Why JPMorgan's New Overdraft Rules Are a Big Deal

Weeks after a blistering report accusing banks of racking up historic overdraft fees to the tune of $38 billion (yes, with a "b"), the nation's largest commercial banks are reforming their overdraft rules. Bank of Ameica and JPMorganChase pledged to reduce fees and let customers opt out of over-drafting all together. This is excellent news for both consumers and the Obama administration.

CNN reports that Bank of America "will allow customers to opt out of the ability to outspend their accounts, and it will no longer charge fees for more than four items per day or on overdrawn balances of less than $10."

JPMorganChase went even further. Chase customers can't withdraw more money from an ATM than they have in their account, and the bank will eliminate overdraft fees for debit customers entirely (unless they choose otherwise). Hats off to both, and I hope smaller banks follow suit.

The timing of these announcements is interesting. The widely-circulated (and literally unbelievable) $38 billion figure comes from a report last month from Moebs Services. The announcements also dovetail with increased pressure from Washington, as Treasury Sec. Tim Geithner and other bank crusaders on Capitol Hill are moving forward on financial regulation and the creation of an agency to crack down on consumer abuse. Overdraft fees have spiraled out of control and Bank of America would be been a prime target of consumer regulation. As the Moebs Service report on overdrafts found:

At BofA, a customer overdrawn by as little as $6 could trigger a $35 penalty. If the customer does not realise they have a negative balance and continue spending, they could incur that fee as many as 10 times in a single day, for a total of $350.

That's fleecing, plain and simple.

Ultimately, it should be pointed out that this is exactly what Obama wants. The Jennifer Aniston Theory of Obamaism states that while the president seeks vast and deep changes throughout the banking industry (among others) he's not interested in being the sheriff of Wall Street. He doesn't want to do the banks' dishes. He wants them to want to do their own dishes. The two largest banks volunteering to overhaul their overdraft rules? That's what doing you own dishes looks like.