When a consumer signs up for a bank account at a credit union, they expected to be treated better than at a traditional bank.

However, recent overdraft practices at many credit unions, including Star One Credit Union of Sunnyvale, Calif. have been under fire as customers question their fairness.

Four years ago, many of the big named Federal Credit Unions in California were slapped with lawsuits. In 2012, unfair overdraft practices of several credit unions were noticed and reported and as a result, the credit unions, including Star One Credit Union, found themselves the subjects of these lawsuits.

At the time, many credit unions participated in what is called “high-to-low” transaction posting practices. These practices were established in the early 2000s.

What that means is that when those credit unions posted a customer’s transactions, they would post them in order of amount of the transaction, with the higher purchases posting first.

When a higher purchase would be posted first, the bank account with a potentially lower balance would be drained quicker than if the purchases had been posted in the order that they accrued.

This can result in more overdraft fees than if they had posted in order. Many consumers reported this and labeled this as an unfair practice.

Star One Credit Union was implicated in these unfair overdraft practices.

The attorney in this case accused Star One and other credit unions of  “the systematic manipulation and re-ordering of electronic debit transactions from the highest dollar amount to the lowest dollar amount…to maximize the amount of overdraft fees collected.”

Star One Credit Union Overdraft Practices

Start One Credit Union recommends that customers sign up for their savings account overdraft protection, which is setup to have the customer’s primary checking and savings account linked. This is the best option for the customer.

According the Star One’s website, if a customer is found to have insufficient funds in their checking account, multiples of $100 will be transferred from the savings account without any charge.

Star One Credit Union provides an opt-in courtesy pay if a customer does not opt for the savings account option. Under this provision, SOCU will automatically provide up to $2,000 for a purchase if there is insufficient funds in the account. However, each transaction costs the customer $15.

As early as 2010, financial institutions became prohibited from charging overdraft fees unless the customer signs up for overdraft protection.

Still, many consumers, including those at Star One Credit Union, are reporting unfair overdraft practices.

The Consumer Financial Protection Bureau (CFPB) reviews overdraft practices of credit unions.

U.S. banks make a great deal of money on overdraft practices, according to the CFPB. Banks make close to $30 billion each year from debit card overdraft practices. Some banks will allow several charges in one day.

This allows the overdraft fees to build up at an alarming rate for customers.

At the same time, credit unions may not adequately inform customers about how their programs work. Many customers have to search their financial institutions website thoroughly in order to find out about overdraft practices in order to be informed about what actual terms and conditions might be.

ATTORNEY ADVERTISING

The choice of a lawyer is an important decision and should not be based solely on advertisements.