Several banks and credit unions are currently under investigation for potentially abusive overdraft protection policies including reordering transactions, and more still may be using similar practices. HSBC Bank was hit with a lawsuit over its overdraft practices a few years ago that ended in a settlement agreement.

More and more consumers are coming forward with complaints of unfair overdraft policies that, in some cases, can cause a real financial burden.

Overdraft Program Basics

Of course, the overdraft protection programs offered at banks and credit unions across the country can undoubtedly be a benefit for some. It can give customers extra padding in their checking accounts, allowing them to have money transferred to cover transactions when they would otherwise hit the bottom.

In return for this protection, customers are charged an overdraft fee upon overdrawing their account. Fees vary from state to state and bank to bank, but the average overdraft fee is around $31. Some are substantially more.

These fees are not a one-time thing, and instead are incurred each time a customer makes a transaction that overdraws their account. Overdraft fees compound—any additional transaction on an overdraft account will in turn bring its own fee, which can quickly add up.

What Are Deceptive Overdraft Practices?

There are a few methods that may be used to incur excessive overdraft fees. For instance, when customers sign up for an account, they may not be told all the details of the program or its associated fees. Others may not even be informed that they have the ability to opt out of the overdraft protection program.

Some banks may even have a policy of reordering transactions in an advantageous way in order to collect more in overdraft fees. Banks can deliberately skew the order of customers’ transactions to incur the most fees possible.

Customers generally expect that their transactions will be processed chronologically, in the order they are made. However, some banks may be purposely reordering transactions from highest to lowest rather than from first to last, making each transaction increasingly more likely to overdraw an account.

This means that a customer can end up overdrawing their account multiple times successively, leaving them with a much heftier overdraft charge than they ever expected.

HSBC Overdraft Fee Problems

While overdraft protection programs are a fairly standard feature at banks and credit unions all over the country, at some financial institutions, unfair overdraft practices can cost consumers a substantial amount. These programs can be used to take advantage of customers, wringing out the most in fees that they can.

HSBC Bank has been hit with litigation over its overdraft policies that, in the past, have included reordering transactions. That litigation ended with a settlement agreement. Though settlements do not equal admissions of liability, HSBC also changed its policies after the settlement went through to stop reordering transactions.

Just last year, HSBC Bank settled a massive class action regarding its HSBC overdraft fee policies for $32 million. The lawsuit was filed over the alleged HSBC overdraft fee practice of deliberately reordering transactions in a way that increased the amount customers would be forced to pay in overdraft fees.

Filing an Unfair Overdraft Practices Lawsuit

If you were affected by HSBC’s old policies like reordering transactions or other unfair overdraft practices, but did not participate in that HSBC overdraft fee settlement, you may be able to file a class action lawsuit to pursue your own. A consultation with a knowledgeable attorney can apprise you of all your legal rights and options.

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