During the course of the year, Payment Cards Center industry specialists organize a number of workshops centered on topics in consumer credit and payments. These internal workshops are most often led by invited presenters and follow a rather informal discussion format. In some cases, the content discussed will lead to written discussion papers or future collaborations with the speaker; in other cases the workshop will simply serve to educate the audience. Since its inception, the workshop series has grown to be a focal point for the center’s research agenda. Highlighted in this edition of Update are some of the workshops hosted during 2010.
Dana Miller, Staff Attorney, Department of Consumer and Community Development Studies and Education, Federal Reserve Board of Governors
The background for this presentation was the Board’s approval, on November 12, 2009, of a final rule to regulate overdraft fees on bank deposit accounts. Under the rule, banks must first obtain the consumer’s consent before charging for providing overdraft protection for transactions triggered by ATM use or one-time debit card use. In other words, the consumer must opt in to the service.
On January 22, the Payment Cards Center held a workshop to look at how the Board used consumer testing during recent overdraft-related rulemaking. Dana Miller discussed consumers’ comments about overdraft protection services and model disclosures shown to them. According to Miller, these testing sessions provided much noteworthy information about how consumers think about and use overdrafts and overdraft protection services. She emphasized three findings during the workshop: first, consumers do not view all overdrafts in the same way; second, misconceptions about how overdraft protection services work abound; and third, consumers’ understanding of overdraft protection programs can be increased by careful use of formatting and, ultimately, the information included (and excluded) in disclosures.
David Humphrey, Professor of Finance and the Fannie Wilson Smith Eminent Scholar in Banking, College of Business, Florida State University
There are a variety of measures used to evaluate the degree of competition in banking markets. Unfortunately these measures often present conflicting results. This paper applies frontier analysis to Spanish banking data for the years 1992-2005. This technique makes it possible to control for variations in asset composition, productivity, scale economies, business cycles, and other forms of risk. Based on this analysis, it appears that competition in Spanish banking markets slackened after 2000. This is consistent with the widening spread between loan and deposit rates and stable fees for services whose costs should have fallen as further scale economies were realized.
Barbara A. Ryan, Deputy to the Vice Chairman, and Rae-Ann Miller, Senior Advisor to the Director of the Division of Insurance and Research, Federal Deposit Insurance Corporation (FDIC)
On March, 22, 2010, Barbara A. Ryan and Rae-Ann Miller presented the results of two surveys the FDIC recently published about underbanked households in the United States. These surveys are the FDIC National Survey of Unbanked and Underbanked Households and the FDIC Survey on Banks’ Efforts to Serve the Unbanked and Underbanked. Ryan and Miller reviewed the national, state, and metropolitan statistical area demographic data collected from the surveyed households as well as the reasons provided by respondents for their unbanked or underbanked status. They discussed the products and services banks offer to underbanked consumers and the challenges that affect banks’ outreach efforts. Two key findings of these surveys are that 25 percent of U.S. households can be characterized as unbanked or underbanked and few banks offer products tailored to the credit and payment needs of these consumers.