Regions gives customers an extra day to avoid overdraft charges

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Regions Bank customers now have extra time to avoid overdraft fees, the bank announced Thursday. 

Under a new policy, customers with personal checking accounts get an additional business day to deposit money and avoid the bank's $36 overdraft fee. Birmingham, Ala.-based Regions has made a number of changes to help customers avoid overdraft fees in recent years, including enhanced alerts and early access to direct deposits.

The latest change "builds on the enhancements we made throughout the last two years and will make it easier for customers to manage their accounts, cover overdrafts and avoid fees," Kate Danella, head of consumer banking at Regions, said in a statement. 

All Regions customers with checking accounts that carry the potential of an overdraft fee now have until 8 p.m. Central Time on the day after an account is overdrawn by more than $5 to compensate for the shortfall. Previously, customers had to cover the overdrawn balance by the end of the day that the overdraft occurred to avoid being charged a fee. 

Regions in 2021 changed the order in which it posted transactions so that debits and withdrawals were posted in the order they are made, a move bank officials said they believed would cut down on overdraft fees. At the time, Regions executives cited the healthier financial position of many American consumers during the pandemic as one of the primary reasons for making plans to rely less on revenue generated from overdraft fees.

In 2019, Regions generated more income from overdraft fees than most of its peers. Almost 18% of noninterest income at the $154 billion-asset bank that year came from overdraft and nonsufficient funds fees, according to an analysis by the Center for Responsible Lending.

Regions has twice in the past eight years been sanctioned by regulators for its overdraft practices. Last September, the Consumer Financial Protection Bureau fined Regions $50 million for charging customers allegedly illegal overdraft fees. The CFPB ordered Regions to refund at least $141 million in fees charged between August 2018 and July 2021.

Regions' new overdraft feature is the latest in a series of moves by banks to revamp their overdraft policies and reduce their dependence on related fees. Several other large banks have introduced similar extended grace periods, including Wells Fargo, TD Bank, PNC Financial Services Group and Huntington Bancshares.

Banks have also reduced the fees they charge customers who overdraw their accounts, and they have limited the number of times that such fees can be charged. 

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"Many large banks have announced that they will reduce or eliminate overdraft fees and meaningfully compete through friendly features," CFPB Director Rohit Chopra told Congress this week. "This is progress, but it is not enough."

Last year was particularly eventful in the fast-changing overdraft landscape. Regulators warned banks that had yet to alter their overdraft policies that they could become the subject of enforcement actions, and the CFPB told banks they are likely violating the law by charging overdraft fees on certain transactions.

The changes at many banks have contributed to a nearly 50% drop in overdraft revenue at banks, according to recent data from the CFPB. In the fourth quarter of 2022, banks collected $1.6 billion in overdraft and nonsufficient funds fees, 48% lower than the 2019 total.