FOR IMMEDIATE RELEASE

Contact: Kim Kellogg/Pat Harden
Fri., Nov. 20, 2009 510-635-4150 (office)
510-325-3195 (Kellogg cell)

Wall Street Banks Lower Overdraft Fees

Lake Bluff, IL (Nov. 20, 2009) -- Moebs $ervices updated its June 2009 survey of more than 2,000 banks and credit unions and found that Wall Street banks, those with assets greater than $50 billion, lowered their price on overdrafts by 1.3 percent..

“While this is a small decrease, it is the first time in 17 years that we have seen the huge banks show some reduction in overdraft prices,” said Michael Moebs, economist and CEO of Moebs Services.”

Overall, 2 percent of financial institutions charging overdrafts reduced their price. About 7.6 percent raised overdraft prices.

“This is the smallest price increase in overdrafts I have seen in over 25 years in collecting this type of data,” said Moebs. “It appears to me that banks and credit unions are sending a clear message to the American public and Congress that they want to change by getting their overdraft prices in line to help – not hinder – consumer usage. He added, “In light of the Federal Reserve’s recent Regulation E changes mandating Opt-In for overdrafts and the Fed’s finding, it seems clear that consumers want their use of overdrafts. These incremental price changes by financial institutions tell me that banks and credit unions want Congress to leave overdrafts alone.”

Nationwide, the 16,000 financial institutions increased the overall price annually by 1.8 percent, with banks in total raising the price of overdrafts 2.1 percent and credit unions raising the price 2.2 percent. Overall, the median price of an overdraft moved up from $26 per overdraft to $27 for all financial institutions. In the past 10 years prices for overdrafts have increased at an annual rate of 8.3 percent. The Consumer Price Index for this same period increased 2.5 percent. “These statistics indicate the recent increases in 2009 are below the normal rate and below the rising CPI, as well,” said Moebs.

According to Moebs, the reason behind so few banks have raised their overdraft price is the classical economic case of price elasticity. “In the past, banks and credit unions could count on raising prices to get more revenue, and the result was volume increased as consumers used more. Price was of no concern. However, the price becomes elastic when it goes too high and consumers stop using the service or seek alternatives. This is exactly what financial institutions with prices greater than $29 to $30 for individual overdrafts have found – lower volumes, “he concluded.

About Moebs Services
Michael Moebs is an Economist and the CEO of Moebs $ervices, headquartered in Lake Bluff, Ill. Annually, for over two decades, Moebs $ervices has conducted surveys of the pricing policies of banks, savings institutions, credit unions, merchants, and payday lenders.

###