America's big banks collected over $11 billion in overdraft fees in 2015, according to a new report from the Consumer Financial Protection Bureau, with the charges making up about 8% of their total profits for the year. The banks covered in the report — the 628 U.S. banks with assets of over $1 billion — have a total of $3.9 trillion deposited in consumer checking accounts.
Overdrafts are essentially short-term loans that allow users to access money even if their accounts are at or near zero, and can have incredibly high interest rates.
Regulators have pushed banks to reform their approaches to charging such fees, which are levied in large part on low-income consumers. But they still account for almost two-thirds of all fee revenue from consumer bank accounts, the CFPB said.
New regulations have required banks to have their customers affirmatively opt-in to overdraft services and the fees that come with them, but CFPB is still considering further rules. The Bureau said it was "looking closely at overdraft practices and will continue to analyze this data to better monitor and understand overdraft programs in the market and the consumer experience."
In 2014, a CFPB report found that overdraft and insufficient fund fees were on average over $250 a year, but that only 8% of customers incurred three-quarters of all the fees. The typical overdraft fee, the CFPB found, was $34, while the median transaction size that results in the fee is about $50, while for debit cards it's $24.
A survey by the Pew Charitable Trusts found that overdrafters were disproportionally likely to be young, low earning, and non-white. 25-year olds, the survey found, were 133% more likely to pay an overdraft fee than 65-year olds, while nonwhites were 83% more likely to pay the fees than whites.
Most worryingly, the Pew survey found that in 2012 and 2013, over 50% of overdrafters did not recall opting into an overdraft program.