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Citigroup (C) Becomes Largest US Bank to Scrap Overdraft Fees
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Citigroup Inc. (C - Free Report) will completely terminate overdraft fees, returned item fees and overdraft protection fees by this summer, making it the largest U.S. lender to do so.
Citigroup’s overdraft fee collection has been among the lowest among its peers. Other than consumer-friendly overdraft policy, the big bank continues to expand access to banking products and services, making banking more financially inclusive for the underserved communities.
The company’s overdraft protection offering for its consumers includes safety check, checking plus, access account package and low balance alerts.
Management noted, “We are continuously looking for ways to utilize our industry-leading capabilities to make the financial system easier and more equitable for communities who have little or no financial buffer.”
Though eliminating overdraft fees will dent Citigroup’s revenues, the company’s diversified businesses and strategic overhaul measures will diversify the top line and strengthen operations. In sync with this, the company has been investing in growth opportunities across wealth and commercial banking, treasury and trade solutions, and securities service businesses to grow fee revenues across the Institutional Clients Group segment. Such efforts will bolster its position in the booming digital industry.
In January 2022, the company revealed plans to exit the consumer, small business and middle-market banking operations in Mexico. This is in addition to its major strategic action announced in April 2021, whereby the GCB segment will exit 13 markets across Asia and EMEA.
Shares of Citigroup have declined 7.4% over the past three months, wider than the industry’s decline of 1.6%.
Citigroup has joined a growing bandwagon of lenders that have eased unpopular charges amid the growing regulatory scrutiny. In May 2021, the U.S. Senate criticized the practice during the pandemic. In December 2021, the U.S. Consumer Financial Protection Bureau (CFPB) noted it was exploring to issue new guidance aimed at curbing banks' reliance on fees from overdraft and non-sufficient funds facilities. Banks raked in $69 billion in third-quarter 2021 from such charges.
In early February, M&T Bank (MTB - Free Report) announced the removal of non-sufficient fund fees and an overdraft protection transfer charge from a linked deposit account.
MTB will also diminish overdraft fees to $15 and limit daily fee assessment to once per day. The alterations are scheduled to be effective from second-quarter 2022.
Recently, Flushing Financial Corporation (FFIC - Free Report) announced terminating overdraft fees. FFIC also scraped insufficient funds and transfer fees on consumer checking accounts for its Flushing Bank, iGObanking, and BankPurely customers.
In October 2021, Regions Financial Corporation’s (RF - Free Report) subsidiary, Regions Bank, announced a new checking account with no overdraft fees, Regions Now Checking account. RF’s new account will include the convenience of modern banking, while eliminating overdraft fees.
The Regions Now Checking account will charge a low, flat $5 monthly fee. It will offer traditional checking account features like check writing, and mobile and online banking with bill pay. Customers will not be charged fees for non-sufficient funds.
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Citigroup (C) Becomes Largest US Bank to Scrap Overdraft Fees
Citigroup Inc. (C - Free Report) will completely terminate overdraft fees, returned item fees and overdraft protection fees by this summer, making it the largest U.S. lender to do so.
Citigroup’s overdraft fee collection has been among the lowest among its peers. Other than consumer-friendly overdraft policy, the big bank continues to expand access to banking products and services, making banking more financially inclusive for the underserved communities.
The company’s overdraft protection offering for its consumers includes safety check, checking plus, access account package and low balance alerts.
Management noted, “We are continuously looking for ways to utilize our industry-leading capabilities to make the financial system easier and more equitable for communities who have little or no financial buffer.”
Though eliminating overdraft fees will dent Citigroup’s revenues, the company’s diversified businesses and strategic overhaul measures will diversify the top line and strengthen operations. In sync with this, the company has been investing in growth opportunities across wealth and commercial banking, treasury and trade solutions, and securities service businesses to grow fee revenues across the Institutional Clients Group segment. Such efforts will bolster its position in the booming digital industry.
In January 2022, the company revealed plans to exit the consumer, small business and middle-market banking operations in Mexico. This is in addition to its major strategic action announced in April 2021, whereby the GCB segment will exit 13 markets across Asia and EMEA.
Shares of Citigroup have declined 7.4% over the past three months, wider than the industry’s decline of 1.6%.
Image Source: Zacks Investment Research
It carries a Zacks Rank #3 (Hold) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Citigroup has joined a growing bandwagon of lenders that have eased unpopular charges amid the growing regulatory scrutiny. In May 2021, the U.S. Senate criticized the practice during the pandemic. In December 2021, the U.S. Consumer Financial Protection Bureau (CFPB) noted it was exploring to issue new guidance aimed at curbing banks' reliance on fees from overdraft and non-sufficient funds facilities. Banks raked in $69 billion in third-quarter 2021 from such charges.
In early February, M&T Bank (MTB - Free Report) announced the removal of non-sufficient fund fees and an overdraft protection transfer charge from a linked deposit account.
MTB will also diminish overdraft fees to $15 and limit daily fee assessment to once per day. The alterations are scheduled to be effective from second-quarter 2022.
Recently, Flushing Financial Corporation (FFIC - Free Report) announced terminating overdraft fees. FFIC also scraped insufficient funds and transfer fees on consumer checking accounts for its Flushing Bank, iGObanking, and BankPurely customers.
In October 2021, Regions Financial Corporation’s (RF - Free Report) subsidiary, Regions Bank, announced a new checking account with no overdraft fees, Regions Now Checking account. RF’s new account will include the convenience of modern banking, while eliminating overdraft fees.
The Regions Now Checking account will charge a low, flat $5 monthly fee. It will offer traditional checking account features like check writing, and mobile and online banking with bill pay. Customers will not be charged fees for non-sufficient funds.