CFPB: Overdraft revenue rebounded at small banks early this year

After seeing a 20 to 25 percent loss in overdraft/NSF fees in 2021, small banks largely rebounded early this year. Midsize and large banks have yet to recoup those numbers.

Small and midsize banks collected 20 to 25 percent less in overdraft/NSF fees in 2021 than in 2019 as a large influx of consumer deposits entered the banking system during the pandemic, according to a recent Consumer Financial Protection Bureau blog post

Small banks recovered a significant portion of their pre-pandemic overdraft/NSF revenue early this year, according to the CFPB, while midsize and larger banks continue to report similar declines. “Some of these differences may be due to the possibility that midsize banks have implemented more overdraft policy changes than small banks,” the report states. 

A December 2021 CFPB report outlined a 26.2 percent fall in overdraft/NSF fee revenue between 2019-2020, some of which was attributed to pandemic-era increases in average checking account balances. According to the most recent report, overall overdraft/NSF fee revenue continued to be relatively low in 2021, falling 27.4 percent below its 2019 volume. That decline was slightly eased in the first quarter of this year, but still remained 20.1 percent below 2019. 

Over the last three years, many of the largest U.S. banks have significantly changed or altogether ended their overdraft fees: Bank of America no longer charges such fees and instead declines transactions when accounts could be overdrafted. Huntington Bank has a 24-hour grace period, and PNC’s Low Cash Mode offers no non-sufficient funds fees and a maximum of one $36 overdraft item fee per day. PNC and JPMorgan Chase both saw significantly larger declines in overdraft/NSF revenue from 2019-21 at 50.2 and 41.2 percent respectively, according to the CFPB. TD Bank and Wells Fargo both saw much smaller declines in fee revenue during the same time, according to the report. 

 “Some banks — and especially those that have seen the largest decline in overdraft/NSF fee revenue — experienced an increase in revenues from other listed fees (maintenance and ATM fees), but these have been too small to offset the loss of revenues from overdraft/NSF fees,” the report stated.


Fredrikson & Byron Law