An analysis of recently available data confirms that financial institutions continue to engage in abusive overdraft practices and that reform is urgently needed. This issue brief highlights five key concerns:

  • Overdraft fees remain an enormous drain on checking account customers. Using newly available call report data as the starting point, we estimate that consumers pay nearly $14 billion annually in overdraft fees
  • Research has consistently found that overdraft fees are disproportionately borne by a relatively small portion of account holders. Further, as an example from our data set of checking account activity helps to illustrate, these fees can multiply, seeming more likely to accentuate income volatility than to smooth it
  • Our analysis of recently released complaint narratives filed with the Consumer Financial Protection Bureau (CFPB) shows that even consumers who carefully attempt to avoid a negative balance find themselves overdrawn nonetheless and struck by disproportionately harsh overdraft fees as a result
  • Ultimately, costly overdraft fee practices push some families out of the banking system altogether. FDIC data indicate that approximately 778,800 households and over 1 million adults who once had bank accounts are currently unbanked (primarily due to high or unpredictable fees), while other estimates suggest even greater numbers
  • The lucrative revenue from overdraft fees keeps banks from offering lower-cost, responsible banking and credit products for low-income account holders and other vulnerable populations

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