language” and said he had apologized for it. In a defiant tone, he added, “Those kinds of articles are a symptom of what is wrong with this city,” saying that it was why other politicians had “decided like I, ‘I do not have the life energy to fight all the battles all the time.’”
But Mr. Massa did not take questions from reporters.
In his short statement in a teleconference, Mr. Massa said he had undergone his “third major cancer reoccurrence scare” in December, one that he did not reveal until now.
“It was a very intense and personal experience, especially in light of having gone through this all before,” he said. “I’m a very salty guy, I’m a very direct guy, and I run at about 100 miles per hour. And my doctors have told me I cannot do that.”
He added: “I will now enter the final phase of my life at a more controlled pace.”
Mr. Massa’s retirement comes as another body blow to New York Democrats, whose governor is battling for his political survival even as Representative Charles B. Rangel has temporarily stepped down from his powerful post as chairman of the House Ways and Means Committee.
Mr. Massa, 50, was elected in 2008 in his second bid for the House, narrowly defeating John R. Kuhl Jr., the incumbent in New York’s 29th District.
Mr. Massa, who is married, was an officer in the Navy for 20 years. Near the end of his naval career, he learned he had non-Hodgkins lymphoma, but he recovered.
Formerly a Republican, Mr. Massa campaigned in 2006 on his opposition to the Iraq war, which precipitated his switch to the Democratic Party.
In the House, he served on the Armed Services Committee, the Agriculture Committee, and the Homeland Security Committee. He also joined the year-old House Populist caucus.
Though his district leans Republican, Mr. Massa is a proponent of a single-payer health care system and was one of 39 House Democrats to vote against health care legislation, saying it did not do enough to rein in costs.
Like other incumbents in the Northeast who have been singled out by Republicans, Mr. Massa had built up a considerable war chest, amassing about $645,000, compared with roughly $122,000 for the Republican candidate, Mayor Tom Reed of Corning, by the end of 2009.
NEW YORK – Bank of America customers will soon be unable to spend more than they have in the accounts linked to their debit cards. It’s a step that may become a common move ahead of new regulations limiting overdraft fees.
