Change to Consumer Overdrafts: Five Questions to Address Before July 1st

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16 November 2009



On November 12, 2009, the Federal Reserve announced substantial changes to Regulation E. The altered regulation changes the way banks must gain consent to enroll their customers in checking account overdraft, a cornerstone of deposit product economics.

In a new report, Change to Consumer Overdrafts: Five Questions to Address Before July 1st, Oliver Wyman discusses the five questions banks must answer before the deadline for implementation arrives:

  1. Can you separate transactions that are affected from those that aren’t?
  2. What are the economics of “intentional” overdrafts?
  3. How do you ensure customers have the chance to choose?
  4. Are you ready to react to customers who make no choice?
  5. What comes next?

“Estimated at as much as $25 to $30 billion in annual charges, non-sufficient funds (NSF) and overdraft fees have been among the fastest growing and most stable revenue lines on bank income statements over the past decade,” says Aaron Fine, a partner with Oliver Wyman.