The HSBC overdraft fee practices are under investigation.

Banks and credit unions have gotten a lot of attention lately for their overdraft protection practices.

Since the financial crisis, financial institutions have generated millions of dollars in revenue by assessing transaction fees for overdraft protection — sometimes in ways that regulators and consumer advocates say can be abusive.

Class action attorneys are now investigating the overdraft practices at several U.S. banks and credit unions. Many new overdraft fee regulations were implemented recently, and banks that continue to do business the way they did before may now be running afoul of the law.

The current investigation encompasses both large national banks and small regional financial institutions. The HSBC overdraft fee practices are part of this investigation.

Examples of HSBC Bank Overdraft Fee Practices

According to the bank’s website, HSBC Bank offers to cover overdrafts either through its standard overdraft practices or through one of its overdraft protection plans.

Under the standard overdraft practices, HSBC Bank pays overdrafts for checks and preauthorized automatic bill payments. The account holder is then expected to deposit funds promptly to cover the overdraft.

For checking accounts other than HSBC Premier, these overdraft transfers incur a fee for Insufficient Funds or Unavailable Funds fee as listed on the bank’s Terms and Charges Disclosure – a $35 fee. These fees are different from the fees identified on the same disclosure as “Overdraft Fees” or as an “Overdraft Transaction Fee.”

HSBC Bank reserves the right to pay overdrafts at its discretion. If it elects not to pay a particular overdraft, that transaction will be declined.

As an alternative to its standard overdraft practices, HSBC Bank offers an overdraft protection plan called Select Credit for Overdraft Protection. Select Credit works like a line of credit that automatically transfers funds, up to the approved credit limit, into the linked checking account to cover the overdraft.

The overdraft fees associated with Select Credit are lower than the fees charged in the bank’s standard overdraft practices. HSBC Bank charges a maximum fee of $10 per day for each day an advance is made to cover overdrafts from a linked checking account.

But in addition to the transaction fee, a Select Credit incurs interest charges. The most recent available information from HSBC Bank, the interest rate that applies to Select Credit advances may be 22 percent or more.

HSBC has faced allegations in the past for using deceptive overdraft fee practices.

HSBC Overdraft Fee Settlement

HSBC Bank was part of a recent overdraft fee class action settlement. The deal resolved allegations that HSBC would allow customers using their debit cards to make purchases even though the accounts were already overdrawn. The banks also allegedly would reorder the transactions to maximize the number of overdraft fees that could be charged.

However, this HSBC overdraft fee settlement did not cover all current HSBC customers. If you are a HSBC Bank customer and you believe you have been subject to deceptive overdraft fee practices, you may have a legal claim. Fill out the form on this page for more information.

In order to properly investigate your claims, you may be required to disclose bank statements to the overdraft fee attorneys. Please note that any such information will be kept private and confidential.

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