For many years, as consumer advocates railed against the proverbial $35 cup of coffee, little was publicly known about how much revenue banks were collecting from U.S. customers who spend more than they have in their accounts.
But that's now changed, as banks with more than $1 billion in assets were required for the first time to report consumer overdraft charges in their most recent call reports.
The resulting data, obtained Wednesday from the Federal Deposit Insurance Corp., reveals wide variations in banks' reliance on revenue from overdraft fees. It also shows which banks could be most vulnerable to looming changes in overdraft regulations.
More than 600 banks that reported the data collected a total of $2.52 billion in consumer overdraft fees during the first quarter of 2015. The charges add up to around $10 billion on an annual basis, and account for around 5% of the banks' total noninterest income.
Overdraft fees account for about 34% of total fees on consumer deposit accounts. According to a research note published Thursday by Compass Point Research & Trading, they will account for about 6% of the banks' estimated earnings for fiscal year 2016.
"Overdraft fees are a significant driver of earnings for banks," Compass Point analyst Kevin Barker wrote.
One large bank that stood out for its reliance on the fees was TD Bank. The U.S. unit of Toronto-Dominion Bank collected $102.7 million from overdraft charges, accounting for 30.3% of its overall fee income during the first quarter, according to the FDIC's data. In comparison, overdraft fees made up less than 6% of fee income at Pittsburgh-based PNC Financial Services Group.
Woodforest National Bank, a $4.6 billion-asset institution with hundreds of branches inside Walmart stores, got 41.4% of its fee income from overdraft charges. At TCF Bank in Wayzata, Minn., consumer overdraft fees accounted for 27.0% of noninterest income. At Birmingham, Ala.-based Regions Bank, the figure was 19.3%.
On the other end of the spectrum were banks that collected less than 1% of their fee income from consumer overdraft charges.
That list includes online banks such as Ally Bank and Discover Bank. It also includes institutions that cater largely to the wealthy, including First Republic Bank, Silicon Valley Bank and City National Bank.
"Higher wealth individuals tend to have more bank accounts, more liquidity," Barker noted in an interview. "Those accounts tend not to tolerate playing games or being targeted for those types of fees."
The wide variation between banks likely reflects not only demographic differences in their customer bases, but also the banks' varying policies on when overdraft fees are charged, and how aggressively they market overdraft-related practices that require a customer to opt in.
The data's release comes as the industry braces for new overdraft rules from the Consumer Financial Protection Bureau. Last week the CFPB announced a delay in the start of the rulemaking process from July to October.
Consumer advocates are pushing for a range of new restrictions, which seem all but certain to put limitations on banks' ability to collect money from overdraft fees.
Those measures could include a ban on the reordering of transactions from high amount to low amount, which tends to maximize overdraft fees, though many banks have now abandoned that practice. They could also include new limits on the allowable size and frequency of overdraft fees.
One question confronting the CFPB involves how to treat overdraft fees charged at ATMs and when consumers swipe their debit cards at the cash register. Fees at the ATM and in the checkout line are more controversial than charges assessed when a check bounces, because they're not as costly to the bank.
Still, most of the nation's 50 largest banks do charge overdraft fees at ATMs and when the customer uses a debit card to make a purchase, according to a recent report by the Pew Charitable Trusts. And those fees are a big money-maker for banks, said Rebecca Borne, senior policy counsel at the Center for Responsible Lending.
That point is underscored by the first-quarter data. At several banks that don't charge overdraft fees at either the ATM or on debit-card purchases Ally, Charles Schwab Bank, HSBC, Citibank and First Republic overdraft fees accounted for less than 1% of noninterest income.
Houston-based Prosperity Bank was identified by Pew as using numerous practices that can lead to higher overdraft revenue, including charging the fees at the ATM and on debit-card purchases. Prosperity got 23.7% of its noninterest income from overdraft fees in the first quarter, according to the FDIC data.
Among the largest banks, JPMorgan Chase reported $415 million in overdraft fees, which was 4.0% of its noninterest income. Bank of America reported $371 million, or 5.5% of its noninterest income. Wells Fargo collected $355 million, or 5.4% of its noninterest income, from overdraft fees.
Before the new reporting requirement took effect, banking trade groups argued that institutions shouldn't have to report such fine-grained data about their fees, since call reports were intended simply to reflect each bank's financial position.
Now some in the industry are concerned that the new data will be used to spin misleading stories.
"I'm just afraid it could be used the wrong way," said Jeff Platter, vice president of sales and marketing at Haberfeld Associates, which advises financial institutions on how to acquire more customers.
He expressed concern that certain banks that don't engage in abusive practices but do have a lot of checking-account customers will nonetheless be targeted by regulators and consumer groups, since the data will suggest they rely heavily on overdraft fees. The average amount of overdraft fee revenue that banks collect from each checking account holder would be more meaningful than the aggregate totals are, Platter said.
In addition to data on overdraft charges, banks with more than $1 billion in assets are also required now to report consumer ATM fees and consumer periodic account maintenance charges, which often take the form of monthly fees.
During the first quarter, the 626 banks that reported the fees collected $975 million in periodic maintenance charges and $439 million from consumer ATM fees, according to the FDIC data.
Joe Adler contributed to this report.