LAKE FOREST, Ill.—A new study of overdraft opt-in rates indicates that the higher the overdraft price the lower the opt-in rate—and that the bigger the institution, the higher the OD charge.
The study, by Moebs $ervices, found that as a result the large majority of CUs enjoy markedly higher opt-in rates than banks.
The Moebs $ervices Opt-In Study in June revealed CUs enjoy opt-in rates at 56.7%, thrifts are at the national median (43.3%), and bank customers opt-in at a 31.7% clip. “Also, 74.4% of all depositories offer debit card overdrafts, and, significantly, 25.6% do not,” said Michael Moebs, economist and CEO at Moebs $ervices.
A recent Moebs overdraft pricing study shows that banks' median OD charge is $30 and has remained stable in the last two years. CUs’ median price is $28.50, a dollar amount that has been inching up.
Moebs reminded that with Regulation E in 2010 the Federal Reserve required mandatory opt-in by banks, thrifts and credit unions for consumers for debit card overdrafts. “Measuring Opt-In rates for financial institutions has always been elusive, with the Consumer Financial Protection Bureau primarily relying on data from a small segment of very large banks. The Moebs Services Opt-In Study developed a methodology to measure opt-in rates utilizing a broad (2,806), statistically selected sample of FIs.”
The Moebs analysis first identifies FIs that do not offer debit overdrafts. Then, eliminating those that don’t offer the service, it compares debit OD only to those FIs that offer checking account overdrafts and debit card overdrafts, explained Moebs.
“Under other methodologies, FIs often under-reported their opt-In rates, since over 25% of the institutions did not offer debit card overdrafts,” said Moebs. “Correcting for these measurement inaccuracies the usage numbers become more accurate and provide a better comparison of the differences between FI types.”