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Study: All Community Banks Inform Customers of Overdraft Programs

Relationship Bankers Minimize Potential for Overdraft Fees

Washington, D.C. (July 2, 2012)—All community banks inform their customers about the details of their overdraft payment programs, according to an Independent Community Bankers of America study released today. The ICBA Overdraft Payment Services Study also found that nearly all of these Main Street institutions inform customers of alternatives to overdraft services and structure their services to minimize the potential for overdraft fees.

“Community banks rely on positive and trusting relationships with their customers, so keeping their customers informed of overdraft services and options is in everyone’s best interest,” ICBA Senior Vice President of Regulatory Policy Viveca Ware said. “Because consumers seek the convenience and protection that overdraft coverage offers, community banks offer a variety of services tailored to the specific needs of their customers. These services are an extension of their commitment to provide the highest level of customer service.”

According to the study, 100 percent of community banks keep their customers informed about overdraft programs and 97 percent inform their customers of alternative services. Community banks deploy various communication channels, such as account disclosures and customer contact personnel, to inform customers of service alternatives.

Community banks also strive to minimize overdraft fees for their customers. The study found that almost all community banks (95 percent) post credits before debits and three-quarters of community banks transfer available funds from a customer-enrolled deposit account to prevent the activation of overdraft payment services. Most community banks (78 percent) waive overdraft fees for overdraft amounts under an average threshold of $15. Additionally, most use their customer knowledge and relationships by making ad hoc overdraft payment decisions or by using hybrid programs that incorporate manual review with automated programs, which helps customers and manages risks to the bank.

The study demonstrates that current regulatory policy is adequate and that further regulatory policies should not impede the ability of community banks to offer a variety of overdraft payment services to meet their customers’ financial needs. Consumers must retain the ability to access overdraft services that best fit their financial needs and avoid being locked into an ill-fitting overdraft program. These policies also should continue to distinguish between ad hoc overdraft payment and automated overdraft payment programs to ensure that community banks can continue to meet the varied financial needs of their customers.

The complete study is available on the ICBA website. For more information, visit www.icba.org.