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Overdrafts and Alternative Short-term, Low Dollar Credit Facilities
Last January, I published a study (http://www.docstoc.com/docs/15325575/2008-Overdraft-Study)on the impact of NSF/OD fees on banks (see and testified before Rep. Luis Gutierrez’ (D. IL) sub committee on Financial Institutions and Consumer Credit in Washington (see http://www.house.gov/apps/list/hearing/financialsvcs_dem/HR04022009.shtmlAbout Us).

I felt that banks had pushed the NSF/OD pricing to a point of diminishing returns, customer agitation, Federal Reserve regulation, Congressional scrutiny and potential legislation.  We now see the results of that with the new Federal Reserve regulations and the potential impact of the Chris Dodd bill and the proposed CFSA.

This is not only about banks losing a key source of fee income - it is also about another element of the contraction of consumer credit.  There is potential to further reduce access to consumer credit by up to $15 billion with the reduction of overdrafts.  This, in conjunction with the reduction of credit card lines,the limits of HELOC's due to reduced home values and threatened reduction of alternative credit facilities (payday, title, pawn and similar low dollar, short-term credits) , places a challenge to community banks to find ways to meet the legitimate credit needs of its customers.

Bretton Woods and our associates can help guide you through these challenging issues.