End of overdraft charges: BofA is the first to react
As the new laws are gradually taking effect, banks and financial institutions are modifying their rules to put up with the changing regulation. Bank of America has recently decided to abolish the overdraft benefit altogether in the light of the changes which would, henceforth, require the banks to limit their overdraft charges.
The Federal Reserve has set a new rule which would be in effect from 1 July 2010, would require the banks to get the consent of the customer prior to charging him overdraft fees. The Bank of America (BofA) has retaliated to this change by abolishing the overdraft benefits altogether.
Henceforth, BofA customers wouldn't be allowed to over draw their accounts through debit cards and checks. The bank suggests that it is not always possible to inform each and every customer prior to overdrawing their accounts since most of these customers do it on a regular basis on debit card purchases and most of the time they do it unknowingly. Nevertheless, these overdraft charges cause inconvenience for both for the customers and the bank later. Some customers accumulate so much in overdraft charges that they later face difficulties even in repaying it.
BofA is all set to implement this new rule from June 19th 2010 on new accounts and from August on existing accounts. It is said that BofA is only the initiator as the other banks may soon follow its footsteps and abolish or put limit to overdrawn accounts.
However, the industry experts are skeptical on how the banks would compensate for their losses on overdraft fees, which amounts to over a billion dollar. According to an expert, the banks would look into recovering their losses on overdraft charges through other channels. One likely possibility is distributing the loss amongst the customers, who are not serial over-drafters, which would only increase the cost of individual banking.