U.S. Banks See Diverging Trends in Overdraft Fee Income as Regulatory Pressure Eases

Fourteen of the largest U.S. retail banks reported increases in income from overdraft and bounced-check fees during the first nine months of the year, while two major lenders posted sharp declines, according to a Reuters analysis. Overall, overdraft and non-sufficient funds (NSF) fee income among the 20 largest reporting banks rose 2% to $2.99 billion, reflecting widening divergence across the industry. The uptick comes as economic pressures raise the likelihood of consumers overdrawing accounts, even as many banks have phased out NSF fees in recent years.

The rise in fee income follows congressional Republicans’ decision in May to repeal a Biden-era Consumer Financial Protection Bureau (CFPB) rule that would have capped overdraft fees at $5, down from the typical $35. The regulation, part of a broader crackdown on so-called “junk fees,” was projected to save consumers $5 billion annually. While several banks had already reduced or eliminated such charges under earlier political pressure, the rollback has given some institutions room to maintain or expand overdraft-related revenue.

USAA Federal Savings Bank recorded the largest year-on-year increase at 20%, followed by Citizens Bank and TD Bank, while Wells Fargo and Truist reported declines of 10% and 22%, respectively. Despite the recent increase, overdraft fees remain far below historical levels, with industry-wide revenue at $6 billion in 2023 compared with $13 billion in 2019. Analysts say the trend reflects lasting changes in consumer protection, even as some banks continue to rely on overdraft charges as a source of income.

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