Reg E Forces Overdraft Changes
A recent survey conducted by economic research firm and overdraft program provider Moebs Services showed that 1,800 banks and credit unions have made changes to their overdraft strategy since Regulation E was made a requirement in November 2009 by the Federal Reserve.
The results were from a survey of 2,000 banks and credit unions conducted in early March 2010.
Out of all the financial institutions surveyed 11.4% changed their overdraft strategy by increasing price, decreasing price or beginning or stopping offering overdraft service.
"Two facts from this survey surprised us," said Mike Moebs, economist and CEO of Moebs Services. "Those were the number of depositories that started overdraft programs for the first time and the number that stopped offering overdraft programs."
Eleven percent of those surveyed started a new overdraft program and 13.5% stopped offering overdrafts.
"So, Bank of America wasn't the first to do this: over 200 institutions have," Moebs added. "This is an incredible opportunity for community banks and credit unions to grab market share and help those 33 million Americans whose banks have stopped offering overdrafts."
Among those that made changes to their overdraft programs, 18.4% decreased their overdraft fee price. Fifty-seven percent increased their overdraft fee price.
Since it was made a requirement for consumers to opt-in for debit card and ATM overdrafts, Moebs said that the median overdraft fee price nationwide for all depositories has remained the same at $27 per overdraft. For banks the median stayed at $30 and for credit unions the median remained at $25.
"This proves that good regulation by the Fed, which doesn't tamper with market forces such as price, produces good results. Banks and credit unions are getting into the overdraft business, leaving the overdraft business, and increasing and decreasing price. Consumers and providers win."