An overdraft occurs when there is not enough money in an account to cover a transaction, but the credit union or bank pays for it anyway. However, many overdraft practices may be deceptive or misleading to customers.

What is Overdraft Protection?

Overdraft protection programs are those wherein the financial institution will pay for the transaction and charge the customer a fixed “overdraft” fee, typically ranging from $25-$35 dollars per transaction.

Information about the specifics of overdraft practices are posted on the credit unions’ websites — often under the guise that this is a beneficial service to the customer. The truth, in fact, is that some of the overdraft fees that can be accrued can cause significant financial damage to a customer.

Deceptive Overdraft Practices

Since July 1, 2010, credit unions and banks must ask customers to choose overdraft protection rather than enroll them automatically. Yet despite this and other federal rules on overdraft fees that went into effect in 2010, many financial institutions are still using deceptive overdraft practices including:

• Misleading marketing overdraft programs that are designed by the bank or credit union to increase overdraft fees, but referring to those practices as “overdraft protection,” “Courtesy Pay,” or “Overdraft Coverage”
• Posting transactions including debit card purchases from high to low in order to increase the number and amount of overdraft fees when the account is overdrawn
• Providing inaccurate balances to customers, leading them to unknowingly overdraft their account
• Delaying the processing of deposits
• Determining overdraft fees based on inaccurate balances

First Technology Federal Credit Union Overdraft Practices

According to First Technology Federal Credit Union’s website, overdraft protection links a customer’s First Tech checking account with another First Tech account (savings, line of credit or credit card).

Available funds are automatically transferred to cover purchases and prevent returned checks and declined items if the customer doesn’t have available funds in their checking account.

Without overdraft protection, there is a $28 overdraft fee assessed for each transaction when funds are unavailable.

When opening a new account there is an overdraft protection section that allows new customers to authorize First Technology Federal Credit Union to clear any overdrafts from a checking account.

However, the customer must order in numerical order what method they prefer to use: Consumer Line of Credit, Savings Account, or Other Account.

There is no check box or instructions to decline overdraft protection, which may lead the customer to believe that overdraft protection is required and not optional.

Help for Victims of Deceptive Overdraft Programs

By law, overdraft protection programs are optional.  Failure by a credit union or other financial institution to offer opt-out or adhere to a consumer’s wishes with respect to overdraft protection is grounds for legal action.

Consumers who suspect they are being charged improper overdraft fees or have incurred excessive overdraft fees due to debit card purchases being reordered may want to consider speaking with an attorney, who can help determine if the overdraft practices were proper or improper and advise about possibly bringing an overdraft fees lawsuit.

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