Regions to Stop High-to-Low Reordering of Withdrawals

Regions Financial in Birmingham, Ala., will stop using high-to-low reordering of checks and debits next year, resulting in a revenue loss of between $10 million and $15 million per quarter.

The $119 billion-asset Regions, in the first quarter, will start a test run of processing checks and debits in chronological order. The switch will result in lost income from overdraft fees, the company said Tuesday. Regions' current overdraft fee is $36.

Regions will assess the results after the test run and it may make other changes in deposit and checking products to offset the lost revenue, Chairman and Chief Executive Grayson Hall said during a Tuesday conference call to discuss third-quarter earnings.

"We realize that it's our job to figure out how to mitigate those service-charge reductions," Hall said.

Regions plans to fully implement the new policy in the second half of next year, Chief Financial Officer David Turner said.

Banks generate a significant amount of noninterest income by reordering customers' withdrawals from the largest amount to the smallest amount. Banks also argue that high-to-low reordering protects consumers, because it reduces the chance that larger payments are returned unpaid.

Pew Charitable Trusts and other advocacy groups say high-to-low processing saddles consumers with unnecessarily high fees. Some banks have recently dropped the practice, including Wells Fargo, which announced the change in July. Wells Fargo was ordered a by a federal judge in May 2013 to pay a $203 million penalty for high-to-low reordering. It's one of several banks that have been hit with legal penalties for the practice.

However, a Pew report in April said that 22 out of 44 large banks still conducted some degree of high-to-low reordering, including Regions Bank. The Pew report said Regions was one of six banks that had particularly bad policies on reordering transactions.