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Overdraft/NSF revenue down nearly 50% versus pre-pandemic levels [1]

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Date: 2023-06

For the past year-and-a-half, CFPB has been closely monitoring trends in overdraft/non-sufficient fund (NSF) fee revenue and practices. With data now available for all four quarters of 2022, we have a fuller picture of reductions in these revenues compared to pre-pandemic levels. Our most recent analysis finds the following:

Overdraft/NSF revenue for the fourth quarter of 2022 alone was approximately $1.5 billion lower than in the fourth quarter of 2019 – a decrease of 48% compared to before the pandemic, suggesting an annual reduction of over $5.5 billion going forward. This decrease suggests average annual savings of more than $150 per household that incurs overdraft or NSF fees; many households that have typically paid a high number of overdraft or NSF fees annually have saved much more. 1

Even with this substantial reduction, consumers paid over $7.7 billion in 2022 in overdraft/NSF fees.

Evidence continues to suggest that financial institutions are not increasing other checking account fees to compensate for reduced overdraft/NSF revenue. Across all reporting banks, combined account maintenance and ATM fees remained flat from 2019 to 2022.

This analysis of bank call report data follows our previous analyses of trends in checking account fee revenue published in December 2021, July 2022, and February 2023.

Overdraft/NSF Fee Revenue

Banks with assets over $1 billion have been required to report overdraft/NSF fee revenue in their call report data since 2015. For each of the five years from 2015 to 2019, the overdraft/NSF revenue reported by these banks totaled $11-12 billion annually.2 Bank overdraft/NSF fee revenue was lower in 2020 and 2021 than before the pandemic, likely primarily due to pandemic-related stimulus checks pushing up average checking account balances.3 In the second half of 2021, overdraft/NSF fee revenue rebounded somewhat. However, this revenue began decreasing again in early 2022. The sustained reductions we find in 2022 versus 2019 are likely due to changes in bank policies that started to go into effect toward the end of 2021 and throughout 2022.

For the fourth quarter of 2022 alone, overdraft/NSF revenue was approximately $1.6 billion, compared to roughly $3.1 billion in the fourth quarter of 2019 – a decrease of 48%, or nearly half.4 Overdraft/NSF revenue also trended downward throughout 2022, with quarterly revenue approximating $2.2 billion, $2.0 billion, $1.9 billion, and $1.6 billion for the first through fourth quarters, respectively.5 This quarterly trend further indicates that overdraft/NSF policy changes are impacting bank revenues – especially since, historically, overdraft/NSF revenues in quarters three and four have typically been higher than in quarters one and two.

Figure 1 below compares quarterly 2022 overdraft/NSF revenue to the average quarterly revenue from 2015-2019. These revenues in the first, second, third, and fourth quarters of 2022 were lower than the average from 2015-2019 by 18%, 29%, 38%, and 45% respectively.

FIGURE 1

Quarterly overdraft/NSF revenue, average of 2015-2019 compared to 2022

For the full year 2022, combined overdraft/NSF revenue was $7.72 billion, a decrease of 35% compared to the $11.97 billion reported in 2019.

Figure 2 shows the reported bank overdraft/NSF fee revenue by year, beginning in 2015.

FIGURE 2

Annual overdraft/NSF revenue 2015 to 2022

Despite these declines, reporting banks collected $7.7 billion in overdraft/NSF fees from their customers in 2022. Though banks have made a range of changes to their policies over the last year-and-a-half, some banks continue to charge overdraft fees as high as $37 each. Overdraft fees can total hundreds of dollars per day, exacerbating financial setbacks. And they can lead to account closures, essentially pricing people out of the banking system.

Table 1 below compares overdraft/NSF revenue in 2022 to 2019 across specific banks and groups of banks. The individual banks listed were the largest overdraft/NSF revenue generators in 2021, with each collecting more than $200 million in these fees. Table 1 also shows trends among four groups of banks that generated $200M or less in OD/NSF fee revenue in 2021, consisting mainly of small and midsize banks (referred to as “small/midsize bank groups”).6

Despite the overall decrease in overdraft/NSF fee revenue, we continue to see significant differences across banks and groups of banks. While this evidence is indirect and does not control for changes in the number, composition, or behavior of accountholders, the variations likely reflect, at least in part, changes in overdraft/NSF programs.7

Table 1

Change in overdraft/NSF fee revenue for the year 2022 versus the pre-pandemic year 2019 for select individual banks and groups of banks8

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[1] Url: https://www.consumerfinance.gov/data-research/research-reports/data-spotlight-overdraft-nsf-revenue-in-q4-2022-down-nearly-50-versus-pre-pandemic-levels/full-report/

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