Pentagon Federal Credit Union is facing scrutiny over its overdraft fee practices. Investigators are reviewing whether these policies could result in putting credit union members under greater financial pressure.

Overdraft fees at Pentagon Federal Credit Union take the form of interest charges on a line of credit. That line of credit starts at $500 and is currently subject to a fixed interest rate of 14.99 percent, according to the credit union’s website. Members must apply for and be approved to use this type of overdraft protection.

In addition, Pentagon Federal Credit Union offers customers a “money saving feature” for active duty service members in the United States uniformed services. This program, called the Warrior’s Advantage, waives overdraft fees at Pentagon Federal Credit Union for these active duty members who overdraw their accounts.

Pentagon Federal Credit Union offers this line of credit-based overdraft protection as an alternative to paying non-sufficient funds fees of up to $30 per transaction.

Members can opt to incur these interest-based overdraft fees at Pentagon Federal Credit Union as an alternative to paying non-sufficient funds fees. These fees can run as high as $30 per transaction. The credit union also says that for accounts without overdraft protection, it will decline transactions that would otherwise overdraw the account.

Overdraft Fees at Other Institutions

Across the country, banks and credit unions are reportedly making billions from overdraft fees they charge to customers. These fees often affect consumers with financial difficulties due to the higher likelihood that their primary checking account is overdrawn.

Overdraft fees can quickly accumulate into larger expenses. According to a recent 2015 report from CNN and SNL Financial, three of the largest banks in the country earned over $6 billion from ATM and overdraft fees. JPMorgan Chase, Bank of America, and Wells Fargo have been at the center of these overdraft fee complaints.

Previously, banks and credit unions were able to invoke overdraft protection without the customer’s consent. However in August 2010, it became illegal for financial institutions to implement overdraft protection if the customer did not sign up for the service. In addition, these financial institutions allegedly used questionable methods to maximize overdraft fees including indexing the transactions by amount and not by date.

Banks and credit unions have reportedly been looking for ways to used overdraft fees to increase their revenues, sometimes descending into unlawful and unfair practices. One notorious overdraft fee practice is known as reordering, in which the financial institution pays transactions in the order of largest to smallest, instead of chronological order.

Reordering tends to cause the account to become overdrawn sooner. As a result , more subsequent transactions qualify as overdrafts, allowing the institution to collect more in overdraft fees.

Customers who believe they may have experienced improper overdraft fees at Pentagon Federal Credit Union or other financial institutions may be able to seek compensation. A consultation with a banking fees lawyer can help determine eligibility for an overdraft fees lawsuit.

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