Overdraft Pricing Remains Steady
A new study conducted by Lake Bluff, Ill.-based economic research firm Moebs Services reveals that since the Federal Reserve’s August 2010 implementation of Regulation E, which requires financial institutions to receive consumer approval prior to cover debit card and ATM overdrafts, CU overdraft transaction prices have remained flat at $25.
CUs have also been careful to offer all four types of overdrafts (ATM, debit card, ACH and check). Fom 2010 to 2011, the percentage of credit unions offering all four increased from 50% to just 53%. That’s a significant difference from banks, 74% of which offered all four types of overdrafts in 2010 and 86% in 2011.
Another significant finding of the Moebs Services study is that consumers are using overdrafts at a more rapid rate. Since Reg E, more than 77% of consumers in the U.S. chose to allow for debit card and ATM overdrafts, which Moebs pointed out is more than 100 million checking account consumers.
“What many regulators do not understand is that Reg E as introduced by the Federal Reserve in 2009 and implemented in 2010 has changed consumer behavior to regard overdrafts as safety nets and no longer as a penalty,” Moebs said. “Because of the added federal scrutiny, banks are unable to provide a safety net to their consumers with overdrafts and are therefore cutting the regulatory burden by cutting services.”