Some Findings from the FDIC's Study of Bank Overdraft Programs

Here are some interesting findings from the Executive Summary in the FDIC's Study of Bank Overdraft Programs released on Monday:

• A significant share of banks (24.7% of all surveyed banks and 53.7% of large banks) batched processed [sorted] overdraft transactions by size, from largest to smallest, which can increase the number of overdrafts.
• More than half of banks with automated overdraft programs (54.2%) reported that they relied on a third-party vendor to implement or manage the program.
• Most banks using vendors to manage their automated overdraft programs (70.6%) also reported that they paid third-party vendors a percentage of the fees generated by the program, typically 10 to 20 percent of additional fees generated.
• Almost half (48.8%) of all reported NSF transactions took place at POS/debit (41.0%) and ATM (7.8%) terminals. Checks accounted for 30.2% of the reported NSF (nonsufficient fund) transactions.
• Accounts held by young adults (ages 18 to 25) were the most likely among all age groups to have automated overdraft NSF activity. Among young adult accounts, 46.4% incurred NSF activity, compared with 12.2% of accounts held by seniors (over age 62) and 31.9% of accounts held by other adults.
• Assuming a $27 overdraft fee (the survey median), a customer repaying a $20 POS/debit overdraft in two weeks would incur an APR of 3,520%; a customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173%; and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067%.