Michael Moebs, Moebs $ervices
LAKE FOREST, Ill.—Credit union overdraft revenue reached an all-time high in the third quarter, totaling $5.8 billion, according to the latest Moebs $ervices Overdraft Study.
The previous high, slightly less than $5.8 billion, was reached in 2012. For the year ending September 30, 2015, credit unions show a 1.8% increase in overdraft revenue vs. 2014.
“One thing that is boosting credit union OD revenue,” noted Moebs, “is more and more credit unions are lowering the overdraft price, which gets them more OD transactions and more revenue. We are not seeing the banks do this.”
Banks, despite a $300-million decrease since Q1 2015, have experienced an increase of approximately $300 million compared to the third quarter of 2014. Overall financial services overdraft revenue in the third quarter grew by about $1.6 billion from Q1.
OD Revenue Fluctuating
“When comparing quarter to quarter, in 2015 we see a 3.6% increase for credit unions. Since 2012’s high point, credit unions’ OD revenue has fluctuated,” said Michael Moebs, economist and CEO at Moebs $ervices, adding that the U.S. economy has had much to do with the quarterly volatility of OD revenue at banks and credit unions.
“All indications are that as gas prices fluctuated wildly during the first nine months of the year, OD revenue followed suit resulting in significant quarter-by-quarter changes,” said Moebs. “Overdraft revenue for banks, thrifts and credit unions combined, however, remains steady at an annualized $32.2 billion.”
Moebs $ervices’ Overdraft Study continues to show the strong link between economic conditions and the American consumers’ financial behavior. The Moebs study is based on Call Reports submitted by banks, thrifts and credit unions, showing total actual overdraft revenue for the four quarters ending September 30, 2015.
According to Moebs, author of the report, as the price of gas at the pump has come tumbling down, consumers find they have more spendable income and they also show less concern about overdrafts. In fact, they want the safety net, he said.
Gas Pump Money
The Consumer Financial Protection Bureau registered approximately 750,000 complaints from December, 2011 to October, 2015. Overdraft fees accounted for only 1.6% of these complaints.
“As oil prices fall consumers are spending their gas pump savings on other things,” explained Moebs. “OD volume has risen about 1% since the third quarter of 2014, reflecting a less concerned financial picture for the consumer. The data indicates that American consumers have adjusted their financial behavior without concern about overdraft fees.”
“Credit Unions appeal to those who overdraft more. The consumer likes overdrafts as reflected in the low number of CFPB complaints. Low gas prices are getting the consumer back into the economy. As the consumer starts to gradually get back into the economy their financial behavior starts to change, and one change is overdrawing more,” noted Moebs.