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

by Bart Narter, November 16, 2009
Operations/ Benchmarking
North America

Abstract

REPORT PREVIOUSLY PUBLISHED BY OLIVER WYMAN

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.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

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