Should Bank of America Receive Praise? Or More Criticism?

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Last week, the bank made news by eliminating debit card overdraft fees. That’s not quite correct, though: Bank of America has basically eliminated debit card overdrafts entirely. Starting this summer, when you try to use your debit card but don’t have enough money in your account to cover the bill, your card will be rejected. (Right now, the transaction can be processed, and you’ll be hit with a $35 fee for what amounts to a short-term, absurdly high-interest loan.) When the changes occur, you won’t be able to overdraw your account, and therefore you can’t get hit with an overdraft fee.

The no-overdrafts policy comes after a half-hearted change last fall, when Bank of America and Chase—having been roundly criticized by politicians and consumer groups for their sneaky, abusive overdraft policies—installed a few paltry limits on just how much a customer could be charged. Example: BofA would hit customers with “only” a maximum of four overdraft fees per day, so at $35 a pop you’d “only” be hit with a max of $140 daily.

Such overdraft “protection,” as it’s called, was generally included with customer accounts, and a customer could get rid of it only by contacting the bank and officially requesting to opt out. This summer, however, such “protection” will only be included if a customer opts in. Many banks are actively campaigning to convince customers why they should do just that.

Last week, Bank of America decided that instead of trying to convince debit card holders why they should sign up for overdraft protection, the service—along with the fees that accompanied it—would disappear entirely.

The LA Times David Lazarus, for one, is not impressed:

Rep. Carolyn Maloney (D-N.Y.), who has spearheaded efforts in Congress to crack down on abusive bank practices, was typical of those showering BofA with love. She declared, “Let me now praise Bank of America!”

It’s understandable that folks who regularly criticize banks would want to hand out milk and cookies when they see something beneficial for consumers.

But it seems pretty pathetic to sing a company’s praises just because it’s decided to stop mistreating customers.

I mean, is that how miserable things have gotten, that we honor businesses just for doing the right thing? That we reward them for saying they’ll quit doing something they never should have done in the first place?

How does BofA explain the decision?

Susan Faulkner, the senior vice president who heads BofA’s debit-card business, told me the change is in response to customer requests.

“Customers have been telling us that they don’t want to spend money that they don’t have,” she said. “We want to help them avoid overdraft fees.”

Yep — that’s BofA’s story and it’s sticking to it.

“All of this is in response to our customers,” Faulkner said. “We heard it loud and clear. It’s about building a foundation of trust with our customers.”

Moreover: “We’re doing this proactively.”

Um, yeah. Except that right around the same time BofA’s customer-driven policy change takes effect, so will new federal rules requiring banks to ask customers in advance if they want overdraft protection.