Overdraft Fees Mean Eleven-Figure Business
If you’ve ever been stuck with an overdraft fee—I did once, but it was ultimately regarded as a mistake due to an online funds transfer that didn’t go through—then you know how annoying it is. That’s doubly true when you’ve got multiple accounts with an institution; why don’t they just reroute the funds themselves and not charge the penalty? According to word from the Consumer Financial Protection Bureau (CFPB), the loss of around $15 billion in 2016 might explain why.
The CFPB study noted that overdraft fees were up 2.2 percent from the previous year’s study of 2015, and of that $15 billion, $11.41 billion went to United States banks. This is a fairly complete picture, with word coming in from large and small banks alike along with credit unions. However, only banks that have at least $1 billion in assets are required to report such things, so the actual number is likely higher.
The Federal Reserve has been working to try and turn some of this around, adding in a requirement that banks get customers’ permission to cover a transaction, but even with this measure there are still plenty of fees being paid out. United States consumers that get hit with the fees are reportedly getting hit for about $450 a year.
Richard Hunt, head of the Consumer Bankers Association, expressed an eagerness to work with the CFPB on this, but claimed that banks already offer “…clear, concise procedures for opting into overdraft services.” These “clear, concise procedures” were said to be considered “confusing” by just one percent of those involved in a survey about such matters.
These fees are likely to be part of one of the first mobile payments systems as long as there are checks to write. We can ask “why not just route money from our savings accounts automatically to cover this shortfall,” but when we consider the portion of that $15 billion that would be lost, well, we likely have our answer already, don’t we? Perhaps next we should ask the fox why he doesn’t take a job guarding henhouses because he could eat free corn like the chickens.
Still, with a little extra vigilance, we can keep out of this particular fee trap and cut down on some of that $15 billion annually.