LAKE FOREST, Ill.—Overdraft revenue for the second quarter of 2015 grew $1.7 billion over the first quarter of 2015, the largest quarter-to-quarter increase since the fourth quarter of 2011, according to a new study from Moebs $ervices.
Banks are responsible for the increase while CU overdraft revenue remained flat.
At $32.5 billion for the year ending June of 2015, overdraft revenue is at the highest actual level since June of 2010, said Michael Moebs, economist and CEO at Moebs $ervices.
The revenue increase is not due to changes in overdraft prices, but due to the increase in overdraft volume, the research shows.
“Moebs Services Study of Overdraft Revenue continues to show the strong link between economic conditions and the American consumers’ financial behavior,” said Moebs.
Fees Increasing
The study from Call Reports submitted by banks, credit unions, and thrifts, shows total actual overdraft revenue for the four quarters ending June 30, 2015. Overdraft revenue was up year over year by $800 million, or an increase of 2.5%, to $32.5 billion.
“Overall service charge on deposit revenue is at $42.3 billion for year ending June, 2015, its highest level since June, 2010,” said Moebs. “Financial institutions are increasing their fee revenue. Financial Institutions overall overdraft prices have been constant at $30 for the past 10 quarters, so the revenue increase is due to increases in volume. The increase has come entirely from banks while credit unions remained flat year over year.”
Overdraft activity spiked quarter to quarter in 2015. Overdraft activity per consumer checking account increased from 6.7 per checking account per year in the first quarter to 7.1 in the second quarter, Moebs explained.
“The low of 6.7 matches the first quarter of 2014 and is the lowest yearly usage rate since 1994,” said Moebs. “The high of 7.1 matches the third quarter of 2014 and reflects the more normal rate since 2001.”
CFPB Complaints
The Consumer Financial Protection Bureau registered approximately 410,000 consumer complaints from December, 2011 to June, 2015. Overdrafts accounted for only 1.6% of all these complaints, said Moebs.
“The consumer is more concerned about loans, which account for 70% of all complaints,” said Moebs. “Of the deposit complaints, 63.4% are checking complaints focused on opening, closing, maintaining, depositing and withdrawing.”
Moebs said overdraft revenue is becoming more reflective of the consumers’ response to economic conditions.
“For now, anticipating and managing overdraft volume is more of a pricing challenge for financial institutions than price itself,” said Moebs. “The consumer is more concerned about getting a credit card, vehicle loan or mortgage than avoiding overdraft fees. Financial institutions and the CFPB need to note the consumer focus and plan for 2016 accordingly.”