Who Pays the Price? Overdraft Fee Ceilings and the Unbanked

Jennifer L. Dlugosz, Brian Melzer and Donald Morgan
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Jennifer L. Dlugosz: https://www.federalreserve.gov/econres/jennifer-l-dlugosz.htm

No 973, Staff Reports from Federal Reserve Bank of New York

Abstract: Would capping overdraft fees increase financial inclusion? Studying an event in which caps were relaxed, we find banks raised overdraft fees but also expanded overdraft coverage and deposit supply, leading more low-income households to open accounts. While inattentive depositors may not benefit from being banked, the rise in account ownership persists, suggesting newly banked households valued their account even after learning about its costs. We find no evidence that being banked weakens households’ broader credit health, including delinquency, indebtedness, and credit scores. We conclude that overdraft fee caps hamper, rather than foster, financial inclusion.

Keywords: overdraft; financial inclusion; unbanked; consumer credit; usury limit (search for similar items in EconPapers)
JEL-codes: D1 E43 G21 G38 G5 (search for similar items in EconPapers)
Pages: 47
Date: 2021-06-01
New Economics Papers: this item is included in nep-ban and nep-mac
Note: Revised July 2023
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Citations: View citations in EconPapers (2)

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