Sage Datko  |  October 27, 2022

Category: Fees

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overdraft fees for pending transactions

Many credit unions, including Digital Federal Credit Union and SEFCU, may be charging customers predatory overdraft fees for pending transactions.

What are overdraft fees?

Overdraft fees are fees assessed by financial institutions against customer accounts when a customer attempts to make a purchase without having an adequate amount of money in their account. These fees are generally in the range of $25 to $35, and can add up quickly if the bank or credit union attempts to re-process the transactions.

According to the CNBC, Americans paid over $34 billion in overdraft fees in 2017, helping banks obtain high profit margins.

In some cases, nearly 20 percent of bank profits come from overdraft fees. These fees may disproportionately affect low-income consumers. According to research from the Pew Charitable Trusts, 91 percent of overdraft and non-sufficient funds (NSF) fees are paid by just 18 percent of account holders. These account holders often pay at least three overdraft fees per year, and make less than $50,000. For approximately 25 percent of them, they will pay a week’s worth of wages in overdraft fees over the course of a year.

Digital Federal Credit Union lawsuit

Digital Federal Credit Union (DCU) is one of the largest credit unions in New England, with over 700,000 members in New Hampshire and Massachusetts and approximately $8 billion in assets.

In a credit union class action lawsuit filed in June 2018 by plaintiff Brandi Salls, the financial institution has been accused of breach of contract, as well as purposefully deceiving its customers about the union’s overdraft fee policies. According to Salls, Digital Federal Credit Union charged her overdraft fees for pending transactions when her account had a sufficient amount of funds to cover her purchases.

Digital Federal claims that their account agreement clearly states their overdraft fee structure. However, multiple customers claim that the policy wording is confusing and vague.

Confusing overdraft policies

According to Digital Federal, overdraft fees are assessed when a customer’s available balance is too low to cover their attempted transactions. However, customers claim that Digital Federal’s term “available balance” is misleading. According to DCU, “available balance” means “the money in an account minus holds placed on funds to account for uncollected deposits and for pending debit transactions.”

Digital Federal filed a motion for dismissal, but this motion was denied by U.S. District Judge Timothy S. Hillman. With this dismissal, Hillman concurred that the credit union’s fee policies were confusing, stating, “The overdraft disclosure does not provide any information clarifying that ‘enough money’ is to be construed as ‘available balance.’ Therefore I find that a reasonable person could construe ‘enough money’ to mean ‘ledger balance.’”

This confusion is not limited to DCU.  Consumers and consumer advocates are concerned that terminology included in numerous overdraft policies, like SEFCU overdraft policy, may be so confusing that consumers won’t realize they have overdrawn their accounts until the damage is done.

How do financial institutions assess overdraft fees?

Overdraft fees are charged by credit unions and banks when a consumer makes a purchase that exceeds the amount they have in their account, if the consumer opts in for overdraft protection. The financial institution allows the charge, covers the missing funds, then charges an overdraft fee for enabling the charge to go through.

Many customers claim that financial institutions have assessed unnecessary overdraft fees on their accounts by purposefully processing transactions out of order. Some 40 percent of the biggest banks in the U.S. engage in this practice, which makes it more difficult for consumers to keep track of their finances, leaving them vulnerable to unexpected overdraft fees for pending transactions.

Other customers have claimed that their credit unions and banks have allowed them to overdraw their accounts multiple times in a row, in order to collect more fees.

Moreover, many banks and credit unions have vague or confusingly worded policies about their fee structure, making it easy for customers to be hit with unexpected charges.

Due to the additional financial instability being experienced by millions of Americans due to the coronavirus pandemic, some state governors have instructed banks to waive overdraft fees for a period of time. However, many states have not taken this step. While some banks have programs to assist customers who are experiencing financial hardship, only 7 percent of the largest 100 banks in the U.S. explicitly offer automatic non-discretionary assistance to people who cannot pay their overdraft fees. While speaking with a bank representative may be a way to try to get these fees waived, those who have been assessed predatory fees may also qualify to speak with an experienced attorney about their options.

As of 2022, numerous banks have committed to either reduce or stop charging bank fees to consumers. Bank of America is reducing its overdraft fees by $25 while banks such as Capital One, U.S. Bank, and Wells Fargo have done away with the fees entirely.

If you have been assessed deceptive or predatory overdraft fees for pending transactions by your bank or credit union, you may be able to file a class action lawsuit against your financial institution and pursue compensation. Some banks have agreed to pay millions to resolve claims that they charged unfair overdraft fees on customer accounts. Hiring a qualified lawyer may make it more likely for you to win your case and receive compensatory damages.

Join a free bank overdraft fee class action lawsuit investigation

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. Learn more by filling out the form on this page.

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

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Join a Free Bank Overdraft Fee Class Action Lawsuit Investigation

If your bank and credit union has engaged in deceptive overdraft fee practices, you may have a legal claim. Fill out the form on this page now to find out if you qualify!

An attorney will contact you if you qualify to discuss the details of your potential case.

PLEASE NOTE: If you want to participate in this investigation, it is imperative that you reply to the law firm if they call or email you. Failing to do so may result in you not getting signed up as a client or getting you dropped as a client.

In order to properly investigate overdraft fee claims, you may be required to disclose bank statements to overdraft fee attorneys. Please note that any such information will be kept private and confidential.

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