Questionable credit union overdraft fees are currently the subject of investigations by law firms in anticipation of a class action lawsuit against a San Francisco area credit union.

Patelco Credit Union has drawn scrutiny in recent months over how they assess overdraft fees and what triggers them. Patelco is one of several credit unions and banking institutions that have been accused of engaging in questionable practices that include processing transactions out of order, resulting in transactions that trigger excessive fees.

Overdraft Fees, Explained

When paper checks were commonly written, a bank or credit union offering overdraft protection would cover a shortage, either by transferring funds from a linked account (such as a savings or money market account), or making a cash advance or temporary loan against future deposits.

At one time, such overdraft fees were a significant source of extra revenue for for these institutions. However, with the increasing use of electronic transactions and smartphone “apps” that help customers to better keep track of their balances, the revenue obtained through such fees declined.

In order to make up that revenue, these bank and credit union institutions have allegedly been employing new methods in order to charge such fees, in addition to increasing the amounts. Consumers have complained that in some cases, fees are charged multiple times for a single transaction, putting an unfair burden on depositors.

Patelco Credit Union Overdraft Fees

On its website, Patelco states that depositors can designate as many as eight “backup accounts,” from which money will be transferred into the checking account in the event that there are insufficient funds to cover a paper check or debit card purchase. It clearly states that signing up for this type of overdraft protection is “…a great way to avoid overdrawn accounts, overdraft charges and late fees.”

A printed fee schedule states that credit union overdraft fees of $28 apply when funds are advanced in order to cover any of the following situations in which there may be insufficient funds to cover a transaction:

• Debit card purchases (provided the customer has “opted in”)
• ACH (Automated Clearing House) returned item (the electronic version of a “bounced check”)
• Non-Sufficient Funds (NSF) for paid items, automatic bill pay or Point of Sale (POS) transactions

Patelco also offers what it calls an “Overdraft Protection Line of Credit,” which is basically a short-term loan. While Patelco states this program has no “monthly, cash advance or usage fees,” the interest rate on these short-term loans can be very high.

How Are Banks Doing It?

Consumers are complaining that Patelco and other banking institutions, like SEFCU, have been processing transactions out of numerical or chronological sequence in order to increase the chance that an NSF fee will be triggered.

In these cases, if a customer makes an POS purchase or writes a check for $10 against a $100 balance in anticipation of a $300 deposit the following day, then submits a $300 payment expecting that the deposit will cover the transaction, Patelco may process the $300 first in order to be able to assess the fee.

If you were charged unfair overdraft fees by your bank or credit union, you could be eligible to participate in a FREE class action lawsuit investigation. If you qualify, an attorney will contact you to discuss the details of your potential case at no charge to you.

Fill out the form on this page now for a free, immediate, and confidential case evaluation.

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