Squeezed by falling revenue on deposit accounts, banks are turning to a familiar source of income: overdraft fees.
Nearly four years after regulators tried to curb the fees, banks are lifting them to new heights. The median fee for withdrawing more from a checking account than a customer has on deposit increased to an estimated $30 in 2013—a record—up from $29 in 2012 and $26 in 2009, based on a survey of 2,890 banks and credit unions by Moebs Services Inc., an economic-research firm in Lake Bluff, Ill.
“Banks have a revenue gap that needs to be recouped,” said Greg McBride, chief financial analyst at Bankrate.com, which tracks overdraft fees and other charges.
Banks’ fee revenue from checking, savings and other deposit accounts has been sliding since several regulations took effect. The Federal Reserve in 2010 stopped banks from automatically charging customers overdraft fees on debit-card and automated-teller-machine transactions. In addition, the Dodd-Frank financial-overhaul law included an amendment that went into effect in 2011 lowering a debit-card fee large financial institutions charge merchants.
The recent regulations “have forced banks to raise fees where they ordinarily would not have done so,” said Richard Hunt, chief executive of the Consumer Bankers Association, which represents retail banks with more than $1 billion in assets and is based in Washington.
At the same time, years of low rates on mortgages and other loans have eaten into the income banks collect from interest charges, an important driver of bank earnings.
To help make up for lost revenue, experts say banks are raising overdraft fees and pitching related services, hoping to increase the pool of customers who can incur such fees.
remember when you were excited about Obama? Wasn’t he going to do all that stuff - healthcare, hold the banks accountable, immigration reform, bring home troops, stand up to big Pharma, abolish Guantanamo… think back. Why will it be different this time?
On Monday, the New York Times ran an op-ed from Democratic presidential candidate Hillary Clinton, titled, “How I’d Rein In Wall Street.”
In her op-ed, Clinton outlined how she would “fight for tough new rules, stronger enforcement and more accountability that go well beyond” Dodd-Frank. Although Clinton does not support the reinstatement of Glass-Stegall, she wrote that her “plan goes beyond the biggest banks to include the whole financial sector.”
“We need to tackle excessive risk wherever it lurks, not just in the banks,” Clinton suggested.
The Bank of North Dakota has a new DEAL for state residents struggling with student loan debt.
The state-owned bank launched a new program Monday that will allow North Dakota residents who have lived in the state for six months or more to consolidate all of their student loans through the bank.
Bank President Eric Hardmeyer said the DEAL One Loan program – believed to the first of its kind in the nation – will allow borrowers to potentially lower their interest rates, extend the payback period of their loans and have lower monthly payments while dealing with a single provider.
“We think that this is a really good program that is going to benefit a lot of North Dakotans,” he said, noting about 50,000 North Dakotans may be eligible for the program.
Hardmeyer said many people are struggling with high student loan payments, with interest rates on a lot of private loans at 9 to 12 percent.
The new DEAL program offers a variable annual percentage rate, which is at 1.73 percent through June 30, or a 5.34 percent fixed APR. Rate increases are capped at no more than 1 percent annually, and the rate can’t exceed 10 percent under the program.
“We think that’s going to provide some protection,” Hardmeyer said.
Unlike the bank’s existing DEAL Consolidation Loan program, the new program allows federal student loans to be consolidated with private loans. There’s no consolidation fee, and repayment terms vary depending on the size of the loan, with a maximum term of 25 years.
As authorized by state lawmakers last year, the bank offered the program to physicians and others in the medical community in cities of 4,500 people or less as a way to make sure it could accommodate the potential increase in loans, Hardmeyer said, adding he’s confident the bank will be able to handle the load.
Gov. Jack Dalrymple, chairman of the three-member Industrial Commission that oversees the Bank of North Dakota, called it “the missing piece” in the student aid program. He said the state’s needs-based and merit-based scholarship programs have grown, “but we still have the problem of old loans, many of them at difficult interest rates. So, it’s a great deal.”
Hardmeyer noted the program may not be right for everyone, as federal loans still offer some features the state program doesn’t, including income-based repayment plans and loan forgiveness options.
The Bank of North Dakota will publicize the program through newspaper ads, college alumni foundations and the Department of Commerce, as well as through local banks and social media, spokeswoman Janel Schmitz said.
“We’re going to hit it hard,” Hardmeyer said.
More information about the program is available at banknd.nd.gov.
This week Sanders doubled down on his economic populism. In a speech on Tuesday, just a few miles away from Wall Street, the Vermont senator clarified his views on financial reform. “To those on Wall Street who may be listening today,” Sanders said, “let me be very clear…Greed is not good. Wall Street and corporate greed is destroying the fabric of our nation. And, here is a New Year’s Resolution that we will keep: If you do not end your greed we will end it for you.”
Responding to Clinton’s accusation that his proposals are too vague and simplistic, Sanders was especially clear about his intentions as president…
NEW YORK — Standard & Poor’s Ratings Services has lowered its credit ratings for many of the world’s largest financial institutions, including the biggest banks in the U.S.
Bank of America Corp. and its main subsidiaries are among the institutions whose ratings fell at least one notch Tuesday, along with Citigroup Inc., Goldman Sachs Group Inc., JPMorgan Chase & Co., Morgan Stanley and Wells Fargo & Co.
S&P said the changes in 37 financial companies’ ratings reflect the firm’s new criteria for banks, and they incorporate shifts in the industry and the role of governments and central banks worldwide. The agency did not release its evaluation of each company but said it plans to discuss the changes during a conference call early Wednesday.
Bank of America’s issuer credit rating was cut to “A” from “A+,” while its Countrywide Financial Corp. and Merrill Lynch & Co. Inc. units and a series of related subsidiaries were cut to “A-” from “A.”
Ratings downgrades are never seen as positive, but this round may be particularly damaging for Bank of America.
Concern already was growing Tuesday about whether B of A has enough capital to withstand another downturn in the U.S. economy or further trouble in Europe, and the bank’s stock fell to a two-year low before the ratings announcement.
There are a series of proposals, mostly surrounding taxes and caps on size, leverage and presumably complexity. The first bullet point, a cap on size relative to GDP, is similar to the SAFE Banking Act, which failed in the 2010 Senate with 33 votes. They all sound like good ideas, though they received little-to-no GOP support during the debates.
Mike Konczal sorts through Huntsman plan to end To big to Fail. Wonky but worth a read.