JUNE 2013

A white paper of initial data findings

CFPB Study of

Overdraft Programs
2 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Table of Contents

Executive Summary ................................................................................................... 4

1. Introduction .......................................................................................................... 8

2. Market and Regulatory Context of Overdraft Programs ................................. 10

3. Consumer Overdraft Incidence, Fees, and Related Account 

Closure................................................................................................................ 20

3.1 Overdraft and NSF Incidence .................................................................21

3.2 Overdraft and NSF Fees......................................................................... 22

3.3 Account Closure ..................................................................................... 24

3.4 Paid vs. Returned Overdraft Items ........................................................ 26

4. Overdraft Use Following the 2010 Opt-In Requirement Under 

Regulation E....................................................................................................... 27

4.1 Overview of Regulatory Changes ........................................................... 28

4.2 Variations in Implementation Approaches ........................................... 28

4.3 Opt-In Rates ........................................................................................... 29

4.4 Variations in Opt-In Rates by Bank........................................................31

4.5 The Impacts of Opting In and Not Opting In ........................................ 33

4.6 Variation in the Changes in NSF/OD Incidence ................................... 39

5. Overdraft Policies and Practices across Institutions ..................................... 41
3 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

5 .1 Calculating Available Funds................................................................... 42

5.2 Transaction Processing and Posting Orders.......................................... 44

5.3 Overdraft Coverage Limits and Making Pay/Return Decisions............ 48

5 .4 Charge/No-Charge Decisions, Waivers, and Refunds........................... 52

5 .5 Linked Account Overdraft Protection, Alerts, and Other Programs to 

Limit Overdrafts..................................................................................... 54

5 .6 Accountholder Behavioral Characteristics and Screening Policies....... 58

6. Conclusion, Open Questions, and Further Research Steps .......................... 60

Glossary .................................................................................................................... 64

Notes.......................................................................................................................... 69
4 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Executive Summary

In February 2012, the Consumer Financial Protection Bureau (CFPB) initiated a broad inquiry 

into financial institutions’ overdraft programs for consumer checking accounts. This effort 

included a public Request for Information (RFI) and a detailed study of overdraft programs at a 

small set of large banks that are supervised by the CFPB. These banks provide a significant 

portion of all U.S. consumer checking accounts. Through the CFPB’s supervision program, these 

banks have provided institution-level information about their overdraft programs and accounts 

during 2010 and 2011. 

Many of the concerns that motivated the CFPB’s inquiry are not new. In response to growing 

costs to consumers, federal agencies have addressed these issues in different ways at different 

times, which industry has recognized.a Our review is intended to provide the factual basis to 

inform efforts to develop more uniform treatment of these issues across financial institutions.

This paper summarizes initial findings from our inquiry. It draws principally on the institutionlevel information received from banks participating in the study, as well as responses to the RFI 

and other industry sources. These findings indicate that overdraft programs can be costly for the 

consumers who use them, and that both consumer outcomes and policies related to overdraft 

programs can vary considerably across banks. Specifically: 

 Costly service: The banks in the study used different methodologies for measuring 

the incidence of accounts that incurred overdraft and non-sufficient funds (NSF) 

fees. The percentage of accounts experiencing at least one overdraft or NSF 

transaction in 2011 was 27% for study banks that tracked all incidences for all 

 

a

See American BankersAssociation letter to Federal Deposit Insurance Corporation, Office of the Comptroller of the 

Currency, Federal Reserve Board of Governors, and CFPB (August 24, 2011), available at http:// 

www.aba.com/aba/documents/news/ OverdraftLetter82511.pdf.
5 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

accounts opened at any time during 2011 and 20% for study banks utilizing other 

methods. The average overdraft- and NSF-related fees paid by all study bank 

accounts that had one or more overdraft transactions in 2011 was $225 and varied by 

as much as $201 between study banks.

 Heavy overdrafters: A small percentage of consumer checking accounts incur a 

substantial number of overdrafts. The proportion of consumer checking accounts 

with at least one overdraft or NSF that were heavy overdrafters (defined for purposes 

of this paper as consumers incurring more than 10 non-sufficient funds or overdraft 

transactions during 2011) was 27.8% for study banks that tracked all incidences for 

all accounts opened at any time during 2011 and 13.5% for other study banks. 

 Involuntary account closures: Some banks close consumer checking accounts at 

significant rates, mostly due to unpaid negative balances. Study banks involuntarily 

closed 6.0% of consumer checking accounts that were open or opened during 2011. 

Involuntary closure rates varied widely; the study bank with the highest involuntary 

rate closed 14 times more of its accounts in 2011 than the bank with the lowest 

involuntary closure rate. While not all negative balances are caused by overdraft, the 

majority of negative balance incidents result when consumers overdraw their 

accounts.

 Implementation of the opt-in requirement on overdraft coverage of ATM 

and POS debit card transactions: A 2009 Federal Reserve Board amendment to 

Regulation E (subsequently recodified by the CFPB) requires accountholders to 

provide affirmative consent (opt in) for overdraft coverage of automated teller 

machine (ATM) and non-recurring point of sale (POS) debit card transactions before 

banks can charge for paying such transactions. This change became effective for new 

accounts on July 1, 2010, and for existing accounts on August 15, 2010. The share of 

accounts that had opted in to ATM/POS debit card coverage at the end of 2011 varied 

by 18 percentage points across study banks. Opt-in rates among the study banks of 

accounts that were opened during 2011 were generally higher than for existing 

accounts and varied dramatically, ranging from single-digit percentages to more than 

40%.

 Overdrafters who did and did not opt in: Consumers’ overdraft experiences 

before and after the implementation of the opt-in requirement provide some insight 
6 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

into the impact of the new opt-in requirement. While a majority of accounts that 

were the heaviest overdrafters (with more than 10 overdraft or NSF transactions in 

the first half of 2010) did not opt in, these accountholders opted in at a higher rate 

than accounts overall (44.7% compared to 15.2% of all accountholders among the 

sample of banks). While both heavy overdrafters who did and did not opt in 

experienced a reduction in fees per account in the second half of 2010, the reduction 

in fees for those who did not opt in was $347 greater, on average, than for those who 

did opt in.

 Variations in overdraft-related practices and policies: Numerous bank 

policies can affect when a transaction might overdraw a consumer’s account and 

whether or not the consumer would be charged a fee. These include, among others:

o when banks provide funds availability on deposits;

o how banks treat holds on funds in connection with debit card transaction 

authorizations;

o what transaction posting orders banks use;

o how banks set overdraft coverage limits (the amounts by which consumers 

are permitted to overdraw their accounts) and at what levels;

o whether banks offer waivers or delays in assessing overdraft fees to accounts 

for de minimis transactions or short negative balance periods; and

o whether and how banks charge additional fees for extended or sustained 

negative balances.

In addition, several other bank policies may influence consumer outcomes with respect to 

overdraft programs including how banks promote enrollment in automatic transfers from linked 

deposit accounts or credit lines to avoid overdrafts, how banks screen new account applicants, 

and other policies influencing the characteristics of accountholders across banks. 

These practices and policies, among others, varied significantly (and in some cases, 

dramatically) among study banks. For example, the percentage of accounts enrolled in overdraft 

protection programs involving automatic transfers from linked personal deposit accounts 
7 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

ranged by close to 40 percentage points across study banks. Likewise, study banks used a variety 

of transaction posting orders and employed a range of methods for setting overdraft coverage 

limits. 

In announcing the launch of this study, CFPB Director Cordray observed that “overdrafts can 

provide consumers with needed access to funds.” Nothing in this report implies that banks and 

credit unions should be precluded from offering overdraft coverage. Moreover, our study notes 

progress in some areas in recent years in protecting consumers from harm. Nonetheless, our 

findings with respect to the number of consumers who are incurring heavy overdraft fees or 

account closures and the wide variations across institutions indicate that certain practices and 

procedures merit further analysis to determine whether they are causing the kind of consumer 

harm that the federal consumer protections laws are designed to prevent. 
8 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

1. Introduction

In February 2012, the Consumer Financial Protection Bureau (CFPB) launched an inquiry into 

overdraft practices and their effect on consumers. In announcing that inquiry, CFPB Director 

Richard Cordray observed that “Overdrafts can provide consumers with access to funds, but the 

growing costs of overdraft practices have the capacity to inflict serious economic harm.”1

Director Cordray went on to note that there have been a number of changes in overdraft 

practices in recent years, some as a result of new regulatory requirements, some in response to 

litigation, and some undertaken voluntarily by banks, thrifts, and credit unions (collectively 

referred to in this paper as “financial institutions” or “institutions”). Director Cordray explained 

that as an agency committed to evidence-based decision-making, the CFPB needed “to know the 

facts and figures about all of this, and more, in order to carry out our role of protecting 

consumers.”2

The CFPB’s analysis of overdraft programsbrelies on two principal sources of data: (1) responses 

to a Request for Information (RFI) published in the Federal Register3in February 2012; and (2) 

aggregate, institution-level information data from a sample of large banks regarding those 

banks’ overdraft programs coupled with detailed, de-identified account and transactional 

information from random samples of consumer checking accounts at these same banks.c

 

b

The descriptions of overdraft programs provided in this paper reflect market research and do not imply that the 

CFPB has necessarily approved or critiqued any particular aspects of the features or operation of these products from 

a regulatory or supervisory standpoint.

c

None of the data contain personally identifiable information about consumers.

The study banks are large banks covered by the CFPB’s supervisory authority and do not include credit unions, thrifts, 

or banks with total assets under $10 billion. In addition to these sources, the study includes information that the 

CFPB gathered from, and republishes with the permission of, subscription data services. It also includes publicly 

available information (including program terms and policies), and information voluntarily shared with the CFPB for 

publication by industry vendors.
9 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

The CFPB’s Request for Information generated responses from financial institutions, 

consumers, industry associations, and consumer advocates on overdraft program practices and 

outcomes for consumers. The RFI supplements the large bank study by providing information 

about smaller institutions through the responses these institutions and their trade associations 

submitted. The large banks that provided overdraft program and transactional data for the study 

(referred to in this paper as “study banks”), while not representative of the market as a whole, 

collectively hold a substantial percentage of domestic checking deposits. These banks also 

maintain a large share of all U.S. depository institution branch offices and provide accounts in 

all 50 states.4

In this paper, we begin to address the issues raised by overdraft programs through analysis of 

the institution-level information provided by the study banks and the information we received in 

response to the RFI. As each of the study banks is subject to the CFPB’s supervisory authority, 

we present our analyses in a manner that preserves the confidentiality of the supervisory 

information upon which these analyses rely. Future analyses will draw from de-identified 

account-level and transaction-level data to further our study of overdraft programs.

Section 2 describes the market and regulatory context for this paper focusing on changes over 

time in checking account use, overdraft programs, and related regulations. Section 3 presents 

aggregated information about consumer outcomes with respect to overdraft incidence, fees, and 

account closure provided by the study banks. Section 4 explores the potential impact of changes 

to Regulation E, which requires a consumer’s affirmative opt-in before an institution can charge 

a fee for overdraft coverage on specific types of transactions. Section 5 describes the institutional 

operating policies and variations in pricing and overdraft program configurations that can 

influence consumers’ outcomes with respect to overdraft programs. Finally, Section 6 

summarizes the key findings of this report and notes issues for further research and analysis.
10 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

2. Market and Regulatory 

Context of Overdraft 

Programs

Overdraft programs on checking accounts have evolved from a manual courtesy program to an 

automated feature that today generates a significant share of financial institutions’ revenue from 

deposit accounts. Some financial institutions market overdraft programs as a service that saves 

customers the embarrassment and cost of rejected payments. In recent years, consumer 

advocates and financial regulators have scrutinized some overdraft program practices as 

potentially harmful to consumers, and regulators have raised safety and soundness as well as 

consumer protection concerns.5 The published supervisory expectations of the various 

prudential regulators are not necessarily aligned and may be creating an unlevel playing field 

among depository institutions. 

Consumer Checking Account Overdrafts and Overdraft Programs: Consumers can 

trigger overdraft program coverage when they attempt to spend or withdraw funds from their 

checking accounts in an amount exceeding the accounts’ available funds.dThe financial 

institution can then choose to either pay or reject the transaction. These decisions, once made 

manually at the discretion of each institution’s managers, have become largely automated. Some 

automated overdraft programs incorporate a variety of information such as a customer’s average 

account balance, deposit volumes, or account tenure to determine whether the institution will 

pay the transaction when customer funds are otherwise insufficient (i.e., into overdraft). 

Transactions that an institution decides to pay into overdraft (“overdrafts” or “overdraft 

 

d

 Institutions use a wide range of factors to calculate consumer account balances and to determine whether to 

authorize or post an attempted transaction. These factors are discussed in Section 5: Overdraft Program Policies and 

Practices across Institutions. 
11 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

transactions”) may then incur an overdraft fee. Transactions initiated by check or ACH that the 

institution rejects usually generate a non-sufficient funds (NSF) fee; in contrast, institutions 

generally do not charge an NSF fee when declining a debit card authorization inquiry at a 

merchant or ATM.e 

With respect to transactions that are paid into overdraft and generate a fee, institutions 

generally charge overdraft fees in fixed amounts rather than in proportion to the size of the 

payment being made. The same is true with respect to NSF fees charged on transactions that are 

rejected.fSome will additionally charge an extended or sustained overdraft fee if the 

accountholder does not make a deposit to bring the account back to a positive balance within a 

specified period of time after incurring an overdraft. 

The Evolution of Checking Account Use and Automation of Overdraft Approval: 

Checking accounts are the product most consumers use to receive and deposit funds, withdraw 

cash, and make payments for everyday expenses and loan payments. Over the last several 

decades, the mechanisms available to consumers to withdraw funds or make payments from 

checking accounts have expanded and grown more complex.g Those changes have also created 

more opportunities to overdraw an account held with an institution that offers overdraft 

coverage.

Beginning in the mid-1970s, the advent of ATMs made it possible for consumers to withdraw 

cash from their accounts without visiting a branch teller line and to do so 24/7. The advent of 

regional, national, and global ATM networks made it possible to make cash withdrawals all over 

the world. 

Many institutions subsequently expanded transactional capabilities by replacing ATM-only 

cards with debit cards that could also be used to make electronic payments to merchants and 

service providers from checking accounts. Debit card transaction volumes have grown quickly as 

the networks that enable these transactions have broadened. Acceptance by grocery stores, gas 

stations, and other retailers helped to drive the popularity of “online” or “PIN debit” payments 

 

e

See Section 4.1 for a discussion of NSF fees and declined debit card authorizations.

f

The per-item charges for NSF and overdraft transactions also tend to be identical at each institution.

g

These expanded transactional capabilities, such as ATMs, are available to consumers through other types of 

accounts, including savings accounts. Our analysis to-date and this paper, however, focus exclusively on overdrafts 

related to consumer checking accounts.
12 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

across regional and global ATM networks. By 1996, “offline” or “signature debit” transaction 

volumes overtook PIN debit payment volumes. 6 These debit cards offered broader merchant 

acceptance, including at Internet retailers. In 2006, debit card payment transaction volumes in 

the U.S. exceeded both check and credit card payments, and from 2006 to 2011, the total volume

of U.S. consumer debit card transactions nearly doubled.

7

Spurred by the advent of online banking and both automated and online bill payment, 

consumers’ use of automated clearinghouse (ACH) networks to make electronic payments from 

checking accounts has also grown rapidly. Some ACH payments are “pushed”—i.e., initiated by 

consumers through their institutions’ online or mobile banking applications—while others are 

“pulled” by merchants or billers that have obtained the consumer’s authorization to do so.h 

Consumers may authorize ACH payments to be made on a one-time or a recurring basis. 

The growth in the variety of payment mechanisms tied to checking accounts helped drive 

increases in payment volumes and significantly expanded the types of payments to which 

overdraft coverage could be applied. From 2000 to 2011, the average number of monthly 

consumer noncash payments (including ATM withdrawals) per U.S. household increased by 

over 50%, from approximately 37 to 56 (see Figure 1 below). The expanded payment facilities 

provided consumers with new sources of convenience. At the same time, these new methods of 

payment increased product complexity and may have compounded the difficulty some 

consumers face in managing checking accounts.

 

h

Additionally, merchants and financial institutions can convert checks to ACH transactions.
13 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

FIGURE 1: AVERAGE MONTHLY NUMBER OF CONSUMER CHECKING ACCOUNT PAYMENTS PER 

HOUSEHOLD (U.S.)

Sources: Nilson, Dove, Mercator, Census Bureau, GAO, CFPB Estimates

In the past, institutions determined whether or not to cover payments when customer funds 

were insufficient through manual or ad hoc programs in which decisions were made on a checkby-check basis when checks that consumers had written were presented for payment. However, 

with the advent of electronic transactions (i.e., ATM withdrawals and debit card purchases) that

require real-time authorization decisions, financial institutions faced the question of whether to 

refuse to authorize any electronic transaction for which there were insufficient funds or create 

an automated system of authorizing such transactions into overdraft.

In choosing the latter course, financial institutions established the concept of overdraft limits, or 

amounts by which the institution would allow payments to overdraw a consumer’s account 

without being declined authorization or returned. These limits may be static or dynamic and 
14 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

may or may not vary by customer.i Regardless, institutions authorize and pay or “cover” the 

overdraft payments up to each account’s limit amount and return payments (or refuse to 

authorize electronic transactions) that would cause the account’s negative balance to exceed the 

limit amount. Overdraft coverage limits effectively constitute the amount an institution is 

willing to advance to a consumer on future deposits in return for paying per-item overdraft fees.

Today, automation of overdraft programs is common across the industry. The Federal Deposit 

Insurance Corporation (FDIC) found in a 2011 survey8 that 70% of institutions with assets of 

$38 billion or more, 54% of midsized institutions, and 32% of banks with assets less than $1 

billion employ automated overdraft programs.j A recent survey conducted in response to the 

CFPB’s RFI by a bank trade association to which 575 member institutions responded suggests

that overdraft automation is also common at community banks, where 71% of institutions with 

assets over $250 million report using some degree of overdraft automation (although an equal 

percentage of institutions with assets under $100 million report having only ad hoc programs).

9

Fee Income from Overdraft and NSF Transactions: NSF and overdraft revenues 

constitute a substantial share of total revenues generated by consumer checking accounts and 

contribute significantly to overall revenue, especially for institutions that rely most heavily on 

their consumer lines of business. Analysis suggests that industry revenues from NSF and 

overdraft fees from consumer checking accounts have increased significantly over the past 

several decades. 

Depository institutions combine consumer checking account NSF and overdraft fee revenues 

with other deposit account service charges and fee income in their public reports of condition 

and income (Call Reports). Service charges on deposits reported by banks and thrifts, which 

totaled $34.2 billion in 2012, can include dozens of types of fees levied against consumers, small 

businesses, large corporations, and other types of customers.10 In the call report that credit 

unions submit to the National Credit Union Administration (NCUA), NSF and overdraft fees are 

combined into an even broader category that also includes fees earned on non-deposit services. 

The NCUA reported that fee income earned by credit unions totaled $7.4 billion in 2012.11

 

i

See Section 5 for greater detail on overdraft limits.

j

The FDIC survey requested information about the availability of automated overdraft programs for the institutions’ 

“most basic or entry level account.” Note that the FDIC, in its report, defined automated programs as having “little to 

no discretion given to bank employees, and no case-by-case bank employee decision-making with respect to an

individual customer or item.”
15 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

According to information supplied to the CFPB by the study banks, overdraft and NSF-related 

fees from consumer checking accounts constituted 61% of consumer and 37% of total deposit 

account service charges earned by these banks in 2011. While the composition of fee revenues 

varied considerably among study banks, if aggregate study bank fee revenue ratios could be 

extrapolated to all FDIC-insured institutions, this would imply the banking industry earned 

roughly $12.6 billion in consumer NSF and overdraft fees in 2011. However, there is reason to 

believe that such an extrapolation would understate total industry overdraft revenue. For 

example, several non-study banks that provide information about their overdraft fee income in 

public documents report overdraft and NSF revenue ranging from 41% to 56% of total deposit 

account service charges in 2012.12 Additionally, an industry analyst who conducts an annual 

survey of a large number of institutions reports that in 2012 overdraft and NSF fees totaled $32 

billion—a figure that would represent fully 77% of the deposit account services charges and fee 

income reflected in bank and credit union Call Reports.13

The differences between these estimates may in part be attributable to the differences between 

different types of financial institutions. The study banks, while representing a large share of 

consumer deposits, are banks serving large commercial clients as well as consumers. Smaller 

institutions are generally less likely to provide deposit services to large corporate clients and 

thus are likely to have a larger percent of their deposit service charges attributable to consumer 

accounts, and more specifically, to overdraft and NSF fees. For example, the FDIC estimated in a 

study of bank overdraft programs that among a non-random sample of banks within its 

supervisory jurisdiction, 74.0% of deposit account service charges in 2007 were attributable to 

overdraft and NSF fees.14 Similarly, a bank trade association’s survey of community banks 

found that overdraft and NSF revenue represented 62% of deposit account service charges and 

27.5% of net income after taxes for its member respondents.15 Furthermore, an industry vendor 

that services 1,800 predominantly small institutions has reported to the CFPB that NSF and 

overdraft revenues accounted for 78% of its community bank and thrift clients’ deposit service 

charges and 51% of its credit union clients’ fee income in 2012. The same vendor reports that 

6.9% of its bank and thrift clients’ 2012 operating revenues (net interest income plus 

noninterest income) came from NSF and overdraft revenues. The firm measures the 

corresponding ratio to be 11.6% for its credit union clients.16 

Given these multiple data points, it is not currently possible to determine with precision the 

dollar volume of overdraft and NSF fees that consumers are paying. What is clear, however, is 

that these fees represent a sizable share of the revenue from consumer checking accounts—as 

noted, 61% for the study banks and a likely even higher percentage for community banks.
16 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

For similar reasons, there is some uncertainty as to the trends with respect to this source of 

income. Public reports show that from 1984 through 2012, aggregate deposit service charges 

reported by banks and thrifts insured by the FDIC grew from $6.6 billion to $34.2 billion.

17 Bank 

and thrift service charges on deposit accounts declined since peaking at over $42 billion in 

2008; however, despite this drop-off, charges still grew at an average annual rate of 6.1% (3.1% 

inflation-adjusted) over the 28 years available in the FDIC’s Quarterly Banking Profile (see 

Figure 2 below). Credit union fee income, meanwhile, experienced no similar recent decline and 

grew by over 15% from 2007 to 2012.18

FIGURE 2: SERVICE CHARGES ON DEPOSIT ACCOUNTS FOR FDIC-INSURED INSTITUTIONS, 1984-2012

The growth in overall deposit service charges occurred at a time when banks were generally 

migrating away from charging monthly fees on checking accounts but parallels the increased use 

of automated overdraft programs by financial institutions (as described above) and increases in 

the number of transactions—particularly debit card and ATM transactions—covered by 

automated overdraft programs. The FDIC found in its study of bank overdraft programs that 

41% of all NSF and overdraft transactions occurring in 2006 at banks with automated overdraft 

programs were related to use of debit cards at the point of sale.

19

$42.4

$34.2

$0

$5

$10

$15

$20

$25

$30

$35

$40

$45

$50

19841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012

Source: FDIC Quarterly Banking Profile Q4 2012
17 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

The growth in overall deposit service charges likewise has paralleled an increase in pertransaction fees and implementation of extended or sustained overdraft fees. An aggregator of 

financial services pricing information that conducts an annual survey of checking account fees 

determined that the average overdraft fee increased from $21.57 in 1998 to $31.26 in 2012.20

The industry analyst who estimates 2012 overdraft revenue at $32 billion also reports estimates 

that suggest increases in overdraft revenues contributed to the increases in deposit account 

service charges described above. Specifically, the analyst has estimated that overdraft fees grew 

from $19.9 billion in 1990 to $37.1 billion in 2009, before declining to $31.6 billion in 2011, then 

rising slightly to $32.0 billion in 2012.21 This generally parallels the overall trend with respect to 

deposit service charges.

In summary, evidence from multiple sources suggests that a substantial portion of the observed 

growth in deposit account service charges stems from growth in consumer checking account 

NSF and overdraft revenues. 

Costs to Institutions from Overdraft Programs: The costs institutions bear to provide 

overdraft programs can be difficult to separate from operational costs related to providing 

consumer checking accounts, in general. The CFPB’s study banks and several financial 

institutions that responded to the CFPB’s RFI, however, identified charged off account balances 

as the single largest cost associated with overdraft programs.

Most charge-offs occur when consumers are unable or perhaps unwilling to repay negative 

account balances that result from institutions covering overdraft transactions and imposing fees. 

Charge-off losses generally amount to a fraction of total institutional operational costs. At the 

study banks, charge-off totals are also small relative to the fee revenue these banks earned 

through their overdraft programs. Charged-off account principal balances, which are generally 

primarily due to overdraft programs, represented 14.4% of the net overdraft fees (not including 

NSF fees) charged at study banks in 2011. 

Risks to Consumers: Consumer advocates, among others, have raised concerns about the 

transparency of overdraft program disclosures, rising costs, and the degree to which financial 
18 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

institution practices influence overdraft fee incidence.k In addition, multiple class action 

lawsuits have challenged industry practices with respect to transaction ordering and other 

policies that have allegedly increased the incidence of overdrafts and fees.lFinancial institutions 

generally assert that consumers derive value from these practices. Some cases have settled, 

while others are ongoing.

As part of the FDIC’s study of bank overdraft programs published in 2008, it obtained accountlevel data from a non-random sample of 39 banks that collectively held $332 billion in assets. 

Among the banks studied, 26% of consumer accounts had overdraft or NSF transactions in the 

year for which data were collected. Close to 12% of consumers had one to four overdraft or NSF 

transactions in a year, and 5% had five to nine transactions. Although heavy users made up a 

small percentage of account holders, they paid the vast majority of overdraft fees. Nine percent

of accountholders incurred 10 or more overdraft or NSF transactions and accounted for 84% of 

all overdraft and NSF fees charged.22

The FDIC’s study found that accountholders in low-income areas were somewhat more likely 

than other account holders in the sample to incur overdrafts or NSFs; they were also more likely 

to be among the accountholders that incurred high numbers of overdrafts or NSFs. Young adults 

were also more likely to experience overdrafts or NSFs than accountholders in other age 

groups.23 Thus, the study raised concerns that consumers from potentially vulnerable groups 

may shoulder a disproportionate share of NSF and overdraft fees and checking account costs.m

In a more recent FDIC study of unbanked and underbanked households, the FDIC found that 

unbanked households who chose not to have an account cited unexpected fees such as overdraft 

charges as one of the reasons for remaining unbanked.24

 

k

See, e.g., Pew Charitable Trusts, Still Risky: An Update on the Safety and Transparency of Checking Accounts 

(2012); National Consumer Law Center, Restoring the Wisdom of the Common Law: Applying the Historical Rule 

Against Contractual Penalty Damages to Bank Overdraft Fees (2013); Leslie Parrish, Center for Responsible Lending, 

Overdraft Explosion: Bank fees for overdrafts increase 35% in two years 5 (Oct. 6, 2009).

l

See, e.g., Gutierrez v. Wells Fargo Bank, 704 F.3d 712 (9th Cir. 2012), on remand 2013 U.S. Dist. LEXIS 69287 (N.D. 

Cal. May 14, 2013). Several other banks have settled lawsuits and several others are still pending, most notably in 

multi-district litigation in Florida. See In re: Checking Account Overdraft Litigation, No. 1:09-MD-02036-JLK (S.D. 

Fla.).

m

Some industry trade associations and other respondents to the CFPB’s RFI dispute this and claim there is evidence 

that vulnerable populations do not shoulder a disproportionate share of overdrafts and overdraft fees.
19 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Regulatory Interventions Relating to Overdrafts: The overall growth in fees, and the 

costs they impose on a small number of heavy overdraft users noted above, contributed to 

increased scrutiny of overdraft programs by regulators. The FDIC, Office of Thrift Supervision 

(OTS), Office of the Comptroller of the Currency (OCC), Board of Governors of the Federal 

Reserve (the Board), and NCUA recommended changes to institutions’ overdraft practices 

through supervisory guidance, including joint and agency-specific guidance issued in 2005.25

To further address concerns about heavy overdraft use by consumers, and with the anticipation 

that “improvements in the disclosures provided to consumers could aid them in understanding 

the costs associated with overdrawing their accounts and promote better account 

management,”26 the Board amended Regulation DD (which implements the Truth in Savings 

Act) in 2005 to address certain overdraft disclosures for “promoted overdraft programs” 

(effective July 2006.) Then again in 2009, the Board amended Regulation DD to require new 

disclosures about overdraft fees and account balances (effective January 2010).27 Nearly 

concurrently with the latter amendment, the Board amended Regulation E (which implements 

the Electronic Fund Transfer Act) to require that consumers provide affirmative consent for 

overdraft coverage of ATM withdrawals and non-recurring debit card transactions (generally at 

the point of sale or POS) before institutions can charge overdraft fees on such transactions. This 

amendment was effective as of January 2010, with a mandatory compliance date of July 1, 2010 

for new customers and August 15, 2010 for existing customers.28

Continuing concerns about consumer protection and institutional safety and soundness 

stemming from overdraft programs were reflected in final guidance issued by the FDIC in 2010, 

proposed guidance from the OTS in 2010, and proposed guidance from the OCC in 2011 (which 

the OCC recently withdrew).29 The only extant supervisory guidance is that issued by the FDIC 

which applies only to institutions supervised by the FDIC. 

Overdraft programs have undergone significant change since the FDIC study discussed above, 

for various reasons including, in some instances, in response to regulatory efforts and litigation. 

The remainder of this paper reports initial findings and observations from the CFPB’s study to 

understand the current features of overdraft programs and related policies, their impacts on 

consumers, and the further impacts of recent regulatory guidance and rulemaking.
20 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

3. Consumer Overdraft 

Incidence, Fees, and Related 

Account Closure

This section presents institution-level data on several consumer outcomes related to overdraft 

activity at the study banks. While differences in account or consumer characteristics across 

banksn may contribute to some differences observed in the outcomes described here, differences 

in each bank’s overdraft programs and policies likely are also responsible for some of the 

variances in consumer outcomes. 

Although we cannot determine the degree to which the study banks’ policies and types of 

customers are similar to or different from those of other institutions, these banks hold a 

significant share of domestic checking deposits and thus affect meaningful numbers of 

consumers nationally. In this section we examine the incidence of overdraft activity and related 

fees for consumer checking accountsoat the study banks, and highlight the differences in these 

outcomes for consumers across study banks. We also summarize involuntary account closures, 

which can be a negative outcome associated with overdrafting. Generally, analyses in this 

section reflect the aggregation of or comparison across all study banks. However, some noted 

 

n

For example, the analyses presented here reflect the entire portfolio of consumer checking accounts at the study 

banks, which include different proportions of accounts that are inactive (i.e., that consumers do not use for their 

transactional needs). Inactive accounts do not generate overdrafts because there are no transactions on the account. 

Other differences such as consumers’ account balances or volumes of deposits and payment transactions will likely 

influence their overdraft-related outcomes as well.

o

Our study is limited to consumer checking accounts. It is possible that a consumer account could be used for a 

business purpose (for example, some small business owners may use their personal accounts for their business needs 

as well); however, these users likely constitute a negligible portion of all consumer accounts. 

Some institutions, including study banks, may enable overdrafts on other types of deposit accounts such as savings 

accounts. The CFPB’s analyses do not include NSF and overdraft transactions on these types of accounts.
21 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

analyses here and elsewhere in the paper draw from different subsets of study banks due to 

inconsistencies in bank measurement and reporting. Later sections of this paper describe how 

certain regulatory changes, institution policies, and overdraft program pricing and features may 

have influenced these consumer outcomes.

The CFPB plans analysis of de-identified account-level data obtained from random samples of 

each bank’s customers. The samples comprise approximately 1.5 million accounts and one 

billion transactions and will enable us to apply a consistent methodology in measuring overdraft 

incidence, overdraft costs, and other metrics reported here and that are based on the 

computations supplied by the study banks. Analyses of that account-level data thus may result 

in adjustments to some of the findings derived from the aggregate-level data set forth in this 

report.

3.1 Overdraft and NSF Incidence

In 2011, 27.7% of consumer accounts experienced NSF or overdraft activity across several study 

banks that measured NSF/OD incidence for accounts open at any point during the year.pThese 

were accounts that had items paid, resulting in a negative account balance, or returned due to 

insufficient funds (overdraft or NSF, respectively, collectively referred to as “NSF/OD items” in 

this paper).qThe study banks included in this analysis reported the total number of NSF/OD 

items incurred by accounts that were open at any point in 2011, including those items for which 

a fee was not charged.r One in five consumer accounts (20.1%) at these banks incurred between 

one and 10 NSF/OD items in 2011, and 7.7% of accounts (i.e., 27.8% of the accounts with at least 

 

p

The FDIC’s 2008 study of bank overdraft programs found that 26% of accounts at the banks in the sample 

experienced one or more overdraft items. These findings are not comparable because each study drew from different 

samples of institutions, which likely differ in institutions’ overdraft programs or customer bases. In addition, the 

FDIC’s analysis examined accounts that were opened before the year of analysis, whereas the information reported to 

the CFPB by the study banks includes accounts that opened and/or closed in the course of a year. See FDIC Study of 

Bank Overdraft Programs (Nov. 2008), available at 

http://www.fdic.gov/bank/analytical/overdraft/FDIC138_Report_Final_v508.pdf.

q

The aggregated information presented here includes data collected using different measurement methodologies. 

While we have accounted for these differences, further analysis with the account-level data will enable us to refine 

these figures.

r

Fees may be waived due to a variety of policies including daily fee caps, de minimis thresholds, or others. See Section 

5 for an enumeration of these policies.
22 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

one overdraft or NSF incident) were heavy users of overdraft, incurring more than 10 NSF/OD 

items.s The distribution of NSF/OD items varied across the study banks included in this 

analysis, with the share of accounts with one or more NSF/OD items varying by close to 7 

percentage points. The share of accounts that heavily used overdraft varied by 3.4 percentage 

points across different banks. 

At other study banks, where NSF and overdraft incidence was measured differently, 21.5% of 

consumer accounts experienced NSF or overdraft items in 2011.t Just under one in five (18.6%) 

accounts incurred between one and 10 NSF/OD items at these study banks in 2011. While 2.9% 

of accounts (or 13.5% of the accounts with at least one overdraft or NSF incident) at these banks 

had more than 10 NSF/OD items in 2011, the share of these accounts varied by 4.4 percentage 

points across different banks. Accounts incurring more than 10 NSF/OD items were more than 

four times as common at the bank in this analysis with the highest share of such accounts as at 

the bank with the lowest share of such accounts.u

3.2 Overdraft and NSF Fees

Accountholders that incurred one or more NSF or overdraft fees paid an average of $225 in such 

fees in 2011 at the study banks that measured fees across all accounts incurring NSF/OD items 

in 2011.v The NSF/OD fees paid by accountholders that incurred one or more NSF/OD fees 

during 2011 varied widely by bank. At the two study banks with the lowest average NSF/OD fees 

per account, accounts with at least one NSF/OD item paid on average $147 in NSF/OD fees in 

2011. In contrast, such accounts at the two banks with the highest averages paid an average of 

 

s

This may understate the prevalence of overdraft experiences among consumers because the calculations were made 

by the banks based upon all accounts that were open at any time during 2011, including accounts that were open for 

only part of the year and accounts that were inactive for part or all of the year. Further analysis with the study’s 

account-level data will examine the distribution of overdraft items among different segments of accounts, such as 

accounts that were active for the full year.

t

Several of these banks measure incidence in 2011 for accounts open at the end of 2011 only, and several also include 

only items for which a fee was charged.

u

Again, the aggregated information presented here includes data collected using different measurement 

methodologies. While we have accounted for these differences, further analysis with the account-level data will enable 

us to refine these figures.

v

These fees include fees on overdraft items and NSF items at each bank. Extended overdraft fees are also included for 

those banks that charge such fees. 
23 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

$298. The difference in NSF/OD fees paid per account between the bank with the highest fees

per account and the bank with the lowest fees per account was $201. The chart below displays 

the range of average NSF/OD fees charged to accounts with at least one NSF/OD transaction 

that were open at any point in 2011 at the study banks.

FIGURE 3: AVERAGE NSF/OD FEES PER ACCOUNT INCURRING FEES AT SELECT STUDY BANKS IN 

2011w

In addition, several study banks measured NSF and overdraft fees incurred throughout 2011 for 

accounts that were open as of the end of the year (in contrast to fees incurred by accounts open 

at any point during the year shown above). Average NSF/OD fees for accounts that measured 

costs in this way were $301 at these banks and ranged by more than $120, from under $250 to 

over $350.

 

w

Figure 3 displays an unweighted average of the two study banks with the highest fees per account (“Highest Banks”) 

and of the two study banks with the lowest fees per account (“Lowest Banks”). The “Weighted Average” bar displays 

the average across all study banks included in the analysis, weighted by each bank’s number of accounts at the end of 

2011.

$298

$225

$147

$0

$50

$100

$150

$200

$250

$300

$350

Highest Banks Weighted Average Lowest Banks
24 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

3.3 Account Closure

The negative balances caused by using overdraft programs can lead to a financial institution 

closing a consumer’s account.x Institutions vary in their policies for involuntary account closure 

but will close an account after a period of time has elapsed with an account’s balance remaining 

negative and the institution has taken a charge off in the amount of the uncollected balance. 

Involuntary account closure is a serious outcome for consumers because it may prevent them 

from being able to open checking accounts at other institutions.yIn 2011, 6.0% of accounts that 

were open at the beginning of 2011 or were opened during the year at the study banks resulted 

in involuntary closures.z Most study banks reported that charge offs due negative account 

balances represent the majority of involuntary account closures. 

Involuntary account closure is much more common at some banks than others. The highest 

involuntary account closure rate observed in the study was 14 times the involuntary closure rate 

at the bank with the lowest rate.

 

x

Involuntary closures also can occur due to fraudulent use of an account or account takeover, due to a consumer’s 

inability or unwillingness to repay negative balances caused by other fees charged by the bank or by returned 

deposited items (against which the institution has permitted payments or withdrawals), or for other reasons. 

Similarly, accounts can be involuntarily closed when other credit accounts held by the depositor at the institution are 

past due and (where permitted) the institution exercises right of offset to collect against the outstanding credit 

balance.

y Many financial institutions report to consumer reporting agencies when they close a checking account involuntarily 

due to negative balance or fraud. Institutions use the reports generated by the consumer reporting agencies to screen 

applicants for checking accounts and may decide to deny an application based on a recent history of involuntary 

account closure appearing on such a report.

z

Study banks may differ in their policies for designating accounts as involuntarily closed. This figure refers to 

accounts that were closed involuntarily by the banks and does not include accounts that were closed at the request of 

consumers. 
25 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

FIGURE 4: INVOLUNTARY ACCOUNT CLOSURE RATES IN 2011 AT STUDY BANKSaa

The great majority of involuntary account closures at the study banks are due to negative 

balances that accountholders are unable or perhaps unwilling to repay, and many of these 

closures are associated with the use of overdraft (although other unpaid fees or returned 

deposits may also contribute to some negative balances). Bank policies or other factors that 

affect the incidence of overdrafts may therefore influence the rate of involuntary account closure 

at a bank. Indeed, the study banks with a higher share of heavy users of overdraft (those who 

experienced more than 10 NSF/OD transactions in 2011) among its accountholders generally 

also had higher rates of involuntary account closure. Study banks with the highest shares of 

accounts that were heavy users of overdraft tended to have the highest rates of involuntary 

closure. Conversely, banks with the lowest shares of heavy users of overdraft tended to have the 

lowest rates of involuntarily closure.

 

aa Figure 4 displays an unweighted average of the two study banks with the highest involuntary closure rate (“Highest 

Banks”) and of the two study banks with the lowest involuntary closure rate (“Lowest Banks”). The “Weighted 

Average” bar displays the average across all study banks included in the analysis, weighted by each bank’s number of 

accounts at the end of 2011.

9.0%

6.0%

2.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Highest Banks Weighted Average Lowest Banks
26 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

However, consumers who heavily use overdraft programs may not be the same consumers 

whose accounts are involuntarily closed. Heavy users of overdraft programs may frequently 

incur NSF/OD items but quickly bring their account balances positive, which would prevent 

involuntary closure. In contrast, a single overdraft item may cause an institution to close the 

account if a consumer does not pay the overdraft item and fee after an extended period of time. 

Future analyses using account-level data will examine the overdraft behavior of consumers 

whose accounts are charged off to understand the relationship between use of overdraft 

programs and account closure.

3.4 Paid vs. Returned Overdraft Items

An important consumer outcome of any overdraft program is the percentage of negative 

transactions that are paid (i.e., result in overdrafts) or returned unpaid (i.e., were NSFs).bb 

Paying overdraft transactions may confer some benefit (in exchange for the associated fees and 

other costs) to consumers by helping them make timely payments and avoid late penalty fees 

and/or interest charges from a merchant or biller. In contrast, returning an item generally 

confers little benefit to the consumer (other than perhaps deterring future overdrafting and any 

subsequent consequences) and can result in an NSF fee as well as additional related fees, such as 

a returned check fee charged by the institution to whom the check was presented or a late fee 

charged by the entity to whom payment was due. At the median, study banks paid into overdraft 

83% of transactions that exceeded the available balance in 2011 and returned 17%.

 

bb Declined ATM and POS transactions are generally not considered returned items.
27 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

4. Overdraft Use Following the 

2010 Opt-In Requirement 

Under Regulation E

In 2009, the Board amended Regulation E to require institutions to obtain the affirmative 

consent of consumers before charging overdraft fees on ATM and non-recurring point of sale 

(“POS”) debit card transactions.30 This section explores opt-in ratescc among different 

consumers (including heavy users of overdraft) and across banks. It then compares outcomes 

for consumers who did and did not opt in to ATM/POS debit card coverage and examines the 

change in overdraft items and fees experienced by consumers who did and did not opt in to 

attempt to understand how overdraft use changed after the implementation of changes to 

Regulation E.

 

cc Throughout this paper, our discussion of opt-in rates and overdraft programs is limited to checking accounts only, 

although related regulations (Regulation E and Regulation DD) apply to other types of accounts as well. Regulations E 

and DD have been recodified by the CFPB.

Some institutions enable consumers to affirmatively opt out of all fee-based overdraft coverage—that is, on any type 

of transaction, including checks and ACH. This option is not frequently advertised, however, and many institutions 

that offer this option will charge an NSF fee on check and ACH transactions that are returned due to insufficient 

funds. In addition, among those institutions that offer checking products without an opt-in option for ATM and POS 

overdraft coverage, some institutions also will not pay check or ACH transactions in the absence of sufficient available 

funds. Again, such institutions may charge an NSF fee on check and ACH transactions when such items are rejected. 

Some of these accounts are “second chance” products for consumers with prior histories of account charge offs, 

designed to limit credit risk posed by these accountholders to the institutions. These products are also intended to 

prevent consumers from incurring NSF fees as well as overdraft charges by restricting check writing. A 2011 survey of 

institutions supervised by the FDIC found that 44% of institutions with assets of $38 billion or more offered second 

chance products, while 32% of mid-sized institutions and 20% of community banks did so. 2011 FDIC Survey of 

Banks’ Efforts to Serve the Unbanked and Underbanked, p.16 (Dec. 2011).
28 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

4.1 Overview of Regulatory Changes

As previously noted, when a consumer accesses his or her account through an ATM or debit 

card, the institution must determine whether to authorize the transaction in real time. With the 

advent of automated overdraft systems and pre-set overdraft coverage limits, many institutions 

elected to authorize these transactions although the consumer did not have sufficient available 

funds. These authorizations typically resulted in overdraft charges.

In 2009, the Board amended Regulation E to regulate this practice.31 Beginning on July 1, 2010

(August 15, 2010 for existing accountholders), institutions wishing to offer and charge for 

overdraft coverage on ATM or POS debit card transactions have been required to obtain 

affirmative consent from consumers to receive fee-based overdraft coverage for these

transactions; the amendment treats no coverage as the default so that a consumer who did not 

provide affirmative consent is deemed to have not opted in. 

While an institution may authorize ATM and POS transactions that result in a negative balance

on accounts that have not opted in at its discretion, the institution may not assess overdraft fees 

for paying these transactions. Consequently, institutions typically decline ATM and debit card 

transactions on accounts not opted in that would otherwise result in an overdraft or increase the 

outstanding negative balance of an account.dd The study banks all reported that they do not 

assess NSF fees for declining these transactions.

4.2 Variations in Implementation 

Approaches

In the wake of the amendments to Regulation E, institutions that were charging their customers 

for ATM and POS debit overdrafts and that desired to continue to do so were required to invite 

their customers to opt in. Many institutions did just that. However, other institutions chose 

other paths. 

 

dd In the preamble to the Regulation E amendment, the Board raised concerns under the FTC Act in the event that a 

financial institution charged an NSF fee for declining these attempted transactions. Electronic Fund Transfers, 

Regulation E (Final rule), 74 Fed. Reg. 59033, 59041 ( Nov. 17, 2009).
29 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

For example, 41% of community banks surveyed by a community bank trade association report 

that they will not authorize ATM/POS debit card transactions unless there are sufficient 

available funds in the consumer’s account to cover the transaction.32 Other institutions enable 

consumers to opt in solely for POS debit card transactions, while a third category of institutions

permits customers to opt in only for ATM transactions. In addition, some institutions allow their

customers to opt in to overdraft coverage on ATM withdrawals on a per-transaction basis, but 

only at the bank’s own ATMs. At these institutions, when an ATM withdrawal will overdraw an 

account, the consumer receives one or more on-screen warnings that he or she may be charged a 

fee if he or she proceeds with the transaction.

4.3 Opt-In Rates

How the opt-in requirement under Regulation E affected the total overdraft and NSF fees 

charged to consumers is related to whether consumers chose to opt in. Opt-in rates reported 

publicly by industry trade associations have varied considerably. For example, one bank trade 

association reported an aggregate Regulation E opt-in rate of 16% across 18 member institutions

that offer ATM or POS overdraft coverage.33 In contrast, a community bank association’s survey 

found an average opt-in rate of approximately 60% among its membersee that allowed customers 

to opt in. 34 The CFPB’s study provides an opportunity to observe opt-in rates for accounts 

comprising a large (though not necessarily representative) share of the U.S. banking 

population.ff 

Opt-In Rates Across All Accounts: The weighted average portfolio opt-in rate — i.e., the 

percentage of all consumer checking accounts affirmatively opted in for fee-based ATM/POS 

debit card overdraft coverage— among the study banks at the end of 2011 was 16.1%. If a bank 

did not offer opt-in, their accounts were excluded from this calculation.gg 

 

ee Fifty-nine percent of the institutions participating in the community bank association’s survey offer coverage for 

ATM and POS debit card transactions.

ff The CFPB’s study observed opt-in rates at the end of 2010 and the end of 2011. The opt-in rates reported here 

reflect this time period and may have changed since the study data were collected.

gg However, several study banks that do allow opt-in preclude certain accountholders, usually by product, from opting 

in. These consumer accounts are included in the opt-in rate measurements, which thus may be understated.
30 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Opt-In Rates for New Accounts: As of the end of 2011, the weighted average opt-in rate 

among study banks offering the option to opt in was 22.3% for accounts that were opened 

during 2011. At most banks in the study, opt-in rates for accounts opened after the effective date 

of the Regulation E amendment tended to be higher than opt-in rates for accounts that had been 

opened previously. This is likely because bank personnel are able to secure an election from the 

customer as part of the account opening process, usually in-person at a branch. In contrast, 

existing customers had to be solicited to opt in through statements and various marketing 

channels and would be considered not opted in by default if they did not respond. 

Highest Opt-In Rates for Accounts with Prior Heavy Overdraft History: Data 

collected by the CFPB from study banks indicates that consumers’ likelihood of opting in when 

the opt-in requirement took effect appears related to their prior usage of overdraft programs. 

Figure 5 below shows that 44.7% of accounts that had more than 10 NSF/OD items during the 

first six months of 2010 elected to opt in by the end of 2010.

hh In contrast, only 11% of accounts 

with no NSF or overdraft transactions from January through June of 2010 chose to opt in when 

given the opportunity to do so. The consumer’s decision to opt in could be influenced by a bank’s 

approach to marketing ATM and POS debit card overdraft coverage, a consumer’s preferences to 

have these types of transactions authorized, or the interaction of these or other factors.

 

hh To measure the opt-in rate of accounts by their overdraft use, we used data from a different time period than for 

the opt-in rates described for recently opened and portfolio accounts. Therefore, the overall opt-in rate of 15.2% at the 

end of 2010 displayed here differs from the overall opt-in rate of 21.4% that we observed at the end of 2011.
31 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

FIGURE 5: PERCENTAGE OF ACCOUNTS THAT HAD OPTED IN TO ATM/POS DEBIT CARD OVERDRAFT 

COVERAGE AS OF DECEMBER 2010 BY NUMBER OF NSF/OD ITEMS IN FIRST HALF OF 2010

AT SELECT STUDY BANKS

ii

4.4 Variations in Opt-In Rates by Bank

Portfolio and New Account Opt-In Rates: Opt-in rates ranged by nearly 20 percentage 

points among the study banks’ portfolios of accounts as of the end of 2011. Figure 6 displays the 

range of opt-in rates for new accounts and for all accounts at banks in the CFPB’s study. The 

opt-in rate for accounts opened during 2011 ranged from single-digit percentages to over 40%

across the study banks. The opt-in rate for new accounts at the bank with the highest opt-in rate 

for these accounts was nearly 8 times the opt-in rate at the bank with the lowest rate. Opt-in 

 

ii Over four-fifths—i.e., 81.0%--of accounts in this analysis had 0 NSF/OD items between January 1 and June 30, 

2010; 10.3% of accounts had 1 to 3 NSF/OD items during this time period, and 5.6% and 3.1% had 4 to 10 and over 10 

NSF/OD items, respectively.

15.2%

11.3%

27.1%

34.6%

44.7%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

All Accounts 0 1 - 3 4 - 10 Over 10

Number of NSF/OD Items Jan 1 - Jun 30
32 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

rates for new accounts have increased since the end of 2011 and, for some study banks, 

surpassed 50% in 2012. 

FIGURE 6: PERCENTAGE OF ACCOUNTS THAT HAD OPTED IN TO ATM/POS DEBIT CARD OVERDRAFT 

COVERAGE AS OF DECEMBER 2011 AT SELECT STUDY BANKS

jj

Heavy Overdrafter Opt-In Rates: Opt-in rates at the end of 2010 at banks in the CFPB’s 

study were highest among accountholders that incurred more than 10 NSF/OD items in the first 

half of 2010kk; however, opt-in rates for heavy overdrafters varied considerably across study 

banks (see Figure 7 below). The bank with the highest opt-in rate among heavy overdrafters had 

an opt-in rate 55 percentage points higher than the bank with the lowest opt-in rate among 

heavy overdrafters, and its opt-in rate for these accounts was more than 4 times its opt-in rate 

for accounts that had 10 or fewer NSF/OD items in the first half of 2010.

 

jj Figure 6 displays unweighted averages of the two study banks with the highest opt-in rate (“Highest Banks”) and of 

the two study banks with the lowest opt-in rate (“Lowest Banks”) for both recently opened and portfolio accounts. The 

“Weighted Average” bars display the average across all study banks included in the analysis, weighted by each bank’s 

number of accounts at the end of 2011.

kk Consumers that incur fewer than 10 NSF/OD items may still incur substantial fees and thus may be considered by 

some to be heavy overdrafters. For purposes of the discussions in this paper we have set 10 items as the threshold 

constituting heavy overdraft incidence.

24.8%

16.1%

7.4%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Highest Banks Weighted

Average

Lowest Banks

Portfolio Accounts

44.5%

22.3%

13.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Highest Banks Weighted

Average

Lowest Banks

Recently Opened Accounts
33 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

FIGURE 7: PERCENTAGE OF ACCOUNTS THAT HAD OPTED IN TO ATM/POS DEBIT CARD OVERDRAFT 

COVERAGE AS OF THE END OF 2010, BY NSF/OD ITEMS IN THE FIRST HALF OF 2010 AT 

SELECT STUDY BANKSll

4.5 The Impacts of Opting In and Not 

Opting In

Variation in Consumer Outcomes by Opt-In Status: The following section describes the 

effect of opting in to ATM/POS debit card overdraft coverage on some of the consumer 

outcomes described in Section 3. In particular, this paper compares fees paid per account and 

involuntary account closure rates for accounts that do and do not opt in. Future analysis of 

 

ll Figure 7 displays unweighted averages of the two study banks with the highest heavy overdrafter opt-in rate 

(“Highest Banks”) and of the two study banks with the lowest heavy overdrafter opt-in rate (“Lowest Banks”). The 

“Weighted Average” displays averages across all study banks included in the analysis, weighted by each bank’s 

number of accounts at the end of 2010.

65.6%

44.7%

16.2%

20.3%

14.3%

3.2%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

Highest Banks Weighted Average Lowest Banks

Accounts with > 10 NSF/OD items Accounts with 0 - 10 NSF/OD items
34 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

transaction-level data will enable comparisons between those who did and did not opt in for 

other outcomes, including overdraft incidence, concentration of frequent overdrafters, and the 

ratio of paid and returned items.mm 

Total overdraft and NSF fees assessed on all accounts open during 2011—including those with 

and without overdraft or NSF items in 2011—across the study banks in this analysis averaged 

$70 per account in 2011.

nn Average fees diverge widely by opt-in status, in part because opting in 

means that more of a consumer’s transactions have the possibility of incurring overdraft fees 

(whereas study banks do not assess overdraft or NSF fees for declined ATM and POS 

transactions for accounts that are not opted in), and because consumers who have more 

transactions against a negative account balance are also more likely to opt in, as shown above in 

Figure 5. Accountholders that chose to opt in to ATM/POS debit card coverage incurred $196 in 

overdraft or NSF fees on average in 2011, while those who did not opt in experienced $28 in fees 

on average (again, these figures include accounts that did and did not incur any overdraft or 

NSF fees).

Opted-in accounts had higher rates of involuntary closure than accounts that had not opted in at 

each of the study banks. Overall, 8.5% of opt-in accounts at the study banks were involuntarily 

closed in 2011, while 5.5% of accounts not opted in experienced involuntary closure. Involuntary 

closure rates were more than 2.5 times as high for opt-in accounts as for accounts that had not 

opted in at several study banks.

While involuntary closure rates were consistently higher for opted-in accounts than accounts 

not opted in across study banks, involuntary closure rates varied widely between study banks 

both for accounts opted in and not opted in. The bank with the highest involuntary account 

closure rate of opted-in accounts closed 6.6 times more such accounts than the bank with the 

lowest involuntary closure rate for these accounts.

 

mm We assessed changes in overdraft frequency and fees paid for some consumers after the implementation of 

Regulation E to assess the impacts of opting in versus not doing so. These results are presented in this paper. The 

transaction-level data obtained by the CFPB from the study banks will enable similar analyses for other differences 

between those who did and did not opt in.

nn In contrast, the average fees per account of $225 discussed in Section 3.2 reflects only those accounts that had 

overdraft or NSF activity in 2011. Future analysis will assess similar comparisons between accounts opted in and not 

opted in.
35 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

FIGURE 8: INVOLUNTARY ACCOUNT CLOSURE RATES IN 2011 BY ATM/POS DEBIT CARD COVERAGE 

STATUS AT SELECT STUDY BANKS

oo

Reduction in Overdraft Items for Accounts That Did Not Opt In: To understand how 

the changes to Regulation E to require opt-in may have affected consumerspp in the year of 

implementation, we examined overdraft usage and fees at the study banks during the first and 

second half of 2010, which closely approximates the periods before and after the 

implementation of the opt-in requirement under Regulation E.qq To measure differences 

between these two periods, we limit this analysis to consumer checking accounts that were open 

 

oo Figure 8 displays unweighted averages of the two study banks with the highest involuntary closure rate among 

accounts opted in (“Highest Banks”) and of the two study banks with the lowest involuntary closure rate among 

accounts opted in (“Lowest Banks”). The “Weighted Average” bars display averages across all study banks included in 

the analysis, weighted by each bank’s number of accounts at the end of 2011.

pp The analyses in this section focuses on overdraft and NSF items and fees and does not incorporate any changes that 

may have occurred in other fees at the study banks or in consumers’ use of other financial products that offer shortterm liquidity.

qq To the extent that the study banks may have complied with the Regulation E election requirements before the 

mandatory compliance date, or to the extent that consumers elected to opt in after the mandatory compliance date 

but before the end of 2010, this analysis may understate the potential reduction in fees associated with not opting in.

16.6%

8.5%

5.4%

7.1%

5.5%

2.8%

0.0%

5.0%

10.0%

15.0%

20.0%

Highest Banks Weighted Average Lowest Banks

Accounts Opted In Accounts Not Opted In
36 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

for the entirety of 2010.rr The findings described here therefore do not incorporate the overdraft 

activity of accounts that opened or closed partway through the year, including those that were 

closed as a result of overdraft activity.

Several changes other than the changes to Regulation E may have also influenced consumers’ 

experiences with overdraft programs throughout 2010. These other changes may include new 

disclosure requirements pursuant to amendments to Regulation DD described earlier that 

became effective in January 2010. In addition, some institutions implemented changes to their 

overdraft programs in 2010 (in response to legal, consumer protection, risk management, and 

other concerns), such as by setting fee caps or de minimis negative balance or transaction 

amounts (below which fees are waived). Other factors that may influence overdraft usage also 

vary over time, such as seasonal changes in income and spending or macroeconomic changes. 

The influence of regulatory changes and other external factors described above is likely different 

for consumers who previously overdrafted with great frequency than for consumers who 

overdrafted only occasionally or not at all. Consequently, we segmented accounts in this analysis 

by the number of NSF/OD items the accounts incurred in the first half of 2010. Within these 

segments of accounts, we compared outcomes between consumers who did and did not opt in to 

ATM/POS debit card overdraft coverage to try to home in on the effects of changes to Regulation 

E. 

Figure 9 shows the change in the number of overdraft and NSF items from the first to the 

second half of 2010 for consumers whose accounts were open for the full year.ss Consumers who 

had experienced overdraft or NSF items in the first half of 2010 and did not opt in to debit card 

coverage saw significant declines in the number of overdraft items they experienced in the 

second half of the year. The decline in overdraft items was greatest for the heaviest overdrafters 

who did not opt in, defined as consumers with more than 10 NSF/OD items between January 1 

and June 30, 2010. These consumers experienced an average of 21.5 overdraft items during the 

 

rr The analysis suggests no significant changes between the first half of the year and the second half in terms of 

average monthly deposits or debit card activity.

ss These figures describe average changes in overdraft items across all accounts by debit card coverage status, which 

includes accounts that experienced no overdraft or NSF items. See Figure 5 for opt-in rates by account segment and 

the percentage of accounts in each segment.
37 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

first half of 2010, and subsequently saw the number of overdraft items they experienced in the 

second half of the year drop by 13.1 items.

In contrast, consumers who had more than 10 NSF/OD items in the first half of the year and 

opted in to overdraft coverage on ATM/POS debit card transactions experienced a reduction of 

2.9 NSF/OD items. Consumers with 1 to 10 NSF/OD items in the first half of 2010 who opted in 

experienced slightly more NSF/OD items in the second half of the year.

FIGURE 9: AGGREGATED CHANGE IN NUMBER OF OVERDRAFT AND NSF ITEMS PER ACCOUNT BY 

CONSUMERS’ PRIOR OVERDRAFT INCIDENCE AT SELECT STUDY BANKS – FIRST HALF OF 

2010 VS. SECOND HALFtt

 

tt The aggregated information presented here includes data collected using different measurement methodologies. 

While we have accounted for these differences, further analysis with the account-level data will enable us to refine 

these figures.

0.3 0.9 0.3

-2.9

-0.4 -0.6

-3.4

-13.1

-15.0

-10.0

-5.0

0.0

5.0

All Accounts 1 - 3 4 - 10 Over 10

Overdraft Items Jan 1 - Jun 30

Accounts Opted In Accounts Not Opted In
38 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Reduction in NSF/OD Fees for Accounts That Did Not Opt In: The reductions in 

overdraft and NSF items that consumers experienced after the implementation of changes to 

Regulation E translated into lower overdraft and NSF fees. Accounts that did not opt in 

experienced a 45% drop in fees in the second half of 2010, while opt-in accounts saw an 8% 

increase in fees. 

Consumers who had heavily used overdraft programs in the first half of 2010 who did not opt in 

experienced the greatest reduction in overdraft and NSF fees on these same accounts. The fees 

on these consumers’ accounts dropped by 63%, or over $450 per account, on average, in the 

second half of 2010.uu

FIGURE 10: AGGREGATED CHANGE IN OVERDRAFT AND NSF FEES PER ACCOUNT BY CONSUMERS’ 

PRIOR OVERDRAFT INCIDENCE – FIRST HALF OF 2010 VS. SECOND HALFvv

 

uu As noted earlier, the analyses in this section focuses on overdraft and NSF items and fees and does not incorporate 

any changes that may have occurred in other fees at the study banks or in consumers’ use of other financial products 

that offer short-term liquidity.

vv The aggregated information presented here includes data collected using different measurement methodologies. 

While we have accounted for these differences, further analysis with the account-level data will enable us to refine 

these figures.

$8 $28 $6

-$107

-$12 -$20

-$114

-$500 -$453

-$400

-$300

-$200

-$100

$0

All Accounts 1 - 3 4 - 10 Over 10

Overdraft Items Jan 1 - Jun 30

Accounts Opted In Accounts Not Opted In
39 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Some of the reduction in overdraft items and fees experienced by consumers with very high 

previous overdraft use may reflect “regression to the mean.” That is, some consumers may have 

been in the highest usage category because they had experienced an unusually high number –

for them – of overdrafts in the first half of 2010. The differences in the changes in overdraft and 

NSF activity between accounts opted in and accounts not opted in may therefore provide a 

better indicator of the opt-in requirement’s effect. This difference in changes could be described 

as the “net reduction” in overdraft activity for these accounts.

ww Table 1 below shows that the 

consumers with the most overdraft activity realized the highest net savings from not opting in 

after the opt-in requirement took effect. These consumers saved an average of $347 or 49% in 

NSF/OD fees, on net, in the second half of 2010.

TABLE 1: CHANGE IN OVERDRAFT AND NSF FEES PER ACCOUNT IN 2010 AFTER THE 

IMPLEMENTATION OF CHANGES TO REGULATION E AT SELECT STUDY BANKS

Change in Overdraft and 

NSF Fees per Account All Accounts* Number of NSF/OD Items Per Account**

1 - 3 4 - 10 > 10

Accounts Opted In $8 $28 $6 -$107

Accounts Not Opted In -$12 -$20 -$114 -$453

Difference (Net Reduction) -$20 -$47 -$120 -$347

* All accounts include accounts with no NSF/OD items.

** Number of NSF/OD Items per Account January 1 to June 30, 2010

4.6 Variation in the Changes in NSF/OD 

Incidence

The degree to which overdraft and NSF activity dropped after the changes to Regulation E 

varied across study banks. Heavy users of overdraft programs who did not opt in saw, on 

 

ww These differences could overstate the effect of the opt-in requirement if consumers who thought they were more 

likely to overdraft in the future were also more likely to opt in to overdraft coverage.
40 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

average, great reductions in NSF/OD fees in the second half of 2010; however, the reduction in 

fees for these consumers ranged by close to twenty percentage points across different banks.

Fees dropped for heavy overdrafters that chose to opt in at each bank as well, and these 

consumers also experienced a range of outcomes across study banks after the implementation of 

changes to Regulation E. At the study banks with the greatest drop in fees for opt-in accounts, 

these accounts experienced a 19.5% reduction in their NSF/OD fees between the first and 

second half of 2010. Opt-in accounts at the study banks with the smallest drop in fees for such 

accounts experienced a 3.3% reduction. These different reductions in fees for heavy overdrafters 

who opted in may reflect differences across banks in their overdraft program configurations or 

other policies that influenced the incidence of overdrafts (in addition to the differences in 

consumers across banks and other factors discussed earlier). The following section describes 

these policies and their variations across banks.
41 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

5. Overdraft Policies and 

Practices across Institutions

The range of consumer outcomes across study banks discussed in Section 3 may reflect in part 

the different proportions of consumers at each bank that opted in to ATM/POS debit card 

overdraft coverage. Section 4 illustrated how the decision whether to opt in may influence 

consumer outcomes, including the outcomes of consumers who previously incurred overdrafts. 

The wide variation in opt-in rates across banks, even among heavy overdrafters who 

demonstrated the highest propensity to opt in, suggests a number of factors may influence optin rates.

Several findings in Section 4 indicate that other factors besides the differences across banks in 

opt-in rates also affect consumer outcomes. In particular, differences across study banks in the 

share of consumers who were heavy overdrafters prior to the implementation of Regulation E’s 

opt-in requirement, and in closure rates and fee reductions for consumers with the same 

Regulation E election, suggest that other factors play a role in the variations in consumer 

outcomes across banks.

This section details processing policies, overdraft program features and pricing, and other 

practices that may affect the outcomes that consumers experience and that vary across banks.xx

Future analyses will evaluate how these policies may contribute to the consumer outcomes 

outlined in Section 3.

 

xx Other policies not discussed in this section may also impact the consumer outcomes analyzed in this paper. For 

example, differences in charge off policies across the study banks may contribute to some of the differences in 

involuntary closure rates.
42 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

5.1 Calculating Available Funds

To determine whether a consumer’s transactions cause his or her account balance to become 

negative, depository institutions calculate an account’s available funds. Institutions’ information 

and accounting systems use a set of rules to determine when newly deposited items are deemed 

to increase the available funds be available in an account and when a payment or debit 

transaction is deemed to reduce the available funds in the account. When a consumer makes a 

check deposit into his or her account, there will often be a delay before the deposited check 

clears and the bank receives funds from the bank on which the item is drawn. Similarly, when a 

consumer writes a check, uses a debit card, or authorizes an ACH payment, there can be a delay 

between the time the consumer initiates the payment and the time the item is settled by the 

institution and funds are disbursed to cover the transaction. 

Authorization, Settlement and Available Balance: When a consumer attempts a debit 

card purchase or ATM withdrawal, the consumer’s financial institution receives an 

instantaneous request to authorize the transaction. 

Some authorized transactions, such as PIN-based debit card and ATM transactions, nearly 

always settle the same business day they are authorized. Other authorized transactions, most 

notably signature-based debit card transactions, may not be presented for settlement for a day 

or two after authorization. Many institutions, upon authorizing a transaction, will then make an 

entry (referred to as “memo posting”) that reduces the funds deemed to be available to the 

consumer.

yy

 This enables these institutions to take these transactions into consideration in 

determining whether to authorize subsequent electronic transactions during the course of the 

day. Generally, available funds are reduced by the amount of the authorized transaction. 

However, for certain types of transactions where the amount authorized is often different than 

the amount that will settle – for example, gasoline purchases – institutions may reduce the 

available funds by the full authorization amount (which could exceed that actual purchase 

amount), reduce the available funds by an amount that may be substantially less than the 

purchase amount (such as $1), or elect not to make any reduction in available funds.

 

yy As discussed in further detail below, “memo posting” is used by institutions that post transactions in batch, 

generally in a nightly processing cycle. Some institutions post transactions in real time, in which event there is no 

need to memo post these items.
43 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Funds Availability on Deposits Policies: Institutions are bound by the Expedited Funds 

Availability Act to provide at least the first $200 of certain checks deposited in person at the 

start of the next business day, or on the second business day for deposits made at proprietary 

ATMs.35 An institution can choose to “hold” any amount on certain checks exceeding $200 (i.e., 

a “hold” is placed on that part of the deposit) and not credit the account until the hold is 

released. In most cases, holds will not extend longer than five business days, but institutions 

generally release funds much sooner. Some of the study banks report that they make the total 

check amount available immediately for many deposits, while other banks reported doing so in 

their nightly processing of transactions on the day the deposit is made (provided that the deposit 

is made prior to the cutoff time for the nightly processing, which varies among banks). 

Regulation CC, which implements the Expedited Funds Availability Act, similarly requires that 

funds from ACH deposits be made available to consumers on the next business day from when 

they are received. Most institutions generally make ACH deposits available as they are 

received.zz

Institutions may make some exceptions to their general funds availability policies. Regulation 

CC permits institutions to place longer holds on deposits to new accounts or to accounts with 

repeated overdrafts, on deposits that are of large amounts, and when re-depositing checks that 

have been returned or that raise “reasonable cause to doubt collectability.”36 These exceptions 

may add to the variation in funds availability between institutions and result in differences in 

when an account will be deemed to have insufficient funds to cover a payment.aaa To the extent 

institutions elect to make funds available earlier than required by law, these availability policies 

provide consumers with higher available balances at an earlier point in time and thus may result 

in more cleared items and potentially fewer overdraft or NSF charges to consumer accounts.

 

zz The FDIC’s Survey of Banks’ Efforts to Serve the Unbanked and Underbanked found that some institutions provide 

more generous funds availability on deposits than Regulation CC requires. For example, 29% of respondents with less 

than $1 billion in assets reported that funds for a $2,500 check deposited with a teller or via an ATM “would 

ordinarily be available...on the same business day” as the check was received. See 2011 FDIC Survey of Banks’ Efforts 

to Serve the Unbanked and Underbanked, p.16 (Dec. 2011).

aaa In March 2011, the Board proposed amending Regulation CC to shorten “exception” hold periods on deposited 

funds and make certain other changes. See Availability of Funds and Collection of Checks (Proposed Rule), 76 Fed. 

Reg. 16862 (Mar. 25, 2011). The Expedited Funds Availability Act provides that that the Board, jointly with the 

Director of the Bureau of Consumer Financial Protection, shall, by regulation, reduce the time periods “to as short a 

time as possible and equal to the period of time achievable under the improved check clearing system for a receiving 

depository institution to reasonably expect to learn of the nonpayment of most items for each category of checks.” See 

Expedited Funds Availability Act, 12 U.S.C. § 4002(d)(2).
44 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

5.2 Transaction Processing and Posting 

Orders

Nightly Batch Processing: Most financial institutions engage in a process of posting 

transactions (credits and debits) to the account after the close of business each day. The nightly 

posting process modifies an account’s ledger balance by adding credits (funds made available 

from deposits and other positive adjustments, such as interest credits) and subtracting debits

already paid out (withdrawals and wires) or considered paid out (PIN debit transactions), debits 

eligible to be settled (checks or ACH items presented for payment), or otherwise deemed final by 

the institution (other charges or negative adjustments). An account’s ledger balance is the 

balance after each transaction has settled for the account. Most institutions only post credit and 

debit items on weekday nights (excluding holidays); thus, weekday nights are frequently the 

only times when an account’s ledger balance is adjusted. Consequently, at many institutions, 

regardless of what account activity has occurred during a weekday or over a weekend, the 

account ledger balance remains unchanged from its ending position in the last weekday night’s 

posting process until the completion of the next weekday night’s posting process.bbb

Posting Order: The treatment of debit authorizations and funds availability policies together 

with an institution’s cutoff time for processing transactionsccc determine the day on which, and 

the amount by which, a transaction will affect the amount of funds available in an account to 

cover other payments. Posting orders determine the sequence in which these calculations are 

made in a given day.

Financial institutions determine the order in which they process debit and credit transactions. 

Differences in the order in which various transactions are processed can affect the balances in an 

account after each transaction, including when in the sequence an account balance becomes 

insufficient to cover remaining items and when it becomes negative as a result of an overdraft. 

 

bbb Preliminary analysis of transactional data from banks in the CFPB’s overdraft study shows that a disproportionate 

number of payment transactions, including overdraft and NSF transactions, are posted on Mondays. This reflects the 

large number of transactions that may be initiated by consumers after Friday’s cutoff and during weekend days.

Because nightly posting is a batch process, institutions must define a point at which all subsequent transactions will 

be considered too late for the night’s workload. Transactions received after this “cutoff time” are held for the next 

business day’s nightly process. Cutoff times may vary by institution and by branch or collection of branches within a 

single institution.

ccc See previous footnote for explanation of cutoff times.
45 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

The earlier in a sequence that an account becomes negative, the more overdraft or NSF 

transactions may occur.

Credits-Before-Debits: All institutions that described their posting orders in response to the 

CFPB’s RFI and all study banks generally post deposits and other credits in accordance with the 

institution’s funds availability policy before debit transactions (primarily payments) during 

nightly processing.

ddd

 Posting credits before debits, in comparison with alternative posting 

methods, increases the likelihood a consumer will have sufficient funds to cover debits that are 

processed in the nightly batch and therefore reduces the likelihood that a consumer will incur an 

overdraft or NSF fee. 

Ordering Debits by Type: After posting deposits and other credits during nightly processing,

institutions post debits in orders that vary significantly from one institution to another. Some 

institutions commingle all remaining debits including check, ACH, and settled ATM and POS 

items together for processing in a single batch. Others first categorize debits by different 

transaction types and process them in a sequence of sub-batches.

eee

 Institutions following this 

latter approach may, for example, separate and process bank-initiated and pre-authorized 

(“cash-out”) transactions first. Bank-initiated transactions typically include returned deposits

and accounting adjustments (e.g., to correct errors made in prior postings). At some 

institutions, these may also include overdraft and NSF fees assessed on items processed the 

prior business day.fff Cash-out items are non-revocable transactions already authorized by the 

institution and generally include teller window and ATM cash withdrawals, cashiers’ checks, and 

wires. Although institutions are also liable for previously authorized POS debit card 

transactions, these are frequently processed separately. Among institutions that process in subbatches, policies vary widely in the industry and also among the study banks regarding what 

types of debits are grouped into sub-batches and the sequence of the sub-batches. The order in 

which sub-batches are processed can affect which items – and how many – incur overdraft or 

 

ddd The observed credits before debits industry “standard” applies to nightly processing only and pertains only to 

transactions received on the same calendar date.

eee Individual sub-batches may contain transactions of a single type or commingle multiple types of transactions as 

explained below.

fff Institutions also initiate monthly maintenance and other types of fees; however, these fees are generally not posted 

before customer-initiated transactions.
46 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

NSF fees when an account with a positive balance does not have sufficient funds to pay all of the 

debits in all of the batches.

Ordering Debits by Transaction Size: Some institutions may use additional or alternative

approaches to order items within a batch (if all debits are batched together) or within subbatches (if debits are processed by type). Posting smaller items before larger items (“low-tohigh” processing) increases the probability that more items will be paid and fewer items will be 

assessed NSF or overdraft fees. Conversely, larger items may exhaust available funds earlier 

when posted before smaller items (i.e., in a “high-to-low” manner) and increase the likelihood 

that more items will take the balance negative or post when it has already become negative. 

Some institutions vary how they order transactions by size within different sub-batches (i.e., the 

same institution may order within one sub-batch low-to-high and within another sub-batch 

high-to-low).

Ordering debit transactions by size can have very different impacts, depending on whether the 

debits are commingled or grouped into sub-batches by transaction type. For example, if an 

institution processes cash-out and POS debit card transactions before check and ACH payments, 

it effectively processes smaller payments first because cash withdrawals and debit card POS 

payments are, on average, smaller than check and ACH payments,

ggg

even if transactions within 

each sub-batch are ordered from largest to smallest. 

Chronological and Serial Ordering: Some transactions, such as POS debits and ATM 

transactions, carry a date- and time-stamp. Some institutions choose to use this information to 

separate and post these items chronologically. Similarly, some institutions process checks by 

check number and incoming ACH debits (including checks that were converted into ACH 

transactions by the merchants to whom the checks were written or the banks at which the 

checks were deposited) in the order in which they are received during the day.hhh 

 

ggg Debit card transactions—whether executed across a PIN or signature network—tend to be smaller than checks and 

ACH payments. According to Nilson, the average industry-wide debit card transaction in 2010 was $37, while checks 

averaged $85 and ACH $113. See The Nilson Report #985 (Dec. 2011).

hhh Others may use the time that a payee deposited or cashed a check as a timestamp for the check writer, or will use 

the timestamp on a teller withdrawal if the institution has an online teller platform.

ACH transactions are received in batches, and these batches may contain both credit and debit transactions. 

Institutions generally receive multiple batches per day. 
47 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Wide Variation in Debit Posting Orders: Generally, the CFPB has found that debit posting 

orders vary considerably from institution to institution. No two participants in the study follow 

identical posting order policies, and financial institutions responding to the CFPB’s RFI 

described widely varying posting order policies as well.

Figure 11 below illustrates a range of possible ordering approaches. The “Commingled High-toLow” approach has been adopted by a number of banks. The “Sub-Batched High-to-Low” 

example shows separation of debit items by transaction type and combines different methods 

for ordering transactions within batches. The “Chronological & Serial Order” example depicts a 

policy in which bank adjustments and cash-out items are ordered from highest to lowest 

amount, followed by all time-stamped debits ordered chronologically, and then by checks 

ordered by check number. In each of the methodologies, NSF and overdraft fees are assessed 

after the transactions post, either that night or the next morning.

FIGURE 11: ILLUSTRATIVE APPROACHES TO POSTING DEBITS BY TRANSACTION TYPE, SIZE, AND 

TIMING

There are many additional combinations of methodologies for batching transactions, sequencing 

sub-batches, and ordering items within sub-batches. 
48 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Intraday Processing and Other Processing Variations that Impact Posting Order: 

Some institutions post items on an intraday basis or outside of nightly processing. Institutions 

typically receive multiple batches of ACH transactions during a business day. These batches 

include both debits and credits.

iii Some study banks process ACH transactions as they are 

received during the business day in lieu of or in addition to (for the day’s final batch) processing 

these transactions at night with all other credits and debits. Some institutions that post 

transactions on an intraday basis effectively defer items that would otherwise result in an 

intraday overdraft to the end of the day to determine whether these items can be covered with 

later-arriving credits. Other institutions similarly process teller withdrawals and PIN network 

transactions intraday as they occur. The processing of transactions at the time of execution is 

called “real-time processing.”

Additionally, some banks that process solely at night may distinguish items that occurred after 

the cutoff time on the previous day from current day items in their processing. For example, 

these institutions may prioritize and first process prior day credits, then prior day debits, 

current day credits, and finally current day debits. This practice and intraday and real-time 

processing all cause some debits to post before credits. Thus, these processing approaches may 

cause consumers to incur more NSF or overdraft transactions; however, some institutions 

implement end-of-day adjustments that effectively post credits before debits.

5.3 Overdraft Coverage Limits and 

Making Pay/Return Decisions

Once an institution determines that an account has insufficient funds to cover a check or ACH 

payment, it must decide whether to pay the item or return it.jjj This decision is similar to the 

decision to authorize or decline a transaction that a consumer attempts at an ATM or point of 

sale but occurs during the posting process instead of in real time throughout the day. A paid 

check or ACH overdraft item can result in an overdraft fee. A returned check or ACH item can 

 

iii ACH debits include checks converted to ACH transactions at points of sale.

jjj As discussed below, most institutions allow consumers the opportunity to link their checking account to another 

deposit or credit account at the bank. Where a consumer elects to do so, the pay/return decisions are made only after 

funds in the linked deposit account, or the credit limit on the linked credit account, have been exhausted.
49 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

result in an NSF fee (typically of the same amount as an overdraft fee).kkk Institutions employ a 

number of different practices and policies when making these pay/return decisions. 

As automated processes are necessary for institutions that choose to authorize or decline ATM 

and POS transactions that will overdraw an account, many institutions—including study banks—

use these same processes to make pay-return decisions for check and ACH transactions. These 

institutions generally run programs that assign to each account a limit as to the amount of 

overdraft coverage the institution is willing to extend. For accounts that have opted in to ATM 

and POS debit overdraft coverage, when a request for authorization is received that exceeds the 

available funds, the bank will determine whether to authorize the transaction by reviewing it 

against the assigned overdraft coverage limit. Similarly, in nightly (or intra-day) posting, the 

bank will review potential NSF and overdraft items against the assigned overdraft coverage 

limit.

lll

 Items processed during nightly (and intra-day) posting will generally be paid up to the 

coverage limit; once the account’s limit is reached, subsequent items will be returned unpaid. 

The order in which items are posted may affect not only the number of overdraft fees assessed 

but also the likelihood of particular items being returned and potentially assessed NSF fees. The 

frequency with which this occurs may be ascertainable through our future analysis of the 

account-level data from the study banks.

Setting Overdraft Coverage Limits: Generally, institutions that set overdraft coverage 

limits assign a single limit to each account and use that account limit for making decisions 

regarding check and ACH transactions during nightly processing as well as for authorizing ATM 

and POS debit card transactions for those accounts opted in for overdraft coverage on these 

items.

Overdraft coverage limits may be static (i.e., the institution assigns an unchanging limit to each 

customer) or dynamic (i.e., the limits are calculated and may vary for each account and over 

time). Static limits vary among institutions that employ them, and may range from under $100

 

kkk ATM and POS debit card transactions are excluded because they are authorized at the time the consumer conducts 

the transaction and typically declined when rejected; thus, these items do not get presented for pay/return 

decisioning.

lll For example, if an account has insufficient funds to pay one or more items and an institution has determined it will 

provide up to $500 of overdraft coverage on the account, the institution’s automated process will pay items that take 

the account balance negative by as much as $500. 
50 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

to well over $1,000. Some institutions employ different static limits for different checking 

account products, while others assign the same limit to all customers.

Dynamic limits, in contrast, vary by account and may change periodically as an accountholder’s 

usage or relationship to the institution changes. Many institutions set dynamic limits based on a 

“matrix” or set of formulas that weigh various account and accountholder characteristics in an 

attempt to manage more precisely account credit risk, overdraft program revenues, and 

customer retention. These characteristics commonly include account tenure, average balance, 

overdraft history, and deposit patterns as well as other relationships the accountholder may 

have with the institution.

Limits assigned to accounts at institutions using dynamic overdraft limits may change over time 

as an accountholder’s usage patterns and relationship to the institution change. Thus the 

distribution of limits assigned to accounts by an institution may change based on changes in 

policy, customer behavior, and market conditions that affect both, and banks report periodically 

evaluating and adjusting their algorithms for setting dynamic coverage limits. While many large 

institutions use dynamic limits, the more frequent performance monitoring that dynamic 

models require may strain resources at smaller institutions. Perhaps as a result, many smaller 

institutions maintain static limits.

Institutions that use dynamic limits generally do not communicate these limits to 

accountholders. This is true for all study banks that use dynamic limits. Some institutions that 

use static limits communicate these limits to accountholders.

Distribution of Overdraft Coverage Limit Amounts: For consumers who have opted in 

to ATM and POS debit card overdraft coverage, the size or amount of the overdraft coverage 

limit assigned to a consumer’s account will determine the point at which the institution ceases to 

authorize such transactions. Thus, for accounts opted in for overdraft coverage on ATM and POS 

debit card transactions, lower overdraft coverage limits generally result in more declined 

attempts and fewer approvals, and consequently, fewer overdrafts as a result of these types of 

transactions. The size of the overdraft coverage limit will also affect the point at which the bank 

commences to return check and ACH items. Thus, for these types of payments, lower overdraft 

coverage limits generally result in more NSF transactions and fewer overdraft transactions.

Figure 12 depicts the aggregated distribution of coverage limits of study banks as of June 2012.

Close to 60% of accounts had overdraft limits ranging from $1 to $500; for many study banks, 

these limits fall below the maximum limit that the banks’ prescribe. Approximately 8% of 
51 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

accounts—including but not necessarily limited to new accounts, second chance accounts, 

accounts deemed to present high risks of not repaying negative balances, and accounts receiving 

protected (e.g., garnished) funds—were accorded no overdraft coverage. Most study banks 

indicated that they cap their coverage limits between $1,500 and $2,500, and several reported 

that they had recalibrated their matrices since 2010, lowering their maximum calculated 

overdraft coverage limit by $2,000 or more.

FIGURE 12: OVERDRAFT COVERAGE LIMITS FOR ACCOUNTS AT STUDY BANKS, JUNE 2012

Variations in Overdraft Limits by Bank: Average coverage limits, and the range of limits 

among banks with dynamic limits, varied by study bank. Most study banks quoted average 

coverage limits ranging between $500 and $1,000. Some, including banks with dynamic 

overdraft limits, assign the same limit to most accounts. Most study banks, however, assigned a 

greater diversity of overdraft limits, with higher maximum coverage amounts and accounts 

assigned limits across the range between the maximum and $0. These variations in policies with 

respect to setting overdraft coverage amounts stem from differences in the factors used to 

calculate dynamic limits and willingness to tolerate exceptions, such as manually assigned 

overdraft limits for legacy accounts. 

Manual Overrides: Most institutions with automated overdraft programs make at least some 

pay/return decisions manually. Institutions with such hybrid pay/return processes flag some of 

the automated decisions for review by staff with manual override authority. These reviewers 

apply institutional guidelines that incorporate customer service and fraud detection 
52 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

considerations to decide whether to pay or return potential overdraft items. The institutions 

monitor these manual overrides and measure performance relative to fee income, credit losses, 

and customer attrition.

Additionally, study banks reported that they may “hard code” high overdraft coverage limits—

for example, at $5,000 or more—and override their standard overdraft limits for small numbers 

of relatively low risk consumer accounts. Similarly, upon suspicion of fraudulent transactions, 

some study banks may temporarily restrict an account’s overdraft limit to $0.

5.4 Charge/No-Charge Decisions, Waivers, 

and Refunds

Once a decision is made to pay an item for which there are insufficient available funds, the 

institution then must determine whether to charge an overdraft fee with respect to that item. 

Similarly, once a decision is made to return an item for which there are insufficient available 

funds, the institution must determine whether to charge an NSF fee with respect to that item.

Variations in Per-Item Fees: Most institutions charge the same amount for an NSF item as 

they do for an overdraft item and generally do not vary the fees based upon the size or nature of 

the item. Data obtained from a research firm that actively obtains and tracks information on 

deposit account fee schedules at hundreds of institutionsmmm indicates that the median NSF and 

overdraft fees among the 33 largest institutions it monitors—all of whom were in the top 50 in 

terms of U.S. deposit market sharennn—were both $34 in 2012. The 10th percentile 

NSF/overdraft fee of these same institutions was $25 in 2012, while the 90th percentile fees were 

both $36.37

Data from the same research firm suggests fees are lower at many smaller institutions. The 

median NSF and median overdraft fee across nearly 800 smaller banks and credit unions 

(outside of the nation’s 50 largest depositories) were both $30 in 2012. However, per-item fees 

ranged across this sample from a low of $10 to a high of $45.38

 

mmm Including at least the top five institutions ranked by deposit market share in each of the 50 states.

nnn Per analysis of FDIC data as of June 30, 2012.
53 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Some institutions adjust the fee amount based upon the volume of incidents incurred on the 

account, a practice called “tiering.”ooo Nine of the 33 largest banks monitored by the research 

firm utilized tiered NSF/OD fee structures in 2012, and the research firm has indicated that 

tiering was more prevalent across the industry a few years ago than it is today. Separately, some 

institutions charge a reduced fee or automatically waive the first fee incurred by a new account, 

or the first fee incurred by any account in a new calendar year. Separately still, some institutions 

charge a lower fee on overdraft items below a set dollar amount. Other institutions assess 

reduced fees on accounts designated for special populations, such as students or military 

personnel.

Fee Waiver Policies, Including Fee Caps, De Minimis Waivers, and Forgiveness

Periods: Twenty-four of the 33 largest institutions monitored by the same research firm in 

2012 capped the number of NSF and overdraft fees an account may be assessed per day, and the 

median cap among these 27 institutions was five total items. Notably, these caps ranged 

considerably among even this sample of institutions. The institution with the lowest cap limited 

the number of overdraft and NSF fees that can be charged in a day to a total of two, while the 

institutions with the highest allowed a combined total of as many as 12 overdraft and NSF fees 

in a given day.

Institutions may implement de minimis policies on a per-transaction or net-balance basis. The 

former approach prevents overdraft fees on small-dollar items. The latter method restricts 

overdraft fees when a balance is driven only nominally negative by the sum of items posted that 

day.

ppp Net balance thresholds are more common across the CFPB’s study banks than pertransaction thresholds. Twenty-one of the largest 33 institutions tracked by the research firm

had de minimis policies in 2012, and the median threshold was $5 (includes both per 

transaction and net balance thresholds). The median threshold was $5 in 2012 for smaller 

institutions monitored by the research firm, as well.

Institutions may employ additional means of limiting overdraft fees. For example, one or more 

institutions offer forgiveness periods following a day in which an account has gone negative

during which consumers can make compensating deposits (subject to these banks’ funds 

 

ooo Institutions that tier generally assess a higher fee for second and subsequent NSF and overdraft incidents. The 

median and percentile NSF and overdraft fee figures quoted are for first incidents only. 

ppp In layman’s terms, de minimis thresholds prevent instances in which a consumer may be charged a $35 fee 

overdrawing his or her account while buying a $3 cup of coffee. 
54 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

availability rules) and avoid being charged an overdraft fee. In general, a forgiveness period 

allows a consumer time after an overdraft has occurred to deposit sufficient available funds (or 

provide time for a payroll or other automatic deposit to post) to bring the consumer’s account 

balance positive. If the consumer sufficiently raises his or her balance within the forgiveness

period, the assessed overdraft fees would be waived. 

Sustained or Extended Overdraft Fees: Some institutions charge a fee for accounts that 

remain at a negative balance beyond a specified period of time. These “sustained” or “extended” 

overdraft fees typically do not depend upon the number of items that caused an account to 

overdraft. Instead, these fees are assessed on a one-time or periodic basis when an account’s 

balance has remained negative for a specified period of time after one or more overdrafts have

occurred. Twenty-one of the top 33 institutions in the research firm’s database charged a 

sustained or extended overdraft fee in 2012.39

The frequency of these fees range from daily to weekly or one-time fees assessed while an 

account’s balance remains negative. Institutions generally wait between two and 10 calendar 

days before assessing fees. Among large banks monitored by the research firm in 2012, an 

account with a negative balance that was repaid on day five may have been charged between $5

and $38.50 for sustaining a negative balance. An account that remained overdrawn for 20 days 

could have been assessed fees ranging from $15 to $140. This wide range of fee assessments 

generally holds true for any overdrawn balance exceeding an institution’s de minimis threshold.

5.5 Linked Account Overdraft Protection, 

Alerts, and Other Programs to Limit 

Overdrafts

Most institutions — including all study banks — provide some form of overdraft protection that 

enables consumers to avoid overdrawing their accounts and incurring NSF or overdraft fees. 

These largely involve linking a checking account to a savings account, a line of credit, or a credit 

card account from which funds are transferred automatically to cover payments when the 

checking account balance is too low to cover them. Institutions generally charge fees for these 

overdraft protection transfers. 

Linked Account Overdraft Protection: The research firm referenced in Section 5.440

determined that in 2012, 90% of the institutions the firm monitored offered some sort of linked 
55 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

credit line for overdraft protection.qqq Linkable credit products may include dedicated overdraft 

lines of credit—i.e., lines that are only accessible by overdrawing the associated checking 

accounts—as well as multipurpose personal lines of credit, credit cards, and home equity lines of 

credit. Use of such linked credit accounts to cover overdrafts results in finance or interest 

charges to the consumer, rather than fixed overdraft fees.

Deposit accounts, including savings accounts or additional checking accounts, can also be linked 

to a checking account for overdraft protection. Banks in the CFPB’s study generally offered some 

mix of multiple linkable account options, including both deposit and credit options. 

Most institutions assess a fee in at least some circumstances when funds from a linked account 

are automatically transferred for overdraft protection.rrr Twenty-eight of the 33 largest 

institutions monitored by the research firm in 2012 charged a transfer fee, with these fees 

ranging from $3 to $20 per transfer; the median fee among this population was $10. Less than 

three-quarters of the smaller institutions monitored by the same research firm assess a transfer 

fee, and for these institutions, the median fee was comparatively less at $5.41 Many institutions 

with de minimis thresholds for assessing overdraft fees apply these same thresholds when 

determining whether or not to assess a linked account transfer fee.

Linked accounts may have other costs associated with them. For example, some institutions 

charge an annual or monthly fee on lines of credit. Credit products also carry an interest rate 

that is applied to outstanding balances. Linkable deposit accounts may be subject to monthly 

maintenance requirements and fees, as may some of the consumer checking accounts to which 

they are linked. Some banks in the CFPB’s study offer free (no minimum balance) linkable 

savings accounts, while others require a minimum balance or monthly fee.

Some institutions only transfer funds when the transferred sum is sufficient to cover the sum of 

all overdrafts. Others may transfer enough to cover a portion of the overdrawn balance even if 

there are insufficient funds in a linked deposit account, or insufficient available credit in a linked 

 

qqq The research firm’s penetration figures closely resemble the FDIC’s own findings in their 2011 Survey of Banks’ 

Efforts to serve the Unbanked and Underbanked; i.e., 92% of banks with assets above $38 billion, 94% of banks with 

assets between $1 billion and $38 billion, and 85% of banks with assets less than $1 billion reported having linkedaccount programs to the FDIC. See 2011 FDIC Survey of Banks’ Efforts to Serve the Unbanked and Underbanked, p.16 

(Dec. 2011).

rrr Some institutions waive these fees when the service is linked to certain types of accounts.
56 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

credit account, to cover the full overdrawn balance. When the available funds or credit from

linked accounts are depleted, institutions may charge a fee for the overdraft or NSF transactions 

that may subsequently occur. Thus, consumers may incur both transfer fees and overdraft fees 

in the same day. 

Institutions also differ in how much money is swept when an automatic overdraft transfer is 

initiated. Some institutions transfer the exact amount needed to reset the account balance to $0, 

while others transfer in $50 or $100 increments. In addition, some institutions implement a 

minimum transfer amount, and these amounts may vary. Rounding up the transfer amount may 

help to cover additional payments and prevent additional overdraft occurrences or additional 

transfer fees. On the other hand, transferring an exact amount avoids finance charges (in the 

case of lines of credit) in excess of what the consumer requires. Some institutions utilize both 

approaches by rounding up for transfers from linked deposit accounts but moving only the exact 

amount when transferring from a linked credit account. 

Penetration of Linked Account Overdraft Protection: Among the study banks, the share

of consumer checking accounts linked to other deposit accounts for overdraft protection in 2011

ranged by 37.5 percentage points. The weighted average percentage of accounts linked to 

another deposit account for overdraft protection at the end of 2011 was 28.0%. The percentage 

of open accounts linked to a credit account was lower at 12.8%, with penetration rates ranging 

by 24.8 percentage points across different banks in 2011. The charts below shows linked account 

penetration at the study banks by linked account type. Among other things, the variation in 

take-up rates among study banks reflects different strategies for promoting such services to 

accountholders, the length of time different banks have been offering the service, and possibly

differences in customer behavioral characteristics and preferences across banks.
57 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

FIGURE 13: ACCOUNTS WITH LINKED ACCOUNT OVERDRAFT PROTECTION AT STUDY BANKS IN 2011sss

Online and Text Alerts: Consumers who use online or mobile banking and are at risk of 

overdrawing their accounts may sign up for services that some institutions introduced to help 

them recognize or be notified when their account balances are low. An industry research firm 

estimates that 61% of adult internet users used online banking services in 2011,42 and survey 

findings from the Board indicated that 68% of consumers with a bank account and regular 

internet access used online banking in the year prior to March 2012.43 Penetration of online 

banking use varies considerably among study banks, however, and some study banks estimated 

that over half of their consumer checking accountholders were actively banking online as of the 

end of 2011.ttt

Use of text alerts appears to remain moderately low and varies by institution. Some institutions

do not currently offer text alerts while others have only recently introduced the services. Several 

small institution respondents to the CFPB’s RFI that do not provide alerts indicated cost to be 

their primary reason for not doing so. Among study banks offering the service, the percentage of 

open accounts enrolled to receive low balance text alerts at the end of 2011 ranged by over 25 

 

sss Figure 13 displays unweighted averages of the two study banks with the highest linked account rate (“Highest 

Banks”) and of the two study banks with the lowest linked account rate (“Lowest Banks”). The “Weighted Average” 

bars display the averages across all study banks included in the analysis, weighted by each bank’s number of accounts 

at the end of 2011.

ttt “Actively banking online” is defined to be using within the past 30 days. Note that penetration rates are often 

difficult to compare across institutions due to measurement challenges; some accounts have multiple user IDs (e.g., 

joint accounts with separate accountholder credentials) and some user IDs pertain to multiple accounts (e.g., a 

customer with multiple checking accounts).

36.9%

28.0%

7.7%

0.0%

10.0%

20.0%

30.0%

40.0%

Highest Banks Weighted

Average

Lowest Banks

Linked Deposit Account

28.7%

12.8%

4.5%

0.0%

10.0%

20.0%

30.0%

40.0%

Highest Banks Weighted

Average

Lowest Banks

Linked Credit
58 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

percentage points.

uuu

 As with linked account overdraft protection, among other things, the 

variation in take-up rates among study banks may reflect different strategies for promoting such 

services to accountholders, the length of time different banks have been offering the service, and 

differences in customer behavioral characteristics and preferences across banks.

vvv

Multiple study banks and RFI respondents assert that provision of alerts and online banking 

does not always lead to significant changes in overdraft behavior and that many consumers 

overdraft despite monitoring their accounts frequently.

5.6 Accountholder Behavioral 

Characteristics and Screening 

Policies

While many of the differences between banks with respect to overdrafts—such as in consumers’ 

incidence of overdrafts and related costs, election of overdraft coverage on ATM and debit card 

transactions, and enrollment in overdraft protection programs—stem from differences in banks’ 

overdraft-related policies and practices, these differences in outcomes may also reflect 

differences in the behavioral characteristics of the banks’ accountholders. Institutions influence 

the mix of consumers they attract through their marketing, distribution, product management, 

and risk management strategies and execution.

For example, institutions often target specific consumer segments when seeking to attract new 

customers. Likewise, institutions design and price products to appeal to and meet the needs of 

different types of consumers. The location of an institution’s service area and branch network 

can influence to a considerable extent the kinds of customers it most frequently serves. Different 

consumer segments are likely to bring different needs and preferences with respect to their use 

of checking accounts and their need or propensity to use overdraft coverage.

 

uuu Again, precise measurement is difficult as some joint accountholders may subscribe to receive alerts for a single 

account.

vvv Note that at many institutions, consumers may sign up for text alerts even if they retain paper statements.”
59 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Institutions’ policies for screening new account applicants for credit or charge-off risk and to 

qualify applicants for specific productswww may also play some role in determining the make-up 

of accountholders and their likely overdraft incidence, fees, and related account closures. Study 

banks varied considerably in whether and how they used consumer reporting agencies that track 

and report on past checking account histories and closures, or reports and credit scores from the 

national credit reporting companies, to screen for charge-off risk. Some study banks deny new 

accounts to applicants with a recent history of involuntary account closure and charge-off; 

others utilize credit scores in lieu of or in conjunction with involuntary account closure data to 

assess new checking account applicants; still others apply few or no credit risk criteria when 

screening new accountholders.xxx These different approaches to account screening may result in 

differences in the consumers who hold accounts, and thus explain some portion of the 

differences across institutions in the numbers of customers who carry low balances or manage 

their accounts in ways that put them at risk of incurring overdrafts or of experiencing 

involuntary closures.

 

www As noted earlier, some study banks offer consumers who do not qualify for standard checking account products 

safer, somewhat restrictive products that limit institutional (and consumer) exposure to credit risk.

xxx Institutions must also comply with the Bank Secrecy Act and meet the Customer Identification Program 

requirements set out in Section 326 of the USA PATRIOT Act. The study banks also all reported screening for fraud 

risk and withholding accounts from consumers with prior involuntary closures due to fraudulent use of their accounts.
60 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

6. Conclusion, Open Questions, 

and Further Research Steps

As noted at the outset, in launching the CFPB’s study of overdraft programs, CFPB Director 

Richard Cordray emphasized that the CFPB is “committed to being a data-driven agency” and 

therefore was seeking to learn “the facts and figures” about “actual consumer experiences and 

the consequences of different overdraft practices” as well as about “how well [consumers] are 

able to learn about the costs and risks of overdrafts.”

44 The findings reported in this white paper 

begin to shed important light on consumer experiences with overdraft programs as well as 

institutional practices.

To begin with, it appears that the Board’s “opt-in” amendments to Regulation E have made a 

material difference in the experience of some consumers. First, most accountholders at CFPB 

study banks did not opt in for overdraft coverage on ATM/POS debit card transactions. As of the 

end of 2011, the percentage of accounts opting in among study banks that offer this option were 

16.1% for all accounts and 22.3% for accounts that were opened during 2011. Second, while 

heavy overdrafters demonstrated higher propensities to opt in than infrequent users of 

overdraft, most appeared not to have done so when first given the chance in 2010. Third, heavy 

users of overdraft who had not opted in as of the end of 2010 experienced a 63% reduction in 

their overdraft and NSF costs, on average, between the first half of 2010 and the second half of 

the same year.

But while the Regulation E amendments have had a material impact, and while institutions have 

made other changes with respect to overdraft practices, overdraft fees still represent a sizable 

portion of the fee revenue generated by consumer checking accounts—approximately 61% 

among the study banks. Overdraft and NSF fees also compose 37% of study banks’ total deposit 

service charges and a recent trade association survey found that overdraft and NSF fees make up 

an even larger share—over 60%—of total deposit service charges among community banks. 
61 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Furthermore, the same trade association survey found overdraft and NSF fees to compose 27.5% 

of respondent net income after taxes.

Moreover, the concerns identified by the FDIC in its earlier study continue to persist: there 

remains a small but significant segment of consumers at the banks participating in this study 

who continue to incur a large number of overdraft and NSF fees. These consumers are paying 

substantial sums to access this instant liquidity and maintain their checking accounts. Accounts 

with more moderate overdraft use may also pay hundreds of dollars in fees per year.

A subset of consumers—who may or may not overlap with those that incur large numbers of 

overdraft and NSF fees—had their accounts closed involuntarily after overdrawing and 

sustaining negative account balances for an extended period of time. In 2011, 6.0% of accounts 

that were open at the beginning of the year or that were opened during the year at banks in the 

CFPB’s study resulted in involuntary closures. Involuntary closure is of particular significance 

because consumers who have had their accounts involuntarily closed are likely to be rejected for 

new accounts at many institutions. 

In addition to the high costs that many consumers are paying, what is most striking in the data 

is the variation in consumer experiences and outcomes that we have observed. This is true along 

a substantial number of the dimensions we have measured. For example:

 The proportion of consumer checking accounts that were heavy overdrafters 

(incurring more than 10 NSF or overdraft transactions in 2011) to all accounts with at 

least one overdraft or NSF transaction ranged by as much as 4.4 percentage points 

across study banks using similar measurement methodologies. 

 The mean overdraft fees paid by accountholders who incurred at least one NSF/OD 

item in 2011 varied by over $201 across the study banks.

 The highest involuntary account closure rate observed in the study was 14 times the 

involuntary closure rate at the bank with the lowest rate.

 The opt-in rate among accounts opened in 2011 varied from single-digit percentages 

to over 40% across study banks; opt-in rates among existing accounts ranged 

similarly, though to slightly less extremes. Among existing customers who were 

heavy overdrafters before Regulation E changes were implemented, opt-in rates 

varied by over 50 percentage points at the end of 2010.
62 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

 Among the study banks, the share of consumer checking accounts linked to other 

deposit accounts for overdraft protection in 2011 ranged by 37.5 percentage points; 

rates of use of linked credit account overdraft protection also ranged dramatically.

In theory, the variations in outcomes that we have observed could be attributable purely to 

differences among the customers served by the various banks and those customers’ needs and 

preferences. Bank accountholder eligibility requirements and targeting practices may result in 

different consumer profiles among institutions. 

However, it is likely that the variations we observe are attributable, at least in substantial part, 

to differences in other practices and policies among institutions. For example, at some 

institutions, only a small fraction of new accountholders elected to opt in. At others, a much 

greater percentage elected to do so. This suggests that institutions are describing or selling 

overdraft options differently to new customers. Similarly, the remarkable variation in opt-in 

rates among existing customers in 2010 who had been heavy overdrafters may reflect known 

differences in marketing approaches.

Even among those who have opted-in or opted out, we find wide variations in outcomes across 

the study banks. Our study shows that a large number of factors may determine whether an 

institution will deem the funds in an account insufficient to cover a payment or withdrawal, and 

whether it will assess a fee with respect to such an item. These include:

 The institution’s funds availability policy; 

 How the institution calculates a consumer’s available balance;

 The institution’s policies for setting overdraft limits;

 The institution’s posting practices, including when posting occurs (real-time, intraday, or at night), whether transactions are commingled or posted in sub-batches by 

transaction type, and the ordering of transactions within batches; and

 The institution’s policies with respect to assessing fees, including caps on the number 

of fees, fee cushions or waivers on de minimis transaction amounts or balances, 

forgiveness periods, and extended overdraft fees.

These factors vary from institution to institution, are complex and interact in complex ways, and 

may influence the number of overdraft or NSF fees a consumer is charged. Frequently, several of 
63 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

these factors are not disclosed to consumers (e.g., overdraft coverage limits) or are disclosed in a 

technical manner that may not be readily understandable. Moreover, some consumers may 

incorrectly transpose a set of expectations regarding bank processes from one institution to the 

next. All of this raises questions about the degree to which even the most sophisticated 

consumer could readily anticipate and manage the cost of engaging in a series of transactions at 

one institution or compare the cost of overdrafting at different institutions.

Nothing in this report implies that banks and credit unions should be precluded from offering 

overdraft coverage. Additionally, our study notes progress in some areas in recent years in 

protecting consumers from harm. Nonetheless, our findings with respect to the number of 

consumers who are incurring heavy overdraft fees or account closures and the wide variations 

across institutions indicate that certain practices and procedures merit further analysis to 

determine whether they are causing the kind of consumer harm that the federal consumer 

protections laws are designed to prevent. The CFPB will continue its study of overdraft 

programs, including through analysis of account-level data, to examine the extent to which 

particular policies magnify risks to consumers. This analysis will help the CFPB assess whether 

further action is warranted to implement and enforce federal consumer protection law 

consistently so as to ensure that the market for consumer financial products and services is fair, 

transparent, and competitive and that consumers are empowered to take more control over their 

economic lives.
64 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Glossary

ACH (ACH transaction) – An electronic fund transfer made between institutions across what 

is called the Automated Clearing House network. ACH is used for all kinds of fund transfer 

transactions, including direct deposit of paychecks and monthly debits for routine payments. 

Merchants often enable consumers to pay bills via ACH by providing an account number and 

bank routing number.

Alert (account alert) – Email or text message sent by an institution to an enrolled deposit 

accountholder to notify of account or transaction status; for example, that the account’s balance 

has dropped below a certain threshold or that a scheduled payment has been made.

ATM – Automated teller machine; enables account access, including balance inquiries, 

withdrawal of funds, deposits, or account transfers, typically with debit card and PIN 

credentials.

Authorization – Decision by the institution to pay or allow a debit card transaction. Generally 

distinct from transaction settlement. Authorizations typically reduce funds available to the 

consumer.

Automated Overdraft Program – A program in which a financial institution determines 

whether to authorize or decline items presented against insufficient funds via a computer 

algorithm and an overdraft coverage limit for each account. Overdraft coverage limits used in 

these programs may be dynamic (calculated) or static.

Available Balance (available funds) – The balance used to determine whether the account 

holds sufficient funds for an authorization; calculated by subtracting outstanding debit card 

authorizations and holds on deposited funds from the ledger balance.

Batch Processing (nightly batch processing or nightly processing) – End of day 

debiting of received authorizations, crediting of deposits, and debiting of transactions received 
65 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

and presented for posting against the account ledger balance. This is the process in which 

pay/return decisions are made for check and ACH transactions.

Charge Off – Write-off of a past-due debt or negative balance deposit account. When an 

account is charged off, the account is closed and eligible for collections.

Charge/No Charge Decision – Decision by an institution whether to assess a fee on an NSF 

or overdraft item.

Commingled Debits – Mix of different types of debit (payment) transactions for the purpose 

of making pay/return decisions and posting to a deposit account general ledger. For example, an 

institution might mix ACH and check transactions, rather than posting all of the ACH 

transactions before posting the checks.

Cutoff Time – Point in time during a business day at which all subsequent transactions will be 

considered too late for the night’s batch processing. Transactions received after the cutoff time

are held for the next business day’s nightly process.

De Minimis – Threshold that determines whether NSF/OD items are assessed a fee. 

Institutions may implement de minimis policies on a per-transaction or net-balance basis. The 

former approach prevents overdraft fees on small-dollar items. The latter method restricts 

overdraft fees when a balance is driven only nominally negative by a posted item.

Extended Overdraft Fee (sustained overdraft fee) – A fee assessed on accounts that 

remain at a negative balance beyond a specified period of time. These fees may be applied on a 

one-time or periodic basis after an overdraft has occurred and do not typically depend upon the 

number of items that caused an account to overdraft.

Fee Cap – Limit to the number of NSF and overdraft fees an account may be assessed per

processing day. Often expressed as a threshold dollar amount but could be specified in terms of 

items.

Funds Availability Policy – Terms by which an institution agrees to enable depositors to 

access—i.e., withdraw, make payments from, or transfer—deposits made to an account. The 

Federal Reserve Board’s Regulation CC specifies minimum funds availability requirements for 

banks.

Forgiveness Period – Time allowed after an item is paid into overdraft during which 

consumers can make compensating deposits and avoid being charged an overdraft fee.
66 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Hold (hold on deposit) – Designation of some or all of a deposit amount to be unavailable to 

a depositor to fund a withdrawal, payment, or transfer. Generally represented as a temporary 

debit and offset to a deposit amount credited to an account balance.

Hybrid Overdraft Program – Automated overdraft programs in which certain pay/return or 

charge/no charge decisions are subsequently reviewed and may be overridden by bank or credit 

union staff.

Intraday Processing – Posting of transactions to the ledger balance outside of nightly 

processing; usually as certain transactions are received.

Involuntary Account Closure – Termination of a customer account agreement initiated by 

the institution. Could include both credit and fraud charge offs.

Ledger Balance – The net sum of all cleared credit and settled debit transactions executed 

against an account.

Manual Overdraft Program – A program in which bank or credit union staff review and 

determine whether to pay or return each item presented against an account with insufficient 

funds. Manual overdraft programs do not enable timely decisions on ATM and POS debit card 

transactions; as a result, institutions with manual programs generally do not offer overdraft 

coverage on these transactions. Manual overdraft programs are often ad hoc as staff may not 

review every item presented against accounts with insufficient funds.

Memo Posting – Intraday accounting (debiting and crediting) of transactions and debit card 

authorizations to an account’s available balance.

NSF (non-sufficient funds) – A debit transaction (payment or withdrawal) that if paid 

would exceed the account balance, and is instead returned unpaid by the institution. 

NSF Fee – Fee an institution assesses for an NSF item. 

Opt-in – Affirmative consent received for a consumer account to enable the institution to allow 

the account to overdraw via POS (non-recurring) debit card or ATM transactions. Such consent 

is required per Regulation E.

Overdraft – A debit transaction (payment or withdrawal) that exceeds the consumer’s account 

balance and is paid (covered) by the institution. 
67 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Overdraft Coverage Limit – Amount by which an institution with an overdraft program is 

generally willing to let a consumer’s account go negative. Many institutions do not disclose 

coverage limit amounts to accountholders.

Overdraft Fee – Fee imposed by an institution for covering an overdraft item. Some 

institutions vary or tier overdraft fees based upon item amount or prior overdraft activity. Some 

overdraft items are not assessed fees due to waiver policies.

Linked Account Overdraft Protection – A service that allows a consumer to link a checking 

account to a savings account, another personal checking account, a line of credit, or a credit card 

account from which funds are automatically transferred for a fee to cover payments when the 

checking account balance is otherwise too low to cover them.

Pay/Return Decision – Decision by an institution whether to cover an overdraft or return an 

NSF when an item exceeds the consumer’s account balance.

PIN Debit – Debit card transaction in which a consumer uses a personal identification number 

for security purposes. PIN debit card transactions almost always settle the same business day 

they are authorized (or the next business day if executed on a non-business day).

POS Debit – A debit card transaction conducted at a merchant’s physical terminal or point of 

sale. A consumer may authorize a POS debit with a PIN or signature.

Posting Order – The sequence in which credit and debit items are presented (for making 

pay/return and charge/no charge decisions) during batch processing. For high-to-low posting 

order, an institution presents transactions from largest to smallest amounts; the reverse is true 

for low-to-high posting orders. Orders may also be chronological (based upon transaction date 

and time) or serial (by check number), as applicable.

Real-time Processing – Posting of credits and debits to the account ledger balance at the 

time these transactions are received or executed. Institutions may process in real-time 

transactions received intraday rather than during nightly batch processing.

Service Charges on Deposits – Federal banking agency Call Report (quarterly bank 

reporting of financial performance and status) line item that includes consumer NSF and 

overdraft fees. This line item also includes other fees charged against deposit accounts, 

including monthly maintenance fees, stop payment fees, fees for customers using foreign ATMs, 

etc., as well as charges to non-consumer deposit accounts.
68 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Settlement (transaction settlement) – Disbursement between institutions, usually through 

debiting and crediting of institutional account balances, to cover individual customer payment 

transactions. 

Signature Debit – Debit card transaction in which a consumer often signs his or her name to 

validate the transaction. Many terminals, including those at gas pumps or automatic fuel 

dispensers, do not require an actual customer signature. Signature debit card transactions 

generally settle one to two business days after authorization.

Transaction – Payment, withdrawal, deposit, or institution adjustment on a consumer 

checking account such as an interest credit or fee.

Transfer Fee (sweep fee)– A fee charged by an institution to automatically move funds from 

a linked account to a checking account to cover a debit transaction that exceeds the checking 

account balance.

Waiver – Absence of a fee charge for an NSF or overdraft item. May be the result of a fee cap, 

de minimis policy, forgiveness period, other policy, or manual override.
69 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

Notes

 

1 Richard Cordray, Director, CFPB, Remarks at the CFPB Roundtable on Overdraft Practices (Feb. 22, 

2012), available at http://www.consumerfinance.gov/speeches/prepared-remarks-by-richard-cordrayat-the-cfpb-roundtable-on-overdraft-practices.

2 Id.

3 See Impacts of Overdraft Programs on Consumers, 77 Fed. Reg. 12031 (Feb. 28, 2012), available at

http://www.gpo.gov/fdsys/pkg/FR-2012-02-28/pdf/2012-4576.pdf.

4 Bureau analysis of FDIC and NCUA data obtained through SNL Financial LC.

5 See, e.g., Comments to the Office of the Comptroller from the Center for Responsible Lending, Proposed 

Guidance on Deposit-Related Consumer Credit Products (Aug. 8, 2011); Guidance on Deposit-Related 

Consumer Credit Products, Docket ID OCC-2011-0012 (Proposed guidance), 76 Fed. Reg. 33409 (June 8, 

2011) (OCC); Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127 (Feb. 24, 2005) (FDIC, 

OCC, Federal Reserve Board, and NCUA).

6 Hayashi, Fumiko, The New Debit Card Regulations: Initial Effects on Networks and Banks, Federal 

Reserve Bank of Kansas City, Economic Review (2012).

7 The Nilson Report #1008 (Dec. 2012).

8 2011 FDIC Survey of Banks’ Efforts to Serve the Unbanked and Underbanked, p.16 (Dec. 2011), 

available at http://www.fdic.gov/unbankedsurveys/2011survey/2011report.pdf.

9 Independent Community Bankers of America, ICBA Overdraft Payment Services Study: Community 

Bank Findings, p.24 (2012).

10 FDIC Quarterly Banking Profile (Dec. 2012).

11 National Credit Union Administration, PACA Facts Data 5300 Call Report Quarterly Summary 

December 2012 (Feb. 21, 2012).
70 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

 

12 BB&T Corporation, 2012 Annual Report, p.22 and p.81 (2013); Commerce Bancshares, Inc., 2012 

Annual Report and Form 10-K, Form 10-K p.22 (2013); Cullen/Frost Bankers, Inc., Year 2012 Annual 

Report, p.46 and p.82 (2013); Synovus, 2012 Annual Report, p.58 (2013). 

13 Moebs Services, Overdrafts Rebound Sharply in 2012 (Sept. 24, 2012).

14 Federal Deposit Insurance Corporation, FDIC Study of Bank Overdraft Programs, p.57 (Nov. 2008), 

available at http://www.fdic.gov/bank/analytical/overdraft/FDIC138_Report_Final_v508.pdf.

15 Independent Community Bankers of America, ICBA Overdraft Payment Services Study: Community 

Bank Findings (June 2012).

16 Strunk & Associates, L. P.

17 FDIC Quarterly Banking Profile: Fourth Quarter 2012 Vol. 7, No. 1 (2013).

18 National Credit Union Administration, PACA Facts Data 5300 Call Report Quarterly Summary 

December 2012 (Feb. 21, 2012).

19 Federal Deposit Insurance Corporation, FDIC Study of Bank Overdraft Programs (Nov. 2008), 

available at http://www.fdic.gov/bank/analytical/overdraft/FDIC138_Report_Final_v508.pdf.

20 Bankrate.com, Checking Fees Rise to Record Highs in 2012 (Sept 24, 2012), available at

http://www.bankrate.com/finance/checking/checking-fees-record-highs-in-2012.aspx#slide=5;

Bankrate.com, Average Nonsufficient Funds Fee (Dec. 8, 2004), available at 

http://www.bankrate.com/brm/news/checkingstudy2004/interest/nsf-fee.asp.

21 Moebs Services, 2012 The Year of Overdraft Coming Back (Mar. 25, 2013).

22 Federal Deposit Insurance Corporation, FDIC Study of Bank Overdraft Programs (Nov. 2008), 

available at http://www.fdic.gov/bank/analytical/overdraft/FDIC138_Report_Final_v508.pdf.

23 Id.

24 Federal Deposit Insurance Corporation, 2011 FDIC Survey of Banks’ Efforts to Serve the Unbanked and 

Underbanked, p.28 (Dec. 2011).
71 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

 

25 Joint Guidance on Overdraft Protection Programs, 70 Fed. Reg. 9127 (Feb. 24, 2005) (FDIC, OCC, 

Federal Reserve Board, and NCUA); Guidance on Overdraft Protection Programs, 70 Fed. Reg. 8428 (Feb. 

18, 2005) (OTS).

26 Truth in Savings, Regulation DD (Proposed rule), 69 Fed. Reg. 31760, 31761 (Jun. 7, 2004).

27 Truth in Savings, Regulation DD ( Final rule), 70 Fed. Reg. 29582 (May 24, 2005) and Truth in Savings, 

Regulation DD (Final rule), 74 Fed. Reg. 5584 (Jan. 29, 2009).

28 Electronic Fund Transfers, Regulation E (Final rule), 74 Fed. Reg. 59033 (Nov. 17, 2009). 

29 Overdraft Payment Programs and Consumer Protection, Final Overdraft Payment Supervisory 

Guidance, FIL-81-2010 (Nov. 24, 2010) (FDIC), available at

http://www.fdic.gov/news/news/financial/2010/fil10081b.pdf; Supplemental Guidance on Overdraft 

Protection Programs, Docket ID OTS-2010-0008 (Proposed guidance) (Apr. 29, 2010) (OTS); Guidance 

on Deposit-Related Consumer Credit Products, Docket ID OCC-2011-0012 (Proposed guidance), 76 Fed. 

Reg. 33409 (June 8, 2011) (OCC); Proposed Guidance on Deposit Advance Products; Withdrawal of 

Proposed Guidance on Deposit-Related Consumer Credit Products, 78 Fed. Reg. 25353 (Apr. 30, 2013) 

(OCC).

30 Electronic Fund Transfers, Regulation E (Final rule), 74 Fed. Reg. 59041 (Nov. 17, 2009).

31 Id.

32 Independent Community Bankers of America, ICBA Overdraft Payment Services Study: Community 

Bank Findings, p.35 (2012).

33 Consumer Bankers Association, CBA Releases Data Finding Overdraft Opt-In Rates at 16%, (Oct. 27, 

2011) available at

http://www.cbanet.org/News%20and%20Media/press%20releases%202011/10272011_pressrelease.asp

x.

34 Independent Community Bankers of America, ICBA Overdraft Payment Services Study: Community 

Bank Findings, p.35 (June 2012).

35 12 C.F.R. § 229.1.

36 12 C.F.R. § 229.13.
72 CONSUMER FINANCIAL PROTECTION BUREAU STUDY OF OVERDRAFT PROGRAMS

 

37 Informa Research Services, Inc. (Nov. 2012), Calabasas, CA. www.informars.com. Although the 

information has been obtained from the various financial institutions, the accuracy cannot be guaranteed.

38 Id.

39 Id.

40 Id.

41 Id.

42 Mercator Advisory Group, Next-Generation Online Banking: Mobile, PFM, and Bill Pay (Mar. 2013).

43 Federal Reserve Board of Governors, Consumers and Mobile Financial Services, p.7 (Mar. 2012).

44 Richard Cordray, Director, CFPB, Remarks at the CFPB Roundtable on Overdraft Practices (Feb. 22, 

2012), available at http://www.consumerfinance.gov/speeches/prepared-remarks-by-richard-cordrayat-the-cfpb-roundtable-on-overdraft-practices.