Cullen/Frost creates program to reduce overdraft charges

Cullen/Frost Bankers in San Antonio became the latest banking company to offer customers a way to avoid overdraft fees tied to their checking accounts.

The $42.4 billion-asset company said it will not charge overdraft fees on transactions of up to $100 that take account holder balances into negative territory. Customers must set up a monthly direct deposit of $500 to qualify for the offer.

The move is meant to reduce overdraft penalties tied to small-dollar purchases. Many big banks have put in place so-called de minimis limits on overdraft charges that spare customers the fees if they overdraw by a small amount, but in the past these limits rarely applied to purchases in excess of $5.

Cullen/Frost has been working on the overdraft feature “for several months,” said Jimmy Stead, chief consumer banking officer at Frost Bank. He said the offer “is an effort to do what’s right for our customers and help build long-term relationships with them, not as a result of regulations.”

Still, some industry observers believe the Consumer Financial Protection Bureau under the Biden administration will crack down on banks that charge excessive overdraft fees.

More banks are expected to follow suit.

PNC Financial Services Group in Pittsburgh announced this week that it would launch an alert system that will notify customers when they are in danger of overdrawing their account. The system gives them clients to cover the negative balance or cancel upcoming payments to avoid penalties.

Regulators last year urged banks to waive overdraft fees during the coronavirus pandemic to give consumers more flexibility if they ran short of cash as the economy shut down.

Cullen/Frost’s overdraft fees fell by 22% in 2020 from a year earlier to $28.8 million, according to its call reports.

“It’s important to note that we spent a lot of time having honest conversations with real customers about why overdrafts occur, and we decided we shouldn’t charge a fee for simple mistakes,” Stead said. “It’s true that this will cost us some revenue, but what’s really important is that we have a history of choosing to do what’s right for our customers, even when it takes extra effort or expense.”

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Overdrafts Fee income Revenue and expenses CFPB
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