LAKE BLUFF, Ill. (8/15/11)--Today marks the one-year anniversary of the implementation of Reg E's opt-in for debit card and ATM overdrafts. More than 77% of consumers surveyed have elected to opt-in to allow their financial institution to overdraft their checking accounts with debit cards, said a new study that indicated most view the service as a safety net. During the year, depositories maintained their price for an overdraft transaction at a national median of $28, said Moebs Services, a Chicago based pricing research firm that conducted the study in June. Wall Street banks lowered the price of an overdraft transaction to $34 in 2011, down from $35 in 2010. Nonsufficient fund return fees rose to $28 from $27 during the period, the study found. The study pointed two contradictory findings, said Michael Moebs, economist and CEO at the firm:
* Since Reg E's implementation, more depository institutions are allowing consumers to overdraft their checking accounts with debit cards; and * Institutions offering automatic transfer from a savings account or a line of credit for overdraft protection decreased.
Reg E required depositories to get approval from consumers before covering a debit card or ATM overdraft. The study found that 77% of consumers allowed the overdraft from their checking account when funds weren't available for a transaction. "This is over 100 million checking account consumers, more than voted in the interim election in November 2010," said Moebs. Before Reg E kicked in last summer, 45.4% of institutions offered debit card overdrafts. Today 97.7% do. ATM overdrafts were 61.9% in 2011, compared with 35.2% in 2010. "This shows the consumer treats overdrafts as a safety net, not a penalty," Moebs said. Other findings:
* Overdraft services are fading. Of financial institutions surveyed, 70.4% offered overdraft services in June, compared with 80.9% in 2009. * Those offering an overdraft line of credit dropped to 49.2%, from 63.4% in 2009. Moebs attributed the figures to high costs imposed by the Federal Deposit Insurance Corp.'s new overdraft guidelines.
"What many regulators do not understand is that Reg E as introduced by the Federal Reserve in 2009 and implemented in 2010 has changed consumer behavior to regard overdrafts as safety nets and no longer as a penalty," he said. Because of the added regulatory scrutiny, "banks are unable to provide a safety net to their customers with overdrafts, and are therefore cutting the regulatory burden by cutting services."