BANKS SLOWLY RECONSIDER OVERDRAFT FEES, AMID PUBLIC PRESSURE

The banking industry appears to have overdone it on overdraft fees.

After decades of raking in billions of dollars from mostly poor Americans short of cash in their accounts, the biggest banks — under pressure from lawmakers and regulators — are slowly decreasing their reliance on the widely unpopular practice.

A number of large banks have taken steps this year that would reduce the amount they take in from overdraft fees, which they charge when customers make payments or withdrawals in excess of their account balance. Capital One, the nation’s sixth-largest bank, announced last week that it would end all overdraft fees next year. Other banks have made it harder for customers to trigger an overdraft fee.

Still, it’s unlikely the financial services industry will entirely wean itself offsuch a cash cow anytime soon.

“For many big banks, overdraft fees are still the steady, reliable, predictable, easy revenue that shareholders love,” said Rohit Chopra, director of the Consumer Financial Protection Bureau, in remarks where he directed the bureau to more closely examine bank overdraft practices.

Overdraft has its origins in banks providing a service — for a fee — to customers who may have not balanced their checkbook correctly and wanted a bank to honor a purchase. But the widespread use of debit cards changed this courtesy into a routine source of revenue. Some banks took advantage, for example, by reordering customers’ transactions, deducting big transactions first so that smaller payments would then trigger multiple overdraft fees. If a customer lacked funds in their account, a $5 purchase at a café could end up costing them $35, because of overdraft fees.