The FDIC recently published the results of a large survey about bank overdraft programs. The results are interesting. Here are a few tidbits.
The banks earned an estimated $1.97 billion in NSF-related fees in 2006, representing 74 percent of the $2.66 billion in service charges on deposit accounts reported by these banks. Total NSF-related fee income accounted for roughly 6 percent of the total net operating revenues earned by the banks. Banks operating automated overdraft programs earned $1.77 billion in NSF fees in 2006, accounting for 90 percent of total NSFrelated fee income earned by the entire study population.
Assuming a $27 overdraft fee (the survey median), a customer repaying a $20 POS/debit overdraft in two weeks would incur an APR of 3,520 percent; a customer repaying a $60 ATM overdraft in two weeks would incur an APR of 1,173 percent; and a customer repaying a $66 check overdraft in two weeks would incur an APR of 1,067 percent. More rapid repayment of the overdraft amount results in higher APRs, and slower repayment results in lower APRs.
APRs of 3,520%? Sounds like the banks are the real predatory lenders.