Good for Bank of America

I think. BofA is eliminating overdraft protection on debit card purchases. Most stories, like in the Times and the Journal, are headlining the elimination of overdraft fees, but it’s not like you’re getting overdrafts for free; actually they are eliminating overdrafts on debit card transactions altogether, starting this summer. (You will still be able to opt in to overdraft protection for debit card transactions, but only if you link your checking account to another account, so the money is being transferred from yourself. You will also be able to opt in to overdraft protection, with fees, for checks and automatic bill payments;* and you will be able to decide on the spot if you want to pay a fee to overdraw your account from an ATM.)

So it sounds like rather than getting as many customers as possible to opt in to overdraft protection, BofA has decided to just kill it. I think this is a good thing. So does the Center for Responsible Lending. Of course, the policy does sort of undermine all the previous rhetoric about how overdraft protection was good for consumers and about customer choice. But let’s just blame all that on Ken Lewis and assume that Brian Moynihan made the right choice (although Moynihan was head of consumer banking last year before becoming CEO).

Note also that BofA’s stock price is doing just fine today, right in the middle of the pack of big banks. Maybe it’s not true that banks have to take advantage of customers in order to make money. Yes, I understand that other fees may go up, or interest on deposits may go down, but if all this is doing is shifting costs from hidden fees to well-understood fees, that’s good.

In another attempt to give a little credit, I’m looking at a Morgan Stanley research report from a couple weeks ago projecting tepid job growth during the recovery and recommending comprehensive health care reform, a refundable payroll tax credit, increased job training programs, and protocols for short sales or mortgage principal reduction, with a shout out to a community revitalization project. (Morgan Stanley, too, has a new CEO, former McKinsey director James Gorman.) I doubt Morgan Stanley is putting a lot of lobbying dollars behind these ideas, but still it’s something.

* Which makes sense to me; I wouldn’t want my rent check to bounce, especially if my lease has a big fee for returned checks, but if I’m just buying a cup of coffee I’d rather not get the coffee (or use cash) than pay $35 for it.

4 thoughts on “Good for Bank of America

  1. I think it’s unlikely that either example reflects a decision by the CEO, but rather is indicative of the power of individual employees to shape the overall rhetoric within these large, seemingly-faceless, organizations.

    There is surprisingly little coordinated *internal* messaging when it comes to these things. Especially the latter case – when it comes to really big divisive issues like economic policy, climate change legislation, or healthcare reform, the top of the organization structure cares only about business risk (e.g. alienating a long-time customer that happens to be a coal miner or health insurer).

    Sure, announcements like Walmart’s initiative to cut GHG emmissions carry more weight, but we should also applaud incremental efforts by non-executive employees to push the behemoth in the right direction.

  2. “…actually they are eliminating overdrafts on debit card transactions altogether, starting this summer”

    File this one under “D” for DUH

  3. James,
    enjoy your blog. i wrote the times story and just wanted to point out that you won’t be able to opt in for checks and automatic bill payments. the fed rule only covered debit and ATM transactions, so as i understand it, most banks will continue provide overdraft on checks and ach automatically. Just fyi.
    andy martin

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