The CFPB published a data point report on checking account overdrafts that found banks draw half of their overall fee income from overdraft fees for debit card and ATM use. Only eight percent of customers pay nearly 75 percent of all overdraft fees. The report analyzed data from 2 million accounts and transaction data at large banks from July 2010 through June 2012.
Fees for debit card use come primarily from transactions of $24 or less and $50 for other types of debits. The report found that large bank customers who opt in to overdraft services for debit and ATM transactions pay seven times more fees (almost $260 a year) than customers who don’t (they paid only $35 a year).
Critics of the report point out that overdraft protection helps consumers manage their accounts, and the services are available upon consumers’ election, which can be changed at any time. They caution regulators not to eliminate this option for consumers. While the CFPB acknowledged that banks should be allowed to offer overdraft protection, it found that overdrafts can impose heavy costs on consumers who have low account balances, and, thus, no cushion for error.
Proposed regulations specific to overdraft fees are expected no earlier than next year. Although the report focuses on checking accounts, the broader message with respect to overdrafts likely will feed into proposals for other financial products.
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