The digital banking division of Ally Financial (ALLY 2.42%) said today it is abandoning overdraft fees on all accounts for good. Every customer is eligible, and there are no requirements or restrictions, the company said in a statement.
"Nationwide, more than 80% of overdraft fees are paid by consumers living paycheck to paycheck or with consistently low balances -- precisely the people who need help stabilizing their finances," said Ally Financial CEO Jeffrey Brown. "Eliminating these fees helps keep people from falling further behind and feeling penalized as they catch up."
In 2020, Americans paid $12.4 billion in overdraft fees, according to the 2021 FinHealth Spend Report, which said that 95% of the customers who paid those fees were "financially vulnerable," and were disproportionately Black and Latino. The FinHealth report also found that 43% of the customer accounts paying the fees averaged 9.6 overdrafts last year, resulting in hundreds of dollars per household.
In 2020, Ally made $12 million in deposit account and other banking fees, which includes various fees for outgoing wires, excessive transactions, overdrafts, stop payments, and returned deposits. That means overdraft fees made up a very small fraction of the bank's revenue.
Also last year, the bank waived fees for overdrafts and excessive transactions through July 31, and refunded roughly $7 million of fees on excess transactions and overdrafts through Dec. 31.
The move by Ally comes as pressure is building on banks to greatly reduce and eliminate overdraft fees, especially after a testy exchange between Sen. Elizabeth Warren, the Massachusetts Democrat, and large bank CEOs at a recent congressional hearing.