Community Bankers of Iowa Monthly Banker Update September 2013 | Page 12

• While a majority of the heaviest overdraft users did not select overdraft coverage after the amendment to Regulation E, those accountholders selected coverage at a higher rate than other accountholders (44.7 percent for heavy users compared with 15.2 percent for all accountholders among the banks the CFPB sampled). • While all heavy overdraft coverage users paid less in overdraft fees during the second half of 2010, accountholders who did not choose overdraft coverage paid $347 less in overdraft fees on average during the same period.

• how banks treat holds on funds in connection with debitcard transaction authorizations, particularly for transactions such as gasoline purchases where the initially authorized amount often differs from the settled amount; • which transaction posting order banks use (which affect debit authorizations) and when banks process transactions (which affect funds availability). No two banks the CFPB studied followed identical posting order policies, and financial institutions responding to the CFPB’s request for information also described widely varying posting order priorities; • how banks set overdraft coverage limits and at what levels, which may be static or may vary based on an accountholder’s overdraft patterns or his or her relationship with the institution. Most banks that the CFPB studied imposed overdraft coverage limits between $500 and $1,000; • whether banks offer waivers or delays in assessing overdraft fees for de minimis transactions (on a per-transaction or net-balance basis) or offer short negative-balance periods (21 of the 33 largest banks surveyed had de minimis policies; the median threshold was $5); and • whether and how banks charge additional fees to provide extended or sustained negative balances, which 21 of the 33 largest banks surveyed employed. The frequency of these fees that banks applied range from daily to weekly, while several banks assess one-time negativebalance fees. The CFPB also determined that how overdraft programs are promoted and to whom often influences how much consumers use overdraft protection. Some banks, for example, reported a small fraction of new accountholders had selected overdraft services in 2011 while opt-in rates in 2010 had varied among existing accountholders who frequently overdraft their accounts. Because overdraft fees represent a sizeable portion of the revenue generated by consumer checking accounts—overdraft fees make up approximately 61 percent of consumer checking account revenue for the large banks the CFPB studied— and given that the bureau found a “variation in consumer experiences and outcomes” related to overdraft programs, community banks should expect the CFPB to continue to closely scrutinize the industry’s overdraft programs. ICBA is working diligently to avoid future regulations that impede community banks from offering this valuable service that many customers benefit from and want.

Impact of Variances The CFPB report also pointed out numerous bank policies and practices that can affect when a transaction might overdraw a consumer’s account and whether or not the consumer would be charged a fee. These factors include: • when banks make deposit funds available (some of the surveyed banks make the total amount of deposited checks immediately available, resulting in more cleared items and potentially fewer overdraft or NSF charges to accountholders);

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