That makes Capital One, which is the sixth-largest retail bank in the United States, the first top-ten bank to stop penalizing clients for taking out more cash or writing checks for more money than they have in their account.
“The bank account is a cornerstone of a person’s financial life,” said Capital One CEO Richard Fairbank in a press release, adding that “Overdraft protection is a valuable and convenient feature and can be an important safety net for families.”
Advocacy groups hope is other banks will follow Capital One’s lead in eliminating these fees, which have been moneymakers for companies that levy them.
“This move by Capital One will have tremendous benefits for the most vulnerable consumers,” said said Lauren Saunders, associate director of the National Consumer Law Center, in Capital One’s release. “It’s critical we keep working to make the banking system more inclusive and fair for all.”
“Rather than competing on quality service and attractive interest rates, many banks have become hooked on overdraft fees to feed their profit model,” said CFPB Director Rohit Chopra in a press release. “We will be taking action to restore meaningful competition to this market.”
One prominent analyst wrote that other banks may soon follow Capital One’s lead — or else risk having regulators impose even tougher restrictions.
“Our expectation is that more banks will try to avoid CFPB enforcement actions,” said Cowen Washington Research Group’s Jaret Seiberg in a report.
“Enforcement actions are likely starting next spring. Enforcement is the fastest way for the CFPB to try to change banking industry behavior,” he added.
— CNN Business’ Jeanne Sahadi contributed to this report.