This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
$1 buys you full access to ALL of TheStreet's Subscription Services! Learn More

Overdraft Rules Mean Consumers Will Pay Up, or Get Out (Update 1)

Stocks in this article: BACJPMWFC

Updated with additional comment from Frank Mayer, a partner in the Financial Services Practice Group of Pepper Hamilton.

NEW YORK (TheStreet) -- The Consumer Financial Protection Bureau's new focus on overdraft fees will cause banks to strengthen their most profitable customer relationships, while cutting loose consumers that continue to drain the bottom line, according to industry analysts.

"It costs between $100 and $120 a year to maintain a checking account for your customer," says FBR analyst Paul Miller. " My guess is they will go back to the old days, and these guys are not going to provide free products. They will either push you out the door, or find a way to charge you."

Consumer Financial Protection Bureau Director Richard Cordray

The Consumer Financial Protection Bureau, or CFPB, on Wednesday announced that it had "launched an inquiry into checking account overdraft programs to determine how these practices are impacting consumers," with Director Richard Cordray saying that "overdraft practices have the capacity to inflict serious economic harm on the people who can least afford it."

The CFPB said that a study by the Federal Deposit Insurance Corporation found that consumers who overdrew 20 or more times per year paid an average of $1,610 in overdraft fees annually." Cordray requested comment on a new "penalty fee box" disclosure statement, that would make it easier for consumers to understand just how much they were paying in overdraft fees.

Of course, one would think that a depositor would realize if they were hit with heavy overdraft fees, but clear disclosure is always a good thing.

But there were several hints in the CFPB release that the big banks are looking at another money grab, justified by the "disproportionate Impact on low-income and young consumers," with "46.4 percent of young adult accountholders having incurred overdraft fees," according to a 2008 FDIC study, while "of those, 15 percent recorded more than ten overdrafts in one year."

The CFPB's "What's your overdraft status?" campaign to educate consumers on overdraft fees, may also have an impact on bank revenues, although it would seem that the high fees are already obvious to consumers.

The banks famously took a huge hit to revenue, beginning in August 2010, when the Federal Reserve's new "opt-in" rules went into effect, requiring banks only to provide overdraft protection for ATM or debit card transactions for customers who previously signed up for the service.

1 of 4

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,827.75 +12.81 0.07%
S&P 500 2,072.83 +5.80 0.28%
NASDAQ 4,787.3170 +29.0650 0.61%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs