LAKE BLUFF, Ill. — The practice of ordering consumer payments from highest to lowest is declining among financial institutions, according to a new study from Moebs Services.
In recent years the practice has come under fire from consumers and the Consumer Financial Protection Bureau, as it looks into financial institutions' overdraft policies. Ordering transactions from high to low increases the chance that the consumer will encounter an overdraft fee from a small-ticket purchase.
The Moebs study of 2,807 depositories indicates that financial institutions are moving away from the high-to-low practice in response to technological advances, consumer preferences and regulations.
The study shows that 43.9% of credit unions, banks and thrifts have changed the way that they process overdrafts in the past year.
Nationally, 64% of financial institutions pay in the order that payments are received: CUs (89.1%) are doing the best job, versus 60.3% of thrifts and 48.4% of banks.
Last year, 87.3% of CUs processed transactions as they are received.
With paper float long gone, the consumer is adjusting to the speed of electronic processing, the study showed.
Fewer than one of six financial institutions use high-to-low processing because technology has substantially reduced transaction process time. Low-to-high processing is used by just one out of eight institutions.
The Moebs study also found that many smaller Main Street institutions continue a more personal approach, calling the consumer and paying in the order requested by the account holder.
