Regions Bank announced Thursday that its customers would have an extra business day to make deposits to avoid an overdraft fee.
The Birmingham, Alabama-based lender has made some changes over nearly two years to help customers avoid overdraft fees, including eliminating overdraft protection transfer fees, reducing the bank’s caps on overdraft fees to a maximum of three per day, enhanced banking alerts and launching early access to direct deposits.
“Helping customers build financial wellness is a top priority for Regions Bank,” Kate Danella, head of Regions’ Consumer Banking Group, said in a statement. “Regions Overdraft Grace builds on the enhancements we made throughout the last two years and will make it even easier for customers to manage their accounts, cover overdrafts and avoid fees.”
Regions Overdraft Grace — the new no-cost feature results from research involving the bank’s customers — requires no enrollment, and automatically applies June 15, the statement said.
Under the new policy, Regions customers will have until 8.00 pm Central Time on the day their account is overdrawn by more than $5 to settle the deposit. If the account’s available balance is not overdrawn by more than $5 after the nightly processing is done for the following day, the bank will not charge the overdraft fee.
In 2021, Regions changed the order of transactions to show debits and withdrawals in the order they were made — a change bank officials believed would help reduce overdraft fees, American Banker reported. During the time, the bank officials said Americans’ healthier financial position due to the pandemic was one of the primary reasons the bank planned to rely less on overdraft fees.
An analysis by the Center for Responsible Lending found that in 2019, Regions generated more income from overdraft fees than most of its peers — almost 18% of noninterest income came from overdraft and nonsufficient fund fees.
Regions has been on the radar of the Consumer Financial Protection Bureau for its overdraft fee charges. In September, the CFPB ordered the $154 billion-asset bank to pay $191 million on the allegations that Regions charged its customers “illegal surprises” overdraft fees on certain ATM withdrawals and debit card purchases between August 2018 and 2021.
The penalty included a $50 million fine and $141 million the agency ordered the lender to pay to customers charged with “unauthorized-positive” fees. But the bank argued at the time that it eliminated the authorized-positive fees around a year ago when it rearranged the order in which transactions were posted.
Overdraft and related fees have attracted negative feedback from regulators and lawmakers alike. Citi and Capital One have done away with the fees altogether, while Bank of America has reduced the amount they charge per instance.
In October, the CFPB issued guidance with the support of the White House about “junk fees” that cautioned banks against surprise overdraft fees, which customers cannot anticipate or avoid and likely violates the Consumer Financial Protection Act.
According to CFPB data, many banks' changes led to a roughly 50% decline in overdraft revenue. In the fourth quarter of 2022, banks got $1.6 billion in overdraft and nonsufficient fund fees — 48% lower than the 2019 total, American Banker noted.
"Many large banks have announced that they will reduce or eliminate overdraft fees and meaningfully compete through friendly features," Rohit Chopra, CFPB director, told Congress this week, according to the outlet. "This is progress, but it is not enough,” he added.
