Weeks ago, as the coronavirus pandemic worsened, many financial institutions announced programs to help customers facing financial hardships. Most of those programs allow for you to request to delay your payments, and refrain from charging you late fees related to those payments. But one bank charge you may still see on your account during this time? Overdraft fees.
Overdraft fees gained attention recently when the IRS started sending out coronavirus relief payments. Because the CARES Act doesn’t prevent private debt collectors from trying to take those payments, consumer banks—whose overdraft fees count as private debt—could technically use your relief check to cover your overdrawn balance.
Chase, Bank of America, Wells Fargo and Citi said right away they wouldn’t use relief payments to cover outstanding overdraft fees. Ally Bank announced it would waive all fees relating to overdrafts and other penalties for 120 days, on top of ensuring all customers received their full relief check from the government.
But while banks have pledged to assist customers during the pandemic, there’s some confusion about which fees are being waived and how.
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Some banks require customers to directly request to have an overdraft, insufficient funds or excessive withdrawal fee waived, while others are automatically crediting customer accounts for those penalties.
A few lawmakers are pushing to have banks do away with penalty fees altogether during the pandemic.
Last week, Senators Cory Booker and Sherrod Brown sent a letter to the CEOs of 14 banks asking them to put a temporary ban on overdraft fees during the coronavirus emergency. Booker has long opposed overdraft fees, which can easily run to $33-$36 each.
Shortly after that letter was sent, Representatives David Cicilline and Carolyn Maloney introduced a bill that would prevent banks from charging overdraft fees during declared emergencies.
This isn’t the first time lawmakers have tried to stop banks from charging overdraft fees.
Maloney introduced the Overdraft Protection Act of 2019 in the House of Representatives in September of that year, aiming to make overdraft fees more transparent by forcing banks to make overdraft protection an opt-in-only service. In the Senate, Booker and Brown have twice introduced a bill to put a cap on overdraft fees.
The latest House bill would ban overdraft and non-sufficient fund fees for any transaction, regardless of where it took place (at an ATM, at the cash register, etc.). It would also ban financial institutions from reporting overdraft charges to credit reporting agencies. The bill would allow banks to “extend a reasonable overdraft line of credit” to consumers who need it.
The overdraft ban, if passed, would be active the day after the president declares a major disaster and continue for 120 days after the end of that emergency. The ban could also be enacted at the state level for more geographically focused events.
But just because a bill has been introduced doesn’t mean it’s going anywhere fast. Congress has, you know, a bit on its plate lately, including the latest spending package intended to prop up the economy during the pandemic.
In the meantime, if you’ve incurred overdraft fees on your checking account that haven’t automatically been credited back, you’ll need to contact your bank to ask about its policy regarding overdraft fees during the pandemic.
While some banks have online forms you can use to request assistance relating to the pandemic, not all of them have an online option for dealing with overdraft charges. You may need to initiate an online chat or call—which could entail a long wait time.
While you’re logged into your bank account, now is a good time to set up low-balance alerts or get a daily notification of your checking account balance.
You may not be in a place where you can turn off overdraft protection or avoid overdrawing your account, but getting that alert when your account is running dry can give you a little time to choose an alternate payment option or request assistance from your bank.
