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Community banks bearing the brunt of the Durbin Amendment’s effects

Year-old consumer overdraft protections are hurting community banks, which are reporting low numbers in the first-quarter.

For banks with assets of $500 million or less, first quarter revenue from service fees on deposit accounts compared to one year ago dropped 12.3 percent to $544.4 million, the American Banker reports.

Blair Hillyer, the president and CEO of First National Bank of Dennison, Ohio, told BankInvestmentConsultant.com.com that the bank’s revenue will likely fall by no more than $50,000 this year as a result of the recent overdraft protection fee regulation.

Last year, the Federal Reserve Board of Governors revised Regulation E, requiring banks to give customers the option of participating in overdraft protection services.

Many consumers have opted out of their overdraft protection plans, causing banks of all sizes nationwide to lose approximately $1.6 billion of service fees, the American Banker reports.

Hillyer, however, said that drastic measures, including layoffs and increased interest rates on loans, are being planned in light of the Durbin Amendment.

“When your earnings are already down, and you take two or three hits like this, it really starts making your owners wonder if this is something they should be doing,” Hillyer said, according to BankInvestmentConsultant.com.

The Durbin Amendment, a new regulation that caps the amount banks charge retailers for debit card transactions is supposed to go into effect next month. The rule only caps banks with more than $10 billion in assets, which will force small banks to lower their debit card fees in order to compete.

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