Fitch Ratings said Tuesday that if regulators tighten restrictions on bank overdraft policies, it could threaten a major source of bank revenue and speed up the end of free checking accounts.
The Consumer Financial Protection Bureau is looking at the way banks handle debits and sign up customers for overdraft protection. Separately, many large banks have settled or are facing lawsuits over their bounced-check fees.
Some banks post the biggest debits first, arguing that they tend to be most important, but that can cause a larger number of smaller checks to bounce. Fitch said it expects the bureau to focus on how banks disclose their practices to customers.
The ratings agency, citing regulatory reports, said bank customers paid $34.2 billion last year in deposit service charges including overdraft fees.
"We believe more stringent guidelines could place further pressure on this source of income," Fitch said. It said the consumer bureau's probe adds to revenue and cost pressures facing banks, including a cap on fees for using debit cards. But it said banks will continue to adopt their fee-for-service model.
Fitch said the consumer bureau's inquiry, along with other recent banking regulations, will speed up the demise of free checking accounts and lead to some banks facing fines and demands to change marketing and disclosure practices.
Some large banks have settled lawsuits over their fees. According to court documents, Bank of America agreed to pay $410 million. The lawsuits accuse the banks of processing large ATM and debit-card transactions first to throw customers' accounts into overdraft sooner, thus boosting fees on many smaller charges.
Big banks have dropped some fees amid loud opposition from consumers. Last year, Bank of America backed away from a $5 monthly fee for using a debit card, and JPMorgan Chase and Wells Fargo dropped plans for similar fees.
Banks are still experimenting with other changes, including raising the minimum account balance needed for free checking.