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Illustration: Sarah Grillo/Axios

Ally Bank is doing away with overdraft fees, and it could be an opening salvo for the industry facing mounting pressure in Washington for the decades-long practice.

Why it matters: Banks rake in billions fining customers who spend more money than they have in their account. It's one of many fees associated with banking — shouldered most often by those who can least afford it.

Driving the news: Digital-only Ally Bank is nixing overdraft fees entirely, after waiving them for a period during the pandemic. Previously, it dinged customers $25 each day an overdrawn account attempted another transaction.

But, but, but: The move isn't as Earth-shattering for Ally's business as it could be for others.

  • The fees were a microscopic part (0.07%) of its revenue. Roughly 1 in 8 of its customers overdrafted, Diane Morais, head of Ally's consumer banking products, tells Axios.

The big picture: Low-to-moderate income Black and Latino households were responsible for $255 billion worth of interest and fees for financial services (including overdraft fees) — out of the $303 billion collectively spent nationwide last year, according to a report by the Financial Health Network.

What to watch: What the mega-banks do on overdraft fees.

  • The backdrop: During a hearing last week, Sen. Elizabeth Warren (D-Mass.) asked big bank CEOs whether any automatically waived overdraft fees during the pandemic None of the CEOs had, though JPMorgan’s Jamie Dimon said the bank refunded fees when customers asked.
  • Warren got crickets when she pushed for a pledge that the banks would refund those fees.

Of note: JPMorgan, Citigroup, Wells Fargo and Bank of America took in $4 billion from overdraft charges in 2020 — 27% less than the prior year, according to the Financial Services Forum, the industry's trade group.

  • Overall, bank revenue from overdraft fees dropped for the first time in six years in 2020, the Wall Street Journal reports — citing data from Moebs Services.

Go deeper

Felix Salmon, author of Capital
Sep 3, 2021 - Economy & Business

Goldman and Citigroup's pandemic-era stock performance couldn't be more different

Expand chart
Data: YCharts; Chart: Axios Visuals

Goldman Sachs has had a great pandemic. Its shares are now trading at almost six times the level they traded at when the bank went public in 1999.

Why it matters: That's not because the banking industry, in general, has done particularly well. Citigroup shares, decimated by the 2008 financial crisis, are trading 80% below their level at the time of the Goldman IPO.

9 mins ago - World

"I assume full responsibility," Duterte says of drugs war

Rodrigo Duterte in 2017. Photo: Linus Escandor II/AFP via Getty Images

Philippines President Rodrigo Duterte said Thursday that he assumes full responsibility for a violent war on drugs that has killed thousands of people, Reuters reported.

Why it matters: Last month the International Criminal Court (ICC) formally authorized an investigation into alleged crimes against humanity during Duterte's war on drugs.

CDC approves boosters for Moderna and J&J and mix-and-match

Boxes containing vials of the Janssen COVID-19 vaccine. Photo: Jon Cherry/Getty Images

The Centers for Disease Control and Prevention's independent advisory panel voted unanimously to recommend booster doses of Moderna and Johnson & Johnson vaccine for certain populations and allow people to mix-and-match doses.

The big picture: The agency aligns with the Food and Drug Administration authorization Wednesday night which said people could switch to whichever vaccine they wanted for their booster shot.