Most consumers want important transactions paid by theirfinancial institution even if those transactions result in anoverdraft, the Independent Community Bankers of America foundin a survey of consumers.

The ICBA Overdraft Payment Services Study of 3,000 consumersfound that most consumers understand the potential consequences ofreturned payments and are knowledgeable of alternative services toavoid overdrafts.

Further, most consumers do not pay overdraft fees—more thanthree-quarters of consumers did not incur an overdraft in the pastyear.

The study comes as the Consumer Financial Protection Bureau isseeking public input regarding overdraft programs, andexamining overdraft policies in large banks to see if additionalregulation is needed.

“This study demonstrates that consumers who use overdraftpayment programs understand the service and prefer it to othersources of short-term funding—so overdraft services should continueto be readily available to them,” said ICBA Senior Vice Presidentof Regulatory Policy Viveca Ware.

“Community banks offer overdraft services as a valuable serviceto meet their customers' financial needs. Regulatory policiesshould not impede Main Street institutions' ability to do so,” Waresaid.

The study also found that consumers' choice of financialinstitution makes a difference. With just under 15% paying anoverdraft fee in the previous 12 months, community bank customersincur overdraft fees less frequently than customers of megabanks (24%), credit unions (19%) and regional banks(19%).

Community bank customers also are less likely to opt out ofoverdraft coverage for check and ACH debit transactions, the ICBAsaid.

Without overdraft services, consumers face consequencesincluding merchant returned check fees, late fees, possible creditreport and check verification system blemishes, collections hassleand embarrassment. All of these scenarios can be worse thanincurring an overdraft fee, the trade group said.

According to the ICBA study, most consumers, particularly thoseusing overdraft services, are aware of alternative services to meettheir payment needs, such as account transfers and lines of credit.Overdraft coverage is the most preferred option for consumers withfour or more overdraft transactions in the past 12 months.

Further, more than 85% of consumers prefer that theirfinancial institution pay at least one important transaction, suchas a mortgage or rent payment, provided a fee of an equal amountwould be charged whether the transaction were paid or returned.

The study shows that overdraft payment programs are an importantsource of short-term funding for consumers and that regulatorypolicy should not restrict or impede consumer access to servicesthat are right for them, the ICBA said.

The report is available on the ICBA's website.