Sept. 23 (Bloomberg) -- Bank of America Corp., JPMorgan Chase & Co., and Wells Fargo & Co., three of the biggest U.S. banks, reduced overdraft fees amid criticism from lawmakers that the charges were too high and assessed too often.

The three banks, which offer overdraft protection on all checking accounts, will allow consumers to opt out of the service, eliminating the potential for paying overdraft fees. JPMorgan and Wells Fargo will cancel fees for accounts overdrawn by $5 or less, according to separate statements. Bank of America will end fees on accounts that are short $10 or less, it said in a statement yesterday.

Banks and credit-card lenders have come under fire from Congress because of the fees, which are charged when customers exceed the balance on their checking accounts by writing checks or using a debit card. Customer complaints about fees on bank accounts and credit cards helped spur calls for a consumer financial protection agency.

“These are positive changes, but the system has gotten completely out of whack,” said Senate Banking Committee Chairman Christopher Dodd, a Connecticut Democrat who introduced legislation to crack down on overdraft fees last week. “I will take a close look at the banks’ new policies as I continue work on a bill to permanently protect customers from excessive overdraft fees.”

JPMorgan currently charges $25 for the first infraction in 12 months, $32 for overdrafts up to four times, and $35 after that. Bank of America levies $35 if the amount overdrawn is more than $5 and a $10 fee for shortfalls of $5 or less. Wells Fargo charges $35, while Wachovia Corp., acquired by Wells Fargo on Dec. 31, charges $22 for the first infraction in a 12-month period and $35 after that.

Three Penalties

Those who elect to continue overdraft protection at JPMorgan will pay a maximum of three penalties per day, down from six. Bank of America and Wells Fargo will cap fees at four a day, instead of 10. Wachovia didn’t have a limit.

JPMorgan will apply the changes to all checking accounts, starting in the first quarter of 2010. The bank said it will deduct charges in the order they’re incurred, instead of starting with the largest amount at the end of each day. Consumers complained the existing system drove up fees.

“We recognize the tremendous growth in our customers’ debit-card usage and we’re revamping our overdraft policies and posting order to be more consistent with the way they use their accounts today,” Charlie Scharf, head of retail financial services at New York-based JPMorgan, said in the statement.

Bank of America, based in Charlotte, North Carolina, will introduce some changes beginning Oct. 19, while others will begin June 2010, including a limit on the number of times a customer can overdraw an account. San Francisco-based Wells Fargo didn’t have a date for implementation.

Fee Revenue

The amount of lost fee revenue wasn’t disclosed by any of the banks. A study by the Federal Deposit Insurance Corp. released in November 2008 found that customers paid from $10 to $38 to use overdraft protection. Banks earned an estimated $1.97 billion from the service in 2006, the survey said.

“What we need are consistent overdraft reforms for all Americans who have or open a bank account,” Representative Carolyn Maloney, a New York Democrat, said in a statement today.

Maloney has proposed legislation requiring that consumers be notified when a transaction is about to incur an overdraft fee, and that banks process the transactions chronologically instead of by size. She called the policy changes by Bank of America and JPMorgan “significant improvements.”

To contact the reporter on this story: Elizabeth Hester in New York at ehester@bloomberg.net.

Last Updated: September 23, 2009 18:18 EDT