In light of their recent class-action settlement, Chase has adopted a new policy that protects customers from overdraft charges on debit transactions of $5 or less for at least the next two years.
Recent Chase banking statements contained the following statements:
Good news, we’re making changes to help you avoid fees. For purchases of $5 or less that overdraw your account, we’ll no longer charge you an insufficient funds fee, returned item fee, or overdraft protection transfer fee.
While the phrase is a little tongue-in-cheek, the sentiment is certainly not lost in jest.
On July 22, Chase bank customers can charge a little more freely as JPMorgan Chase will no longer charge overdraft fees on debit charges of $5 or less. This should give Chase checking customers a little peace of mind during tough economic times.
This change is intended to help eliminate the multiple overdraft charges that often spiral many account holders into an endless cycle of financial despair.
A fine example of what this new policy will prevent is present when you examine an overdraft for a simple cup of coffee. Say, perhaps, that your account is overdrawn by $50 (maybe, from part of a mobile phone payment, for example) and then you purchase a cup of coffee (at, say, $3) and then later that day a bite to eat (for, maybe, $4.50).
Before these measures were discussed, Chase would have h able to charge you for both of these miniscule purchases. Chase’s checking disclosure lists their overdraft fee as $34, so these very insignificant charges would have turned $7.50 in food and drink into $75.50 after fees. Now, these purchases will no longer incur any overdraft charges at all.
Apparently, though, this notice came as a result of a class-action suit filed against big banks over how they process debits and institute overdraft chargers. For example, banks used to process payments in the order from largest to smallest in order to always deduct as much as possible at a time so that if the account overdrafts a maximum penalty (or penalties) could be charged.
In February, then, Chase settled the class-action suit for $110 million, with a Federal District Court judge in Miami giving the early approval. Final approval is expected later this year.
Part of this approval is the agreement that Chase will amend its policies to include a provision that will not charge an overdraft on debit card transactions of $5 or less. They must also keep this policy in place for a minimum of 2 years.
According to Robert C. Gilbert, one of the lead attorneys on the side of the plaintiffs reported that Chase suggested this change without the urging of the courts. He said
It’s a creative way to help eliminate a lot of complaints from customers.
Creative, indeed; Chase is somewhat alone in this approach, as they are, probably, the only big bank that is adopting this “less-than $5-per-item” policy is not popular among big banks.
As a matter of fact, the only other bank that is known to have adopted a similar policy is SunTrust. This is according a recent report on 14 large bank overdraft policies that was published by director of financial services for the Consumer Federation of America, Jean Ann Fox.
Hugh Suhr, a spokesperson with SunTrust explained their policy:
SunTrust does not assess overdraft and returned item fees on any transactions that are less than $5. There is no limit to the number of overdraft items that fee will not be assessed for, as long as the amount of the transaction is $4.99 or less.