Limits on Overdraft Fees Won't Cripple Banks, Research Says

USA Today
March 4, 2010
Chu, Kathy

A new report from consulting firm Bretton Woods says new regulations from the Federal Reserve that restrict banks' ability to charge overdraft fees -- which will be implemented in July -- likely will not put a damper on the industry's profitability. Banks earned over $38 billion in overdraft fees last year, and Bretton Woods estimates the new rule will cost credit unions and banks only around $7.3 billion in fee income because it limits "a percentage of overdrafts, not all overdrafts." Banks also have offset the loss in overdraft fees by raising other fees or charging new ones. While consumer advocates applaud the new rule as a good first step, they insist more needs to be done to stop banks from imposing overdraft fees on recurring debit card transactions and checks, charging excessive overdraft fees, and altering the order in which transactions are cleared. Leslie Parrish, a senior researcher at the Center for Responsible Lending, explains, "Even with the (Fed rule) in place, there are a lot of abuses in the marketplace. There are still ways that banks can have their customers rack up hundreds of dollars in overdraft fees per day."

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