Wall Street drops overdraft fees

Wall Street Overdraft Fees

New data suggests that US banks are easing off on overdraft charges. Analysts believe the move is in anticipation of new regulation; however, they also say it is unlikely that putting the brakes on will actually help dissuade new rules.

The data shows that since June, the average overdraft fee in the US rose at a 2.1 percent annual rate, which is slower than the pace of inflation. According to bank-consulting firm Moebs Services Inc., based in Lake Bluff, Ill., who compiled the data, this marks the slowest rise in 17 years.

Its good news for Wall Street's biggest banks too, with the data highlighting that the largest banks in the US posted a modest decline, despite the fact that big banks usually charging the highest fees.

Mike Moebs, founder and chairman of the consulting firm, told the Wall Street Journal: "This is the first time in 17 years that I have seen any of the big retail banks lower fees."

The firm, which samples more than 2000 financial services institutions, noted how the last decade has seen overdraft fee prices rising by a much steeper 8.3 percent a year, highlighting the significance of this decline.

Legislation

However, its not all good news for Wall Street. The Federal Reserve has already issued a new rule that will require banks to get customer consent before charging overdraft fees. What's more, Congress now appears ready to draft wider legislation in the coming months.

The unfolding drama seems set to play out for the next few months, largely because US banks rely heavily on overdraft fees as a key source of revenue. According to reports, overdraft fees earned Wall Street banks $39.5 billion last year, based on service charges on deposits.

This, of course, remains something of a bone of contention for the US public, who take issue at the fact that banks earned this money despite also accepted billions of dollars in taxpayer support.

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