Have unfair overdraft protection practices left you paying wrongly charged overdraft fees?

Consumers across the country have filed lawsuits against their banks and credit unions, accusing them of unfair overdraft protection practices. Some of these maneuvers are less obvious than others.

At least one credit union has been accused of placing pending debit card deposits and certain transactions on hold, only to let the transactions post in an order that will result in more than one overdraft fee. That same credit union allegedly used creative accounting to figure out a contrived balance which was based on anticipated future expenses.

Among other unfair overdraft protection practices, this one most often charged an overdraft fee on a customer’s account when the customer still had plenty of money currently sitting in the account.

Unfair Overdraft Protection Practices Are Big Business

Financial institutions began charging more and bigger overdraft fees as a way to make money when interest rates dropped. Today, overdraft fees are big business for both banks and credit unions.

Consumers often don’t know that a financial institution’s overdraft protection service requires their opt-in, or that a bank or credit union cannot simply assume you want overdraft protection for point-of-sale items. According to Pew Charitable Trusts, most consumers don’t know they have the right to opt out of overdraft protection and to avoid the unfair overdraft protection practices.

Some consumers even use overdraft protection as a type of credit. Almost 75 percent of those who overdrafted their accounts and were charged fees did not know they had a right to have the transaction declined in the event the account had insufficient funds for a debit card purchase. One in three consumers view their bank’s overdraft protection as a way to borrow money in small increments.

Pew says research indicates five percent of customers with checking accounts incur a minimum of 20 overdraft fees each year. Financial institutions allegedly view overdraft protection as a way to assist a consumer who makes a budgeting mistake once in a while, says Pew.

Nearly 54 percent of consumers incorrectly believe they would be charged a fee even when the debit card transaction is declined. Financial institutions do not charge a fee when a transaction is declined. Only if the transaction processes and the consumer’s account goes in the red is there a fee charged, and that is an overdraft fee.

Consumers who report they have spoken with their banks about the financial institution’s overdraft protection programs still often misunderstand the program’s rules and regulations. Without a full comprehension of their rights as a bank or credit union customer, the consumer could be at a higher risk of making financial mistakes that lead to an increase in overdraft fees.

If you believe you have been a victim of unfair overdraft protection practices that have led you to accumulate unwarranted fees, you could be eligible to participate in this overdraft protection lawsuit investigation.