Reports of excessive bank overdraft fees have consumer advocates investigating several financial institutions, including Pacific Western Bank.

Pacific Western Bank, founded in 1982, is a group of companies that includes Capital Source and Square 1 Bank. According to the company’s website, Pacific Western Bank has more than $25 billion in assets.

When Pacific Western Bank merged with California United Bank in October of 2017, the bank released paperwork that detailed a schedule of fees that became effective Dec. 4, 2017. According to that schedule, customers may be charged an overdraft fee of $32 per item paid by the bank, with a daily maximum of $192 in such overdraft fees allowed per account.

A note within the schedule of fees says the bank claims the right to process checks or other transactions posting to the account in any order. They admit the policy may affect the number of fees assessed to a customer’s account. Reordering transactions this way has gotten other financial institutions in trouble with consumer advocates who say the practice leads to excessive bank overdraft fees.

Pacific Western Bank indicates that even if the customer makes a deposit on the same day a different transaction creates an overdraft, “we may charge a fee for the overdraft since the covering deposit may not be posted until the end of the business day.” Such a practice appears to benefit the bank, which would charge a $32 overdraft fee for a “temporary” or “intra-day overdraft,” as Pacific Western calls it.

Reasons for Excessive Bank Overdraft Fees

Pew Charitable Trusts has analyzed the changes in banks over the years. Pew says banks more than doubled their revenue from fees between 1984 and 2015.

In 2015, banks in the United States reported more than $11 billion in excessive bank overdraft fees, including non-sufficient funds fees.  Only 18 percent of account holders pay 91 percent of overdraft and service fees, with most of these customers earning less than $50,000 a year. A full 25 percent of bank customers pay one week’s worth of income each year in excessive bank overdraft fees.

Debit card transactions appear to cause the most harm to financially strapped bank customers because the flat, fixed fees are the same whether the account is overdrawn by $15 or $150.

A debit card overdraft fee of $34 for a $10 overdraft would be considered excessive bank overdraft fees to many consumers.

Pew Charitable Trusts says its research has found some consumers mistakenly rely on overdraft fee programs as short-term loans, which means these customers are even more likely to see excessive bank overdraft fees.

The Consumer Financial Protection Bureau (CFPB) says that debit cards have the lowest median value of all transactions that can lead to the incurrence of overdraft fees. That figure is $24, and if a $34 overdraft fee is  added on top of that, is equal to a loan with a 17,000 percent annual percentage rate.

The CFPB also conducted a study that found customers who had opted in to overdraft protection programs were charged $450 more in excessive bank overdraft fees compared to customers who did not opt in to such programs.

You may have a legal claim if your were charged excessive overdraft fees by one of these banks or credit unions:

• Alliant Credit Union
• Astoria Bank
• BECU (Boeing Employees Credit Union)
• Nationwide
• Pacific Western
• State Employees Federal Credit Union (SEFCU – New York)
• Sterling Bank
• Educational Employees Credit Union (California)

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