Credit unions are experiencing more and more pressure to change the way they run their overdraft programs.

Some credit unions have overdraft programs that some consider out-of-date and confusing for consumers. These kinds of programs often involve dynamic overdraft limits, or programs which are not transparently available and understandable for the consumers.

Some credit unions allegedly have overdraft procedures, which are undisclosed or discriminatory, and leave consumers unsure as to whether or not their finances are in order.

In some cases, for instance, transactions may be processed non-neutrally — that is, not necessarily in the chronological order in which they occur — and leave consumers unaware of the state of their finances on a day-to-day basis.

These kinds of non-transparent procedures, warns credit union expert John M. Floyd, who works to help credit unions with their procedural strategy, will at the very least impact a credit union’s compliance and revenue.

Effective overdraft programs, according to Floyd, take into account not just member service and performance, but compliance with industry standards as well.

Some of the wealthiest credit unions may be subject to scrutiny, which may in turn result in fines and legal action. These credit unions include the following:

• State Farm Federal Credit Union, Bloomington, IL
• Mountain America Federal Credit Union, West Jordan, UT
• Bank Fund Staff Federal Credit Union, Washington, DC
• Desert Schools Federal Credit Union, Phoenix, AZ
• Logix Federal Credit Union, Burbank, CA

If you or someone you know belongs to a credit union that may be using outdated or non-compliant overdraft fee procedures, you may be able to file a credit union overdraft fee class action lawsuit.

Credit unions must follow a set of standards and practices in their overdraft programs. These are based on consumer-focused regulations, industry standards, and best practices, and include several recognizable standards.

Credit unions must be completely transparent and open with their clients regarding fees and program procedures. Overdraft fees should not be unreasonable, and must also be communicated to the client early on so that they have full knowledge of such fees before they occur.

Part of being transparent as a company is making sure that the client knows the full overdraft procedure. Customers should be able to understand their bank accounts and what money is in them at any given time. Credit unions should not actively work to deny their customers this knowledge, which includes enacting discriminatory practices to make the process more complex than it should be.

Overdraft limits should not only be enacted, but also clearly established upfront. It should also be easy for clients to monitor excessive usage.

Finally, instead of taking advantage of certain customers, the credit union should provide materials that outline alternative financial products that better fit the needs of excessive overdraft users.

Credit Union Overdraft Fee Class Action Lawsuits

Credit unions are non-profit organizations that are supposed to be run cooperatively by members. While credit unions sometimes have lower fees than banks, they have been accused of shady business practices with regard to overdraft fees and other charges.

Lawsuits against credit unions may be filed over failure to disclose fee structures, mismanagement of funds, or other improper financial practices.

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