Like most full-service banks and credit unions, City National Bank offers overdraft protection.

The Los Angeles-based, full-service financial institution has branches in California, Nevada, Tennessee, Georgia, Minnesota, the District of Columbia, and New York. City National promotes two types of overdraft protection purportedly designed to ‘help’ the consumer in the event they withdraw more money than they have in their account.

Personal Savings Overdraft Service (PSOS) is an overdraft protection plan that connects your personal savings or money market account to your checking account when there are insufficient funds to cover a pending transaction. Without overdraft protection, the bank charges the customer a fee for drawing on an account with insufficient funds available.

City National’s second type of overdraft protection is the Personal Overdraft Line of Credit (POLOC). This is essentially a loan by the bank, on your behalf. Like a credit card, this comes with a predetermined balance, an annual percentage rate (APR), and terms for repayment. City National advertises overdraft protection as a fail-safe for when its customers may have an occasional financial mishap.

As of 2010, according to NerdWallet, the U.S. Federal Reserve requires banks and other financial institutions to reject payments against accounts with insufficient fundsunless patrons have ‘opted in’ to overdraft plans.

The pressure to do so is often felt when setting up a first-time account because it benefits the bank and not necessarily the customer. Each time an ‘opted in’ customer overdrafts, an average fee of $35 is usually levied. In the absence of this coverage, the payment would be rejected.

According to a report by CW33 TV, once the customer opts in, they can be subject to a common behind-the-scenes practice of reordering incoming transactions from the highest to the lowest. The point of doing this is to get the customer to an insufficient funds situation faster so that the bank can charge one or more improper overdraft fees.

This practice is counter-intuitive to the assumed ‘good faith’ principle of handling drafts chronologically. Once the largest bill is processed out of line and brings the account into the red, the first fee is charged.

Then, other, smaller bills are processed against the ever-growing negative figure. This negative figure needs to be handled by the customer quickly. The practice of reordering transactions by amount is a dangerous trap that particularly affects people with low to modest incomes.

Online banking complicates overdraft protection further since, often times, online banking transactions do not reflect all pending transactions, which can result in account holders basing purchasing decisions on an incorrect balance. This can lead to hundreds of dollars in fees charged to the account holder.

If you were charged overdraft fees or NSF fees by your bank or credit union that you believe are improper for any reason, the attorneys who work with Top Class Actions are ready to investigate these fees on your behalf.

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This article is not legal advice. It is presented
for informational purposes only.