CFPB Publishes Research on Overdraft, Fee Revenues

Three types of aggregate fee revenues—maintenance fees, ATM fees and overdraft fees—all declined in 2020, with overdraft fees seeing the greatest decline at 26.2%, according to data released by the CFPB today. In the years between 2015 and 2019, overdraft fees were increasing modestly year-over-year—about 1.7% annually, the bureau found.

The report also looked at “overdraft/NSF reliance,” which the bureau defined as “the share of overdraft/NSF fees among the three fees listed in the Call Reports.” Overdraft reliance remained consistent between 2015 and 2018, hovering between 65% and 66%, before edging up to 66.5% in 2019 and subsequently falling to 62.4% in 2020.

Notably, the depressed reliance in overdraft fees has persisted throughout the pandemic and into 2021, which the CFPB said “reflects the relatively larger continued shortfall of overdraft and NSF fees in relation to their pre-pandemic volumes, compared to the shortfall in maintenance and ATM fees.”

In the report—which examined Call Report information from 2015 to 2021 at banks with assets of more than $1 billion—researchers acknowledged that “it is not possible to determine how much of the drop in overdraft/NSF fee reliance during the pandemic was due to changing institution policies and practices and how much was due to changing consumer use patterns.”

The CFPB also published a separate report providing a snapshot of overdraft fees at smaller banks and credit unions, based on information supplied by core processors from 2014. The CFPB noted that this data “may not always reflect current practices and outcomes,” but represents “the most detailed and wide-ranging quantitative data the bureau or others have collected on overdraft practices at small institutions.”

In a press release accompanying the reports, CFPB Director Rohit Chopra pledged that under his leadership, the bureau would “take action” on overdraft fees, and that the bureau intends to “enhance its supervisory and enforcement scrutiny of banks that are heavily dependent on overdraft fees.”

In its own statement, the American Bankers Association challenged the bureau’s findings and its criticism of the banking industry. “The research released today by the CFPB paints an unrecognizable picture of the largest, most diverse financial services marketplace in the world,” said ABA President and CEO Rob Nichols. “Banks across the country provide overdraft-free account options, including Bank On-certified accounts available at institutions making up more than 50% of the U.S. deposit market share. Indeed, as the CFPB’s own research shows, overdraft and non-sufficient fund fees fell by 26.2% percent in 2020.”

Nichols emphasized that banks are committed to helping customers fully understand and make informed choices regarding overdraft options. “Under federal rules, customers can only receive debit card and ATM overdraft protection by opting in, and they can opt out at any time. Banks provide customers with multiple tools to help them manage their accounts and avoid overdrawing, including text alerts about low balances and the ability to monitor their accounts digitally.”

He added: “A more comprehensive analysis by the CFPB would have provided this important context and served to better inform consumers about the choices available to them. Instead, the research released today unfortunately uses dated information to unfairly criticize banks for providing services many Americans appreciate and value.”