By: Joe Gillen
Consumers have been extremely vocal about the types of fees they will and will not tolerate from banks, as evidenced by consumer behavior in recent months. However, regulators who have launched an assault on overdraft protection services have failed to recognize the blatant trends that demonstrate consumers' support for these programs.
For example, the Occupy Wall Street movement that took hold in nearly every metropolitan city in the U.S. prompted thousands of Americans nationwide to protest unfair and predatory financial practices. The movement, which is expected to gain force again this summer, was one of the largest organized gatherings the U.S. has experienced in decades.
On Bank Transfer Day, roughly 610,000 consumers transferred their money to more consumer-friendly institutions, according to Javelin Strategy and Research. Lastly, consumer outrage toward some fees, such as the $5 debit card fee that was to be imposed by Bank of America, was strong enough to prompt banks to back out of the decisions.
These examples should be sufficient proof to regulators that consumers want and utilize overdraft protection services. If they were angered or disapproving of these safety nets, they would not only opt out of the programs, but also take action.
A recent study confirms consumers both want and value the benefits of overdraft protection programs. The results of a Moebs report reveal 77 percent of consumers utilize conventional overdraft services. While the frequency with which consumers overdrew their accounts declined in 2011, the number of Americans who opted-in to overdraft protection held relatively steady. Further, many credit unions and community banks lowered their overdraft fees, in contrast with larger banks that increased them to earn more service fee income.
This data, along with the lack of consumer outrage over the issue, is a clear signal that overdraft protection is not something that should be in regulators' crosshairs.