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Overdraft protection has become a hotly contested issue

from "Industry Collects Billions, Consumers Cry Foul", by Lee Conrad, US Banker 05/2005

Consumer groups say some banks encourage customers to overextend themselves. Though regulators have stepped in to halt misleading overdraft-protection practices, advocates warn it's not enough.  

 

Overdraft protection has become a hotly contested issue, and while banks are expected to begin communicating their policies on fees more clearly in the wake of joint guidance published in February by regulators, consumer advocates say that yet more oversight is needed to protect customers.

 

Fees stemming from overdraft protection and non-sufficient funds transactions have become a major source of revenue for depository institutions, topping $33 billion in 2003, according to Mike Moebs, chairman of Moebs Services, an economic research firm that includes overdraft services among its specialties.

 

Credit unions depend the most on overdraft revenue, gleaning 60 percent of net operating income, or $3.5 billion, from these services, Moebs says. Banks collected $26.1 billion, or 17.9 percent, and thrifts claimed $3.5 billion, or 16 percent. He says the $33.1 billion figure was enough to "shock" regulators' lawyers when he made a presentation during their deliberations for this guidance.

 


Written By: rnybeck
Date Posted: 10/24/2005
Number of Views: 2696

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