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CFPB Releases Overdraft Study

Robert L. Carothers
Jones Walker LLP - Mobile Office

August 18, 2014

Previously published on August 14, 2014

On July 31, 2014, the Consumer Financial Protection Bureau ("CFPB") released the results of a study prepared by its Office of Research on the topic of checking account overdrafts. The study was based on a sampling of data from several large banks supervised by the CFPB. It contains a summary of the CFPB's key findings, and as shown below, focuses on overdraft charges for customers who opted-in to overdraft coverage on debit card and ATM transactions (referred to in the study as "opted-in consumers").

The CFPB's key findings included:

  • Overdraft and NSF fees constitute the majority of the total checking account fees that consumers incur. For opted-in consumers, overdraft and NSF fees account for 75% of their total checking account fees and average over $250 per year.
  • Most overdraft fees are paid by a small fraction of bank customers: 8% of customers incur almost 75% of all overdraft fees.
  • The number of overdraft transactions and fees varies substantially with opt-in status. Opted-in consumers are three times as likely to have more than 10 overdrafts per year as accounts that are not opted-in. Opted-in accounts have seven times as many  overdrafts that result in fees as accounts that are not opted-in.
  • Transactions that lead to overdrafts are often quite small. In the case of debit card transactions, the median amount that leads to an overdraft fee is $24 and the median amount of a transaction that leads to an overdraft fee for all types of debits is $50.
  • Most consumers who overdraft bring their accounts positive quickly, with more than half becoming positive within three days and 76% within one week.

The CFPB issued a press release and conducted a conference call discussing the results of its study and expressed concern over the impact of customers opting-in to overdraft services for debit card and ATM transactions. It advised that more studies will be conducted on overdraft practices and their impact on consumers and that it was weighing what consumer protections are necessary for overdraft-related services. The tone of the press release and conference call clearly indicate that additional focus and regulation of overdraft practices is forthcoming, particularly in the area of debit card and ATM overdrafts.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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