Brookings, March 1, 2021, A few small banks have become overdraft giants
The explosion of overdraft fees makes basic banking expensive for people living paycheck to paycheck. Banks and credit unions generate over $34 billion in overdraft fees annually by one estimate. What those with money experience as ‘free checking’ is quite expensive for those without. Prior research has focused on who pays overdraft, finding a small number of people (9%) are heavy overdrafters accounting for 80 percent of the fees. Not as carefully researched is whether this is just a small part of banks’ general business model, or whether for some banks overdraft has become their main source of profit. In fact a few small banks have become overdraft giants relying on overdraft fees as their main source of profit. These banks are really check cashers with a charter. Why do bank regulators tolerate this?
