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FDIC Says Overdraft Fees Gave Banks $2.5 Billion In First Quarter Non-Interest Income

Overdraft fees may be a gray area of finance no longer.

In a report released Wednesday (May 27), by the Federal Deposit Insurance Corp., over 600 banks reported data related to overdraft fees for the first time. And during the first quarter of this year, the lenders garnered $2.5 billion in consumer overdraft fees, reported American Banker on Thursday (May 28).

That tally is roughly 5 percent of the total non-interest income reported by the institutions, assuming a $10 billion annual run rate, and comprises about 34 percent of total fees levied on consumer deposit accounts.

Among the standouts in the FDIC report: TD Bank, which took in nearly $103 million in overdraft charges, and constituting 30 percent of total fee income in the quarter. On the other end of the spectrum: PNC Financial Services Group got less than 6 percent of its fee income stream from overdrafts and online bank Ally Bank, among others, got less than 1 percent of fee income from overdraft activity.

American Banker reported that such outsized overdraft fee income ranges among banks surveyed ties together demographic differences in their customer bases, “opt in” marketing programs and overall overdraft fee policies.

The week before the FDIC data was released, the Consumer Financial Protection Bureau said it would push back its rulemaking process tied to overdrafts from July to October of this year – and likely measures could place a cap on the amount of money banks can collect via overdraft fees, a topic MPD CEO Karen Webster weighed in on last week.

Several measures noted by American Banker include: Reordering transactions from high amounts to low amounts, which can tend to increase overdraft penalties. Other regulations could crimp the amounts and frequency of penalties.

The CFPB will likely examine how to treat overdraft fees charged at ATMs and at checkout registers via debit transactions. Those fees, according to American Banker, are a bit more controversial than charges assessed when a check bounces, because they wind up being not as costly to the bank.

Among the 626 banks that reported such fee data in the latest FDIC numbers, overall fees collected broken down, came to $975 million in periodic maintenance charges and $439 million from consumer ATM fees.

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