Online bank Ally has announced that it will stop charging overdraft fees on customer accounts. This decision comes as other financial institutions are being scrutinised more closely for the profits they made from these fees during the pandemic. According to the business, Ally Bank will join Discover Financial and fintech Chime as companies that provide products without overdraft fees. Customers won't have to worry about fees on services like savings, checking, and money market accounts. The majority of the country's major banks impose a fee on their customers—often around $35—for starting a transaction that requires more money than the customer has in their account. As a pandemic relief measure for its customers, Ally stopped collecting overdraft fees last year, and bank executives said they have now decided to waive Ally's $25 fee entirely as a goodwill gesture. According to research, the fees disproportionately impacted financially vulnerable people, as well as Black and Latinx people. "Overdraft fees are a source of frustration for many consumers, but they are especially burdensome for some," said Ally Financial CEO Jeffrey Brown in a statement. "It's past time to put an end to them." According to analyst Moebs Services, banks collected $31.3 billion in overdraft fees in 2020, the lowest amount since 2005, as banks adjusted their policies during the pandemic. However, according to the 2021 FinHealth Spend Report, 43 percent of "vulnerable" households with checking accounts overdrew money in the previous year, with the average household doing so 9.6 times. During a Senate committee hearing last week, executives from the four largest U.S. banks—Bank of America, JPMorgan Chase, Citigroup, and Wells Fargo—were chastised for their institutions' overdraft practices. Senator Elizabeth Warren (D-Massachusetts) claimed that banks made $4 billion in overdraft fees during the pandemic and urged CEOs to refund the money to affected customers. (The executives at the bank declined.)
