A new national survey conducted by Morning Consult on behalf of the American Bankers Association shows that consumers value and understand existing overdraft services offered by financial institutions.
According to the survey, seven in 10 consumers (70%) find their bank’s overdraft protection valuable – as compared with only 14% who do not find it valuable. Eight in 10 consumers (80%) who have paid an overdraft fee in the past year were glad their bank covered their overdraft payment, rather than returning or declining payment, and 68% of consumers think it’s reasonable for banks to charge a fee for an overdraft, as opposed to only 23% who think it’s unreasonable.
Three in four consumers view overdraft fees as reasonable when considering that large payments like mortgages or rent payments are covered and paid on time (74%) or when considering that customers are protected from late or other penalty fees if payments overdraw a customer’s account (75%).
The survey was released ahead of a possible Senate vote this week on a resolution that would overturn a Consumer Financial Protection Bureau rule on overdraft fees. The rule requires banks with at least $10 billion in assets to cap overdraft fees at $5 unless they voluntarily set a cap that covers their actual costs and losses or treat overdraft protection as a loan covered by the Truth in Lending Act.
“The survey, consistent with past national polling, shows that Americans clearly appreciate and understand current overdraft programs,” ABA President and CEO Rob Nichols said. “The CFPB’s misguided rule would put those programs at risk by implementing a government price cap on overdraft fees, making overdraft protection almost impossible to offer. We urge the Senate and the House to nullify this rule and prevent Americans from being forced to rely on less regulated and higher risk nonbank lenders for their short-term liquidity needs.”
Possible effects on community banks
The survey also found that the vast majority of consumers (91%) said it is easy for them to check their account balance so that they can avoid overdrawing their account. Two-thirds of respondents (66%) are aware that customers can opt out of receiving overdraft protection at any time after they’ve accepted the service, as compared with only 8% who incorrectly believe that customers are required to stay in the program once they accept the service.
Of those respondents who are currently enrolled in overdraft protection, 85% have never seriously considered stopping or getting out of the service. Nearly three-quarters (72%) said they prefer that their bank offer overdraft protection as an option to customers whether there is a fee or not, as opposed to only 11% who prefer that their bank not offer overdraft protection at all.
Significantly, the survey shows that nearly half of bank customers (42%) would likely leave their bank if another bank offered a much lower overdraft fee. This indicates customers are not making mistakes when they access overdraft but are consciously choosing to use the product. Moreover, this suggests that community banks purportedly exempt from the CFPB’s new rule could lose customers if the rule is implemented and larger competitors are forced to reduce their overdraft fees.
