We've been asked to analyze and support the fee we charge for overdrafts. In the past the "support" has been to query other banks in the area to see what they charge. In other words, "What the market will support." But has any bank actually done a cost analysis to support what they charge for an OD fee? If yes, what factors do you consider? Did you come even close to supporting the fee you charge customers? I appreciate any framework you have for this.

An analysis to support your fee will be what does it actually cost your bank to process overdrafts, not a comparison to other banks in the area. Things to consider: the man-hours necessary to process, the hardware/software cost, the cost of collections of unpaid overdrafts, etc.

My first question would be who is asked for the analysis?

What osucpa said.

Orig anon here: The Chief Compliance Officer has asked us for this information. I fully understand Dani's appraoch, and thank you for that.

That's good. It will be extraordinarily difficult to quantify in terms of a per item cost, but the results will indicate that the costs of paying an NSF item are a fraction of those attributable to returning an NSF item.

The fee is profiteering, nothing more.

Don't leave your study lying around...

You would also need to factor in (if you can get away with it) potential losses due to customers non-payment which should also be factored in (additional risk of banking a NSF customer). time to post the question on BOL, Time to prepare the study Management time reviewing the study. Reputational risk..

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