Consumers at banks and credit unions like Meriwest Credit Union are wondering if reordering transactions is legal. This practice is widely in effect at many financial institutions, and each may have a similar reasoning they give to customers explaining why they have chosen to implement the practice of reordering transactions.

What Does Reordering Transactions Refer to?

The practice of reordering transactions refers to banks and credit unions processing the transactions from the consumer’s checking account in an order that may be different from the order in which the transactions were made.

As an example, instead of processing two smaller transactions that left a balance of $5, then processing the third large transaction of $200, which would incur a single overdraft fee for the large transaction, banks and credit unions were reordering transactions to process them from largest to smallest.

In this case, the $200 transaction would cause the account to overdraft, and the two subsequent smaller transactions would also cause the account to incur overdraft fees. If the financial institution charges $35 per transaction, as in the case of Meriwest Credit Union, $105 would be assessed in overdraft fees as opposed to a single $35 overdraft fee as would have been charged by a bank that orders transactions chronologically.

Meriwest Credit Union’s Statement about Reordering Transactions

Meriwest Credit Union
 reserves the right to engage in the practice of reordering transactions, and states the following about how transactions are posted to the account:

“We can receive credit and debit transactions in different forms at various times each business day. We reserve the right to determine the timing and order in which such transactions are posted to your account to the extent permitted by law. We determine the order in which we process and post credits and debits to your account based on a number of factors.

We may pay or authorize some transactions, and decline or return others, in any order we deem appropriate to the extent permitted by law. When the available balance in your account is not sufficient to cover all of the transactions presented that day, some posting orders can result in more returned items and more overdraft and return item fees than other posting orders.”

Is Reordering Transactions Legal?

A number of lawsuits have been filed against banks and credit unions saying that the practice of reordering transactions is deceptive and should not be allowed.

As a result, banks and credit unions have entered into settlements with consumers in order to resolve these allegations. However, when these entities enter into settlements, the claim that they have done no wrongdoing and the settlement is simply to avoid the costs, time and burden of future litigation.

The Consumer Financial Protection Bureau has been investigating these practices, and legal teams have made recommendations that these practices be discontinued. One such recommendation from the University of North Carolina School of Law states that the so-called “banking shuffle” should be barred.

A current lawsuit is pending in New York with allegations that the bank violates state business laws by reordering transactions. The lawsuit was launched in 2012 and is at the appellate court level. The lower court refused to dismiss the claim, and based on the appellate ruling, it will be allowed to continue.

The practice has not as of yet been barred or made illegal, and the situations are considered in the courts on a case-by-case basis at this time, though experts and consumers are pushing for the practice to be barred.

Has Your Financial Institution Been Reordering Transactions?

If your bank or credit union has been reordering your transactions and you believe this to be a deceptive practice, you may be eligible to take legal action. An experienced attorney can review your case in a no-cost, no-obligation consultation to discuss your eligibility and legal options.

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