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Newly released survey data by the Federal Deposit Insurance Corp. reveal most banks automatically enroll customers into overdraft programs that impose a fee. In 2006, the small sample of banks surveyed earned $1.97 billion in overdraft-related fees. The FDIC says the study population for the survey was 1,171 FDIC-supervised financial institutions scheduled for on-site examinations from May through December 2007 and FDIC-supervised institutions with at least $5 billion in assets. The FDIC randomly selected 462 institutions from the study population to complete the survey. Thirty-nine of the banks surveyed submitted transaction data for the survey. Of the surveyed banks, 40.5% offered automated overdraft programs, but 76.9% of large banks operate automated overdraft programs, according to the FDIC. The survey also revealed ATM and debit card transactions are the most frequent cause of overdrafts. The majority (81%) of the banks surveyed that operate automated overdraft programs allowed overdrafts to take place at ATMs and for point-of-sale debit transactions. Most banks alerted customers of nonsufficient funds only after the transaction was completed. Some banks (7.9% for POS-debit and 23.5% for ATMs) did inform consumers of nonsufficient funds before the transactions were complete, enabling customers to cancel the transaction and avoid a fee. The Federal Reserve Board is considering regulations that would require banks to give customers the option of opting out of fee-based overdraft programs. The proposal is expected to be reissued for public comment next week, reports CardLine sister publication American Banker. Early public comments on the issue show little concern from consumers, according to Nessa Feddis, senior federal counsel to the American Bankers Association's government relations division.
