Tuesday Topic: End of Overdraft?

Barb, I guess we're bucking the trend as we just implemented a new software program that provides dynamic limits based on the deposit behavior of our customers. We think our customers need a solution that fits their needs and one that meets UDAAP standards. We know that 80% of our customers never overdraw their account. And we know that about 8% represent the majority of overdrafts. And the thing about that 8% is that they make the deposits to support their behavior. It's important that we find the balance to supporting our customers and generating revenue to provide all the services we do provide for no cost to them.

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John Tyson
CFO/SVP
Altamaha Bank & Trust Company
Vidalia, GA
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Original Message:
Sent: 12-06-2021 10:24
From: Barb Rehm
Subject: Tuesday Topic: End of Overdraft?

Tuesday Topic: End of Overdraft?

Overdraft fees are back in the news (again).

In the last week, Capital One pledged to stop charging the fees while Sen. Elizabeth Warren called on its competitors to follow suit and the CFPB vowed to beef up its "supervisory and enforcement scrutiny of banks that are heavily dependent on overdraft fees" while the Consumer Bankers Association argued competition is reducing both overdraft use and revenue.

I suspect more large banks will follow Capital One and the CFPB will issue enforcement actions and possible even limits on overdraft fees. But what happens then? Banks are forced to provide a service at a loss and/or customers are forced to use more expensive alternatives. Who benefits from that? The bottom line remains that covering an overdraft is a valuable service that banks offer their customers, typically with opt-in acceptance. The opposition to overdraft follows a similar outcry over ATM fees years ago. Why should I pay the bank to access my own money? Because operating ATM networks costs money! I am not sure why banks are viewed as a business that should provide services for free, but it's a dangerous corner to get backed into. Then again, IntraFi Network's most recent Bank Executive Business Outlook Survey of senior bank executives showed 70% do not offer, or do not plan to offer, any sort of alternative product to a traditional overdraft program. (See page 8 of the report here.)

I wonder what you think? Does your bank still charge overdraft fees? Do your customers view it as a service worth paying for? Are you worried about CFPB scrutiny? About the prospect that other bank services will come under pressure to eliminate fees?

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Barb Rehm
Senior Managing Director
IntraFi Network
Arlington VA
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