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Released: March 04, 2010

Overdraft fee limits won’t cripple banks

Source: Kathy Chu, USA Today

A new rule limiting banks’ ability to charge controversial overdraft fees isn’t likely to cripple the industry’s profitability, new research says.

The research — to be released Thursday by bank consulting firm Bretton Woods — is the latest to address the impact of pending Federal Reserve restrictions on the financial industry. These restrictions, which take effect in July, require banks and credit unions to get consumers’ consent before charging them steep fees for paying debit card and ATM overdrafts.

Bretton Woods estimates that the Fed rule will cost banks and credit unions roughly $7.3 billion in fee income, significantly less than other consultants’ projections. In 2009, banks earned more than $38 billion in overdraft fees, according to industry estimates. Overdrafts have become the single largest driver of consumer fee income, USA TODAY’s research has found.

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