U.S. banks are on pace this year to book a record $43.6 billion in fees charged to customer deposit accounts - most notably overdraft fees - just as federal lawmakers prepare fresh restrictions on such fees.
Through the first half of the year, U.S. banks took in $21.8 billion in service charges on deposit accounts, according to data from the Federal Deposit Insurance Corp.
That figure is a record for the first half of a year. Last year, banks booked $39.5 billion in such revenue, which does not include some other types of fees, like those for using ATMs.
Banks have been using account fees to help offset rising losses from loans tied to the U.S. housing depression and economic recession.
But that helpful surge in fee revenues has come at a stiff cost: A political backlash from lawmakers and consumers, angered that banks have raised prices for customers even as U.S. taxpayers have allocated more than $700 billion to support the troubled industry.
A number of banks, including JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC), volunteered this week to place lower daily limits on how many fees they can charge customers who run negative balances. Some of them, including JPMorgan, also said they would rescind their practice of re-ordering a customer's daily transactions, which produces more opportunities banks to charge fees.
It's not yet clear how those changes will affect banks' revenues.
The moves nonetheless failed to appease lawmakers in Washington, many of whom said Wednesday they will proceed with legislation restricting the fees. The Federal Reserve, a bank regulator, could also hand down fresh restrictions on the fees by the end of the year.
The restrictions are likely to occur just as banks have come to depend more on fees to stem losses or eke out profits. Through the first half of the year deposit-account charges represented 5.2% of all U.S. bank revenues, according to the FDIC - more than one of every $20 in revenue. In 2006, service charges on deposits accounted for 4.1% of banking revenues.
Earlier this year, the median overdraft charge rose 10% to $27.50, according to Moebs Services Inc.
But not all banks have raised their fees during the financial crisis.
"My bank charges $20 for overdrafts. We have for 20 years," said Leton Harding, an executive vice president at First Bank & Trust Co. in Abingdon, Va. He said the bank posts transactions to customer accounts in ways that produce the smallest number of fees.
"One way for Americans to get a better deal," he said, "is to shop around."
To help offset restrictions on fees, banks could soon find richer profits in making new loans. Bankers have said recently that they now face much less competition in writing new loans, especially since the markets for packaged loans sold to third-party investors are all but silent.