LAKE BLUFF, Ill. – Today marks the second anniversary of the Fed’s Reg E Opt-In regulation for debit card and ATM overdrafts, and one economist says a number of lessons have become apparent.
“You can’t kill overdrafts,” observed Michael Moebs, economist and CEO at Moebs $ervices. “Too many people want this service and need it as a safety net.”
Moebs shared data points that indicate even Reg E, the recession, and July 1, 2011 FDIC rules targeting overdrafts for financial institutions have not been able to curtail consumer usage. “Overdrafts will always come back no matter what the government or the economy does.”
Moebs’ data shows:
* Overdraft fee revenue (annualized) was $33.9 billion in the third quarter of 2010.
* Overdraft fee revenue fell to a low of $29.5 billion in the third quarter of 2011.
* Overdraft fee revenue was $31 billion in the first quarter of 2012.
* The average price on ODs was $27.66 nationally in June, 2010, and now is $27.94.
* 45.4% of all financial institutions allowed debit card ODs in June 2010, and 72.7% are allowing ODs on debit cards now.
Considering this data, Moebs added the CFPB should tread carefully with regard to regulating overdrafts and lean toward recommendations that improve speed of information delivery to consumers, such as text alerts when an account is overdrawn, and clarity of information regarding a financial institution’s overdraft policies and procedures.