The uncertainty of financial reform
and mandatory opt-in to overdrafts for debit cards and ATMs will shrink
financial institutionsâ revenue from overdrafts by $1.95 billion in 2010
according to Moebs $ervices, an economic research firm based in Lake
Bluff, IL. Overall, banks and credit unions should earn about $35.2
billion in 2010. This is down from $37.1 billion in 2009 according to
Michael Moebs, economist and CEO of Moebs $ervices.
âThis year, the uncertainty of what will happen with financial reform in
Congress, and the impact of Regulation Eâs amendment for mandatory
opt-in on debit card overdrafts really took the wind out of the
overdraft revenue sails.â
âLast year we estimated $38.5 billion in overdraft revenue for US
depositories,â said Moebs. âThis year, the uncertainty of what will
happen with financial reform in Congress, and the impact of Regulation
Eâs amendment for mandatory opt-in on debit card overdrafts really took
the wind out of the overdraft revenue sails.â
Through the first three quarters of 2009 overdraft revenue was
accelerating on an annualized basis to $39.1 billion over $35.4 billion
in 2008, or at a pace over 13 percent, according to Moebs. âAbout $2.0
billion of new revenue was lost in the fourth quarter due to the
uncertainty,â said Moebs. This was also due to the press that Wall St.
banks received for the high prices for overdrafts, according to Moebs.
âThis caused many huge banks with high prices to introduce floors on
checking balances subject to overdraft fees and to put ceilings on fees
charged,â he noted.
Year Consumer OD Revenue (Billion) Median OD Price
2010 $35.2 Est. $27.00
2009 $37.1 $26.00
2008 $35.4 $25.00
2007 $34.1 $25.00
2006 $31.5 $25.00
2005 $29.7 $25.00
2004 $27.9 $25.00
2003 $27.1 $22.00
2002 $25.0 $20.00
2001 $22.2 $20.00
2000 $19.9 $20.00
Source: Moebs $ervices, Inc.
Moebs forecasts that overdraft fee revenue for financial institutions
will be the lowest it has been since 2007.
âBanks and credit unions are having a difficult time trying to get their
operating systems to comply with recent Federal Reserve amendments to
Electronic Banking (Reg E) and Truth-In-Savings (Reg DD),â said Moebs.
âSome institutions like Bank of America have chosen not to offer
overdrafts on debit cards and ATMS. Interestingly, almost an equal
number of banks and credit unions have decided to enter the overdraft
business for the first time. This points out that the recent regulations
written by the Fed are well done since they offer more choice to the
consumer without regulating the price or service design,â said Moebs.
According to Moebs, 2010 is going to be a year of mixed results on
overdraft revenue for banks and credit unions. âThe huge banks over $50
billion in assets, like Bank of America, Chase, and Wells Fargo will
definitely lose revenue,â he said. âHowever, many community banks and
credit unions should show an increase in revenue. Numerous community
banks and credit unions are now reporting big increases in new checking
accounts since Bank of America decided to get out of the overdraft
business,â he said.
âOne bankâs inability to adjust to the changing overdraft landscape is
another bankâs bottom line increase, and this dynamic is all to the
consumerâs benefit,â concluded Moebs.
About Moebs Services
Michael Moebs is an Economist and the CEO of Moebs $ervices,
headquartered in Lake Bluff, Ill. For more than 25 years, Moebs $ervices
has been collecting and analyzing primary empirical data about financial
institutionsâ services, pricing, operating expenses and financial
condition in a counter-intuitive approach that provides simple solutions
to complex issues.
