To play by the rules set by the Federal Reserve that will prohibit banks from charging overdraft fees effective July 1, 2010, Bank of America Corporation (BAC) said on Tuesday that it will eliminate such fees on debit card purchases starting June 19, 2010.
 
This move will restrict the debit card holders of BofA to spend more than what they have in their checking accounts. Customers with inadequate funds in their accounts will be declined if they try to purchase using debit cards. Citigroup Inc. (C) has already implemented a similar policy.
 
While this move will save consumers from surprise hits to their accounts, this will cost BofA millions in fee income as more than 60% of all overdraft fees charged by the bank are for debit card transactions.
 
The new overdraft rule will apply to new customers from June 19, 2010 and for existing customers effective August.
 
However, BofA customers still could withdraw more than their balance from ATMs, but they will have to pay a $35 overdraft fee.
 
Last week, the Treasury received net proceeds of $1.5 billion from the sale of warrants entitling it to purchase BofA common stock. BofA is the first among four banks whose warrants are scheduled to be sold via auctions this month. The three other banks are Washington Federal (WFSL), Texas Capital Bancshares (TCBI) and Signature Bank (SBNY).
 
The market turmoil was more harmful to BofA than its peers. However, the company has concluded its biggest acquisitions. BofA acquired Merrill Lynch almost during the height of the financial crisis last year. It also acquired Countrywide Financial Corporation in Jul 2008. The CEO views these deals as beneficial for stakeholders of the company. Furthermore, this will allow the bank to focus on rebuilding customer relationships.

Finally, differences of opinion with regulators and lawmakers over Merrill’s 2008 bonus payments issues amid escalating losses will end with the recent $150 million settlement between the Securities and Exchange Commission (SEC) and BofA to conclude the civil allegation on BofA for misleading its shareholders in its purchase of Merrill Lynch & Co. last year.

 

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