Aug.15 marks the one-year anniversary of the Federal Reserve's implementation of Regulation E, which requires financial institutions to receive consumer approval prior to covering debit card and ATM overdrafts.
Since then, credit unions and banks have maintained a national median overdraft transaction price of $28.
That's according to a June 2011 study conducted by Lake Bluff, Ill.-based economic research firm Moebs Services. The study also found that since Reg E took effect, debit card and ATM overdraft usage has risen, while the number of institutions offering overdraft protection through a savings account or line of credit transfer has declined.
The study found that 77% of checking account holders – more than 100 million consumers – chose to allow for debit card and ATM overdrafts since Reg E's implementation, Moebs Services said.
The percentage of institutions offering debit card overdrafts has risen from 45.4 in 2010 to 97.7 in 2011, and 61.9% of institutions cover ATM overdrafts, an increase from 2010's 35.2%.
“This shows the consumer treats overdrafts as a safety net, not a penalty,” Moebs Services CEO Michael Moebs said.
Moebs said 80.8% of CUs and banks offered savings account transfer overdraft protection services in 2009, while 70.4% do today; 63.4% of institutions provided line of credit overdraft protection services in 2009 and just 49.2% do in 2011.
“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,” Moebs said. “Because of the added federal scrutiny, banks are unable to provide a safety net to their consumers with overdrafts and are therefore cutting the regulatory burden by cutting services.”
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Natasha Chilingerian
Natasha Chilingerian has been immersed in the credit union industry for over a decade. She first joined CU Times in 2011 as a freelance writer, and following a two-year hiatus from 2013-2015, during which time she served as a communications specialist for Xceed Financial Credit Union (now Kinecta Federal Credit Union), she re-joined the CU Times team full-time as managing editor. She was promoted to executive editor in 2019. In the earlier days of her career, Chilingerian focused on news and lifestyle journalism, serving as a writer and editor for numerous regional publications in Oregon, Louisiana, South Carolina and the San Francisco Bay Area. In addition, she holds experience in marketing copywriting for companies in the finance and technology space. At CU Times, she covers People and Community news, cybersecurity, fintech partnerships, marketing, workplace culture, leadership, DEI, branch strategies, digital banking and more. She currently works remotely and splits her time between Southern California and Portland, Ore.
