More than 1800 banks and credit unions made changes in how they handle
overdrafts since Regulation E,
mandatory opt-in for debit card and ATM overdrafts, was made a
requirement by the Federal Reserve on November 11, 2009. Of all the
financial institutions surveyed, 11.4 percent either increased price,
decreased price, began offering or stopped offering overdraft service.
These results come from a nationwide statistical survey of more than
2,000 banks and credit unions conducted in early March 2010 by Moebs
$ervices, Inc. a Lake Bluff, IL- based economic research firm.
âThis proves that good regulation by the Fed, which doesnât tamper with
market forces such as price, produces good results. Banks and credit
unions are getting into the OD business, leaving the OD business, and
increasing and decreasing price. Consumers and providers win.â
âTwo facts from this survey surprised us,â noted Michael Moebs,
economist and CEO of Moebs $ervices. âThose were the number of
depositories that started overdraft programs for the first time and the
number that stopped offering overdraft programs,â said Moebs.
Of depositories surveyed, 11.0 percent started a new overdraft program,
according to Moebs. âThis is important,â said Moebs, âThis tells me
banks and credit unions want to streamline their operations and comply
with the regulations. These banks and credit unions want to do the right
thing for the consumer.â
Of the depositories surveyed, 13.5 percent threw in the towel and opted
out of offering overdrafts. âSo, Bank of America wasnât the first to do
this: over 200 institutions have,â said Moebs. âThis is an incredible
opportunity for community banks and credit unions to grab market share
and help those 33 million Americans whose banks have stopped offering
overdrafts.â
There were other significant changes, according to Moebs. Among
financial institutions that changed their practices, 18.4 percent did so
by decreasing their OD price. âThis is significant since decreasing the
price will actually stimulate volume and produce more net revenue,â
explained Moebs. âAn increase in price, which is what 57.1 percent of
banks and credit unions did, will actually reduce consent of those
opting in to debit cards for overdrafts and will decrease net revenue of
depositories.â
Overall, according to Moebs, since the Fed introduced mandatory Opt-In
for debit cards and ATM on November 11, 2009, the median price
nationwide for all depositories stayed at $27 per overdraft. NSF changes
increased from $25 for returning a check to $26. Specifically for
overdrafts, banks stayed at $30 per overdraft lead by the huge banks
like Bank of America and Chase, which are over $30, yet credit unions
remained at $25 per overdraft.
Moebs concluded, âThis proves that good regulation by the Fed, which
doesnât tamper with market forces such as price, produces good results.
Banks and credit unions are getting into the OD business, leaving the OD
business, and increasing and decreasing price. Consumers and providers win.â
About Moebs Services
Michael Moebs is an Economist and the CEO of Moebs $ervices, Inc.,
headquartered in Lake Bluff, Il. For more than 25 years, Moebs Services
has been collecting and analyzing primary empirical data about financial
institutionsâ services, pricing, operating expenses and financial
condition in a counter intuitive approach, which provides simple
solutions to complex issues.
