This week, Bank of America announced a new policy that will begin to limit the amount consumers pay on overdraft fees in the coming months for their debit and checking accounts. Many consumer advocates have maintained that the current system was an overlooked problem that should have been dealt with in the federal credit card reform bill.
More recently, Senator Chris Dodd introduced legislation that would limit the financial blow consumers can take from lenders when they overdraft on their accounts. Some charges can run as high as $30 per transaction while an account is overdrafted.
Largely a response to such criticism, the Bank of America announcement says the company will soon stop charging overdraft fees on more than four items a day, and will not impose such fees if an account is overdrawn by less than $10 for one day.
Looking ahead to next June, the credit card giant also indicated that it will set a limit on the number of times people can overdraft, while giving them the option to opt out of such protection. For those who do overdraft a certain number of times, the company will offer personal financial education as well.
It remains to be seen whether other lenders will follow Bank of America when it comes to limiting the amount they charge for overdraft fees. One thing to consider is that many financial institutions derive a considerable amount of their profits from these fees, and may depend on them even more once the federal credit card reforms that scale back late fees and interest penalties have taken effect in 2010.
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