The costs institutions bear to provide overdraft programs can be difficult to separate from operational costs related to providing consumer checking accounts, in general. The CFPB’s study banks and several financial institutions that responded to the CFPB’s RFI, however, identified charged off account balances as the single largest cost associated with overdraft programs.

Most charge-offs occur when consumers are unable or perhaps unwilling to repay negative account balances that result from institutions covering overdraft transactions and imposing fees. Charge-off losses generally amount to a small fraction of total institutional operational costs. Bank chargeoff totals are also small relative to the fee revenue these banks earned through their over...

Please subscribe to keep reading.