Bank of America Corp will test an overdraft program in the first quarter of next year, allowing customers to accept an overdraft fee when a debit transaction is turned down, a company executive said on Friday.

Laurie Readhead, BofA's retail segments executive, said at an analyst conference that the bank will notify a customer via text when a debit transaction is rejected because the purchase would incur an overdraft fee.

The message would give the customer the option to over-ride the rejection and complete the purchase, with an overdraft fee attached.

Currently, BofA, the largest U.S. bank by assets, bars any debit card transaction for customers that would incur an overdraft fee.

We think this is a much better approach, to let the customer choose, Readhead said at the RBC Capital Markets financial institutions conference in Boston.

Readhead did not elaborate on the specific locations or length of the pilot program.

The test program would be the latest in a series of changes to BofA's consumer banking franchise, which has been overhauled following a series of new industry regulations introduced since the financial crisis.

Separately, Readhead said the bank will keep closing branches, evaluate whether to shrink the size of some locations nationwide, or replace stand-alone locations with video ATMs.

Previously, BofA's senior management has said the bank may close up to 10 percent of its branches.

BofA currently has 5,900 U.S. branches.

We will clearly continue to close stores, she said.

Readhead noted that while customers conduct an increasing amount of business with the bank by online or electronic means, most of the bank's efforts to sell financial services remain in the branches.

(Reporting by Joe Rauch)