In a surprise move, TCF Financial Corp. chief Bill Cooper went from publicly attacking government efforts to reform overdraft fees on checking accounts to proposing a new checking account product that essentially would do away with the fees. Instead of paying $35 every time they overdraw their accounts, customers would pay a single daily fee if their accounts are negative. The no-overdraft feature will be part of a new checking account product that the Wayzata-based bank expects to roll out in select markets early next year.
TCF said it hasn't determined the amount of the daily fee for a negative account balance, but it will likely be in the $10 to $25 range.
In scrapping the unpopular overdraft charges, TCF is going a step further than most of the banking industry -- and even what congressional leaders have demanded -- in addressing the growing public backlash over overdraft fees. In recent weeks, nearly every major bank -- including U.S. Bancorp, Wells Fargo & Co., Bank of America and J.P. Morgan Chase -- have announced plans to limit fees on small charges that consumers might have avoided had they known they would be charged fees for them. Still, none of the banks would do away with the fees entirely.
U.S. Bancorp, for instance, said it would limit overdrafts to three a day, down from six previously.
The Federal Reserve is working to change the rules on overdraft fees, and Sen. Christopher Dodd, D-Conn., on Monday proposed legislation that would limit the number of overdraft fees that banks can charge to one per month and six per year; and would require banks to get customers' consent before enrolling them in an overdraft protection program.
In a conference call Wednesday with analysts, Cooper said the new product is designed to address concerns that customers -- unaware that their accounts are overdrawn -- get hit with multiple overdraft fees on a series of small transactions.
"What this account does and what the regulation is directing at is the train wreck that people get into with their accounts where somebody inadvertently ... writes five checks for $10 each," he said. "That's five times they get charged ... which is very expensive as compared to somebody who wrote one check for $50 and only gets hit with one item."
The move is an about-face for Cooper, who just a month ago vehemently defended industry practices. Cooper has argued that about 60 percent of all transactions that appear overdrawn at the point of a purchase are actually not overdrawn when the transaction is later processed by the bank. At TCF, that's about 3 million transactions a year. If customers can't overdraw their accounts, even temporarily, then millions of transactions would be rejected at the register, Cooper has argued.
Yet, Cooper continued to lash out at reform efforts Wednesday, even as he explained the new product to analysts. He predicted Congressional leaders will wait until the Federal Reserve passes its rules before it enacts any legislation.
"The good news about that is the Federal Reserve actually knows something about the banking system, as opposed to Chris Dodd," Cooper said on the conference call. "It's more likely that we'll get rational regulation as opposed to political posturing."
Chris Serres • 612-673-4308
