Depository institutions—banks, thrifts, and credit unions—have attained a unique and central role in U.S. financial markets through their deposit- taking, lending, and other activities. Individuals have traditionally placed a substantial amount of their savings in federally insured depository institutions. In addition, the ability to accept deposits transferable by checks and other means has allowed depository institutions to become principal agents or middlemen in many financial transactions and in the nation’s payment system. Depository institutions typically offer a variety of savings and checking accounts, such as ordinary savings, certificates of deposits, interest-bearing checking, and noninterest-bearing checking accounts. Also, the same institutions may offer credit cards, home equity lines of credit, real estate mortgage loans, mutual funds, and other financial products. In the United States, regulation of depository institutions depends on the type of charter the institution chooses. The various types of charters can be obtained at the state or national level and cover: (1) commercial banks, which originally focused on the banking needs of businesses but over time broadened their services; (2) thrifts, which include savings banks, savings associations, and savings and loans and which were originally created to serve the needs—particularly the mortgage needs—of those not served by commercial banks; and (3) credit unions, which are member-owned cooperatives run by member-elected boards with a historic emphasis on serving people of modest means. All depository institutions have a primary federal regulator if their deposits are federally insured. State regulators participate in the regulation of institutions with state charters. Specifically, the five federal banking regulators charter and oversee the following types of depository institutions: OCC charters and supervises national banks. As of December 30, 2006, there were 1,715 commercial banks with national bank charters. These banks held the dominant share of bank assets, about $6.8 trillion. The Federal Reserve serves as the regulator for state-chartered banks that opt to be members of the Federal Reserve System and the primary federal regulator of bank holding companies, including financial holding companies. As of December 30, 2006, the Federal Reserve supervised 902 state member banks with total assets of $1.4 trillion. FDIC supervises all other state-chartered commercial banks with federally insured deposits, as well as federally insured state savings banks. As of December 30, 2006, there were 4,785 state-chartered banks and 435 state-chartered savings banks with $1.8 trillion and $306 billion in total assets, respectively. In addition, FDIC has backup examination authority for federally insured banks and savings institutions of which it is not the primary regulator. OTS charters and supervises federally chartered savings associations and serves as the primary federal regulator for state-chartered savings associations and their holding companies. As of December 30, 2006, OTS supervised 761 federally chartered and 84 state chartered thrifts with combined assets of $1.4 trillion. NCUA charters, supervises, and insures federally chartered credit unions and is the primary federal regulator for federally insured state chartered credit unions. As of December 30, 2006, NCUA supervised 5,189 federally chartered and insured 3,173 state chartered credit unions with combined assets of $710 billion. These federal regulators conduct on-site examinations and off-site monitoring to assess institutions’ financial condition and compliance with federal banking and consumer laws. Additionally, as part of their oversight the regulators issue regulations, take enforcement actions, and close failed institutions. Regulation DD, which implements TISA, became effective with mandatory compliance in June 1993. The purpose of the act and its implementing regulations is to enable consumers to make informed decisions about their accounts at depository institutions through the use of uniform disclosure documents. These disclosure documents are intended to help consumers “comparison shop” by providing information about fees, annual percentage yields, interest rates, and other terms for deposit accounts. The regulation is supplemented by “staff commentary,” which contains official Federal Reserve staff interpretations of Regulation DD. Since the initial implementation date for Regulation DD, several amendments have been made to the regulation and the corresponding staff commentary. For example, the Federal Reserve made changes to Regulation DD, effective July 1, 2006, to address concerns about the uniformity and adequacy of information provided to consumers when they overdraw their deposit accounts. Credit unions are governed by a substantially similar regulation issued by NCUA. Regulation E, which implements the Electronic Fund Transfer Act, became effective in May 1980. The primary objective of the act and Regulation E is the protection of individual consumers engaging in electronic funds transfers (EFT). Regulation E provides a basic framework that establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer systems such as ATM transfers, telephone bill-payment services, point-of-sale terminal transfers in stores, and preauthorized transfers from or to consumer's bank accounts (such as direct deposit and Social Security payments). The term “electronic fund transfer” generally refers to a transaction initiated through an electronic terminal, telephone, computer, or magnetic tape that instructs a financial institution either to credit or to debit a consumer's asset account. Regulation E requires financial institutions to provide consumers with initial disclosures of the terms and conditions of EFT services. The regulation allows financial institutions to combine the disclosure information required by the regulation with that required by other laws such as TISA as long as the information is clear and understandable and is available in a written form that consumers can keep. Paying or honoring customers’ occasional or inadvertent overdrafts of their demand deposit accounts has long been an established practice at depository institutions. As shown in figure 1, depository institutions have four options when a customer attempts to withdraw or access funds from an account that does not have enough money in it to cover the transaction, and fees can be assessed for each of these options. The institution can (1) cover the amount of the overdraft by tapping a linked account (savings, money market, or credit card) established by the customer; (2) charge the overdraft to a linked line of credit; (3) approve the transaction (if electronic) or honor the customer’s check by providing an ad hoc or “courtesy” overdraft; or (4) deny the transaction or decline to honor the customer’s check. The first two options require that customers have created and linked to the primary checking account one or more other accounts or a line of credit in order to avoid overdrafts. The depository institution typically waives fees or may charge a small fee for transferring money into the primary account (a transfer fee). Depository institutions typically charge the same amount for a courtesy overdraft (an overdraft fee) as they do for denying a transaction for insufficient funds (an insufficient funds fee). In addition to fees associated with insufficient funds transactions, institutions may charge a number of other fees for checking and savings account services and transactions. As shown in table 1, these fees include periodic service charges associated with these accounts and special service fees assessed on a per-transaction basis. Our analysis of data from private vendors showed that a number of bank fees—notably charges for insufficient funds and overdraft transactions— have generally increased since 2000, while others have decreased. In general, banks and thrifts charged higher fees than credit unions for checking and savings account services, and larger institutions charged more than smaller institutions. During this same period, the portion of depository institutions revenues derived from noninterest sources— including, but not limited to, fees on savings and checking accounts— increased somewhat. Changes in both consumer behavior and practices of depository institutions are likely influencing trends in fees, but limited data exist to demonstrate the effect of specific factors. FDIC is currently conducting a special study of the overdraft programs that should provide important insights on how these programs operate, as well as information on characteristics of customers who pay overdraft bank fees. Data we obtained from vendors—based on annual surveys of hundreds of banks, thrifts, and credit unions on selected banking fees indicated that some checking and savings account fee amounts generally increased between 2000 and 2007, while a few fell, notably monthly maintenance fees. For example, as shown in figure 2, average insufficient funds and overdraft fees have increased by about 11 percent, stop payment order fees by 17 percent, and return deposited item fees by 49 percent since 2000. Across all institutions, average insufficient funds and overdraft fees were the highest dollar amounts, on average, of the fees reported. For example, the average insufficient funds fee among the institutions surveyed by Moebs $ervices in 2006 was $24.02, while among the institutions surveyed by Informa Research Services it was $26.07. Data from Informa Research Services also indicated that since 2004 a small number of institutions (mainly large banks) have been applying tiered fees to certain transactions, such as overdrafts. For example, an institution may charge one amount for the first three overdrafts in a year (tier 1), a higher rate for overdrafts four to six of that year (tier 2), and an even higher rate for overdrafts seven and beyond in a single year (tier 3). Of the institutions that applied tiered fees in 2006, the average overdraft fees were $26.74, $32.53, and $34.74 for tiers 1, 2, and 3, respectively. The data from these vendors also indicate that fee amounts for some transactions or services varied or generally declined during this period. For example: The average ATM surcharge fee (assessed by a depository institution when its ATM is used by a nonaccount holder) among institutions surveyed by Moebs $ervices was $0.95 in 2000, rising to $1.41 in 2003, and declining to $1.34 in 2006. This variability was also evident in the fees charged by institutions surveyed by Informa Research Services.