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Overdraft fees are a staple fee for many financial institutions like Community Bank.
Despite new federal regulations and consumer lawsuits aimed at deceptive overdraft fee practices, many customers are not aware that some banks automatically enroll customers in overdraft protection programs.
Federal rules regarding overdraft fees that took effect in mid-2010 and required financial institutions like Community Bank to obtain customers’ permission before enrolling them in overdraft protection programs on ATM and debit card transactions.
Despite the opt-in rule, a study conducted by the Pew Charitable Trusts found that just over half of consumers hit with overdraft fees said they didn’t realize they had signed up for overdraft protection.
Typically, a customer is not notified at the time of purchase that they have an overdrawn bank account and that an overdraft fee will be assessed. The transaction is not declined by the bank and the bank does not record the debit charges in the order they actually occur.
In fact, some banks reorder the charges so the largest amounts are paid first which creates a series overdraft fees that would not have occurred. This allows the banks to maximize overdraft fee income. The average overdraft fee usually runs from $30 to $35 per transaction.
Overdraft fees have been under attack in recent years in class action lawsuits filed against a number of big banks, which were accused of improperly manipulating banking transactions by processing them from highest amount to lowest. This deceptive practice, known as reordering, tends to trigger the most overdraft fees, and leads to big profits for the bank.
Community Bank Overdraft Practices
One of these banks under fire for allegedly manipulating the order of transaction posting is Community Bank.
In 2013, Community Bank agreed to a $2.5 million settlement of consumer banking class action lawsuit affecting over 48,000 class members who were charged overdraft fees between July 20, 2006, and Aug. 15, 2010.
The overdraft fees class action filed in 2012 by William and April Johnson, customers at First Liberty Bank & Trust, a division of Community Bank, alleged that the bank manipulated the posting of debit card transactions to increase the possibility of customers having an overdrawn bank account, thereby maximizing fees the bank could charge, and in so doing, increasing bank profits.
The Community Bank overdraft fees lawsuit specifically challenged the bank’s policy relating to multiple debit card transactions posted on a single day.
The Johnsons claimed claimed the bank posted the transaction with the highest dollar amount first, rather than posting transactions in the chronological order they were made. That allowed it to increase chances the charge would overdraw the account, earning the bank a fee of $32 per overdraft.
For instance, if an account had a balance of $50 and five debit card transactions were made – four for $10 and one for $100 – the bank would post the $100 transaction first, even if it was the last charge made.
That would cause the account to overdraw, allowing it to collect four separate, $32 fees for each transaction. Had it posted the four $10 transactions first, there would be only one overdraft fee.
The bank altered its policy in May 2011, and began posting debits from lowest to highest amount, but that did not compensate customers harmed by its previous policy, the lawsuit stated.
In addition to the monetary settlement, the bank agreed to continue the policy of posting from lowest to highest for at least two more years, to limit the number of overdraft fees charged on any single day to four and to refrain from charging a fee unless an account has a negative balance of $5 or more
If you think your bank has charged you unfair or improper overdraft fees, particularly multiple overdraft fees over a short period of time, an experienced consumer rights attorney can evaluate your case at no charge and discuss your legal options.
Do YOU have a legal claim? Fill out the form on this page now for a free, immediate, and confidential case evaluation. Some of the banks and credit unions being investigated include, but are not limited to:
First Bancorp
Flagstar Bank
Third Federal Savings and Loan of Cleveland
Old National Bancorp
Sterling Bank
Nordstrom Bank
Ally Bank
Bank of Hawaii
Capital One
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The attorneys who work with Top Class Actions will contact you if you qualify to let you know if an individual lawsuit or class action lawsuit is best for you. Hurry — statutes of limitations may apply.
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Join a Free Bank & Credit Union Overdraft Fee Class Action Lawsuit Investigation
If your bank and credit union charged you overdraft fees, you may have a legal claim. Fill out the form on this page now to find out if you qualify!
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