Overdraft revenue fell nearly $1 billion for creditunions, banks and thrifts in first quarter 2013, according to thelatest quarterly study on overdrafts by Moebs $ervices, aLake Bluff, Ill.-based economic research firm.

Total deposit service charges fell on an annualized basis 2.9%,which is the first quarterly fall since the fourth quarter of 2011and only the second time in two years.

The Moebs study also shows that while population, householdformation and newly opened checking accounts continue to grow,overdraft transactions fell to the lowest level since 1999. Moebshas studied OD Revenue since 1992.

“Overdraft revenue is starting to act like a barometer of thesluggish economy,” explained Michael Moebs, economist, and CEO of Moebs$ervices. “With the net pay of Americans sufferinga jolt under the Affordable Health Care Act's provisions ofincreased taxes starting January 1, the savvy checking account useris fine tuning their finances and reducing expenses, especiallydeposit service charges.”

What's more, February and March are historically the lowestmonths for OD transactions because the consumer is trying torecover from the holiday season which can be hard on the wallet andpurse, he said. So, with the reduction of net pay right afterthe holidays, February and March moved up a month sooner making thefirst quarter of 2013 bad.”

Another factor was the Consumer Financial Protection Bureau'sdecision over regulation on overdrafts. Pending CFPB chiefRichard Cordray decided to stretch out potential overdraftregulations for up to two years to provide more study time on theissue.

“This threw banks and credit unions into a quandary over how toposition price changes on overdrafts,” said Moebs, “So mostfinancial institutions decided to keep the prices the same whilethe consumer was overdrawing less.”

The median national overdraft charge is $29.

Also influencing OD revenue to a lesser extent was marketingmoves by financial institutions to give waivers on the first six ODtransactions in a year, to forgo small overdraft balances of lessthan $5.

Moebs suggested that credit unions and banks can continue toreduce fees to increase revenues.

“Wal-Mart took a small family business to the giant in theretail business by reducing price and selling more,” he said. “Ourdata shows financial institutions that lower prices to help theconsumer reduce fees actually increase revenue from having morevolume of new checking accounts and transactions.”

About 30% of the 135 million checking account users are “underbanked” or have a FICO score of less than 600, which remainsunchanged from 20 years ago.

“This seems to tell us the consumer and small business personneeds a financial safety net and wants overdraft service,” Moebssaid. “Banks, thrifts and credit unions also appear ready toprovide the OD safety net, hopefully in a transparent, low priceway, free of market restrictions.”