LAKE FOREST, Ill—A new study shows that overdraft revenue remains stable at U.S. financial institutions.
According to Moebs $ervices, despite regulatory pressures that have impacted FI overdraft programs combined with consumers cutting back on the number of overdraft fees due to the economy, banks and credit unions have stopped a slide in OD revenue by raising the median price, now at $30.
The Moebs Overdraft Revenue Study shows that for the 12 months ending Sept. 30, 2014, total FI overdraft revenue was $31.9 billion. “This revenue matches the revenue for the entire year of 2013, providing 21 months of stable revenue,” said Michael Moebs, economist and CEO at Moebs $ervices.
Moebs pointed out that starting in the summer of 2010, 32 banks were identified as using a pooling of transaction methodology on all consumer transactions, including internal transactions along with a ranking of the value of the transactions. “The Federal Courts ruled this methodology as impermissible. Mega-bank OD Revenue was heavily impacted.”
Regulations emanating from the FDIC in the form of guidelines on overdraft have also curtailed overdraft revenue.
“This restraining of overdraft revenue comes from daily caps on transactions, annual caps on transactions, deminimis balances, etc.,” Moebs stated. “Economically, many households have been building checking account balances and thus avoiding the occasional overdraft by error or shortfall in paycheck to paycheck funds. Even the frequent user of overdraft services has cut back by a reduction of about one-third. More money in checking reduces OD volume.”
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