Mandatory Opt-In Forces Changes in Banking Moebs Survey Finds 13.5 Percent of Financial Institutions Opt-Out of Overdrafts (Lake Bluff, IL March 22, 2010) More than 1800 banks and credit unions made changes in how they handle overdrafts since Regulation E, mandatory opt-in for debit card and ATM overdrafts, was made a requirement by the Federal Reserve on November 11, 2009. Of all the financial institutions surveyed, 11.4 percent, changed by: increasing price, decreasing price, began offering or stopped offering overdraft service. These results come from a nationwide statistical survey of more than 2,000 banks and credit unions conducted in early March 2010 by Moebs $ervices, Inc. a Lake Bluff, IL- based economic research firm. “Two facts from this survey surprised us,” noted Michael Moebs, economist and CEO of Moebs $ervices. “Those were the number of depositories that started overdraft programs for the first time and the number that stopped offering overdraft programs,” said Moebs.

Of depositories surveyed, 11.0 percent started a new overdraft program, according to Moebs. “This is important,” said Moebs, “This tells me banks and credit unions want to streamline their operations and comply with the regulations. These banks and credit unions want to do the right thing for the consumer.”

Of the depositories surveyed, 13.5 percent threw in the towel and opted out of offering overdrafts. “So, Bank of America wasn’t the first to do this: over 200 institutions have,” said Moebs. “This is an incredible opportunity for community banks and credit unions to grab market share and help those 33 million Americans whose banks have stopped offering overdrafts.

There were other significant changes, according to Moebs. Among financial institutions that changed their practices, 18.4 percent did so by decreasing their OD price. “This is significant since decreasing the price will actually stimulate volume and produce more net revenue,” explained Moebs. “An increase in price, which is what 57.1 percent of banks and credit unions did, will actually reduce consent of those opting in to debit cards for overdrafts and will decrease net revenue of depositories.”

Overall, according to Moebs, since the Fed introduced mandatory Opt-In for debit cards and ATM on November 11, 2009, the median price nationwide for all depositories stayed at $27 per overdraft. NSF changes increased from $25 for returning a check to $26. Specifically for overdrafts, banks stayed at $30 per overdraft lead by the huge banks like Bank of America and Chase, which are over $30, yet credit unions remained at $25 per overdraft.

Moebs concluded, “This proves that good regulation by the Fed, which doesn’t tamper with market forces such as price, produces good results. Banks and credit unions are getting into the OD business, leaving the OD business, and increasing and decreasing price. Consumers and providers win.”

About Moebs Services
Michael Moebs is an Economist and the CEO of Moebs $ervices, Inc., headquartered in Lake Bluff, Il. For more than 25 years, Moebs Services has been collecting and analyzing primary empirical data about financial institutions’ services, pricing, operating expenses and financial condition in a counter intuitive approach, which provides simple solutions to complex