Overdraft fees have caused dozens of financial institutions, including some credit unions to be targeted in significant litigation.

In the last few years, several credit unions have been named in overdraft fees class action lawsuits, including Alliant Credit Union.

Alliant Credit Union is a member-owned monetary cooperative headquartered in Chicago, Illinois.

In 2012, Alliant was hit with a controversial $8.4 billion overdraft fees class action lawsuit on behalf of members alleging that the credit union assessed overdraft fees on available balance and manipulated customers’ checking account transactions in order to maximize overdraft fees.

Though it has since changed its account posting practices, the credit union overdraft fees class action lawsuit, which was filed simultaneously with six other overdraft fees class actions against other rival credit unions across the U.S., alleged that Alliant Credit Union purposely set out to maximize the amount they charged their customers in overdraft fees.

In other words, Alliant Credit Union was accused of improperly gathering overdraft fees by reordering transactions from highest to lowest rather than chronologically to maximize the number of overdraft fees.

According to consumer complaints regarding unfair overdraft fees, this results in a seemingly minor overdraft expanding into a financial disaster, where customers are faced with numerous overdraft charges, sometimes totaling into the hundreds.

What are Illegal or Unfair Overdraft Fees?

An overdraft occurs when there is not enough money in an account to cover a transaction, but the credit union pays for it anyway.

Many credit unions, including Alliant Credit Union, offer overdraft protection programs in which the financial institution will pay for the transaction and charge the customer a fixed “overdraft” fee, typically ranging from $25-$35 dollars per transaction.

Since July 1, 2010, credit unions must ask customers to choose overdraft protection rather than enroll automatically. Yet despite this and other federal rules on overdraft fees that went into effect in 2010, many credit unions are still using deceptive overdraft practices including:

• Marketing overdraft programs that are designed by the credit union to increase overdraft fees, but referring to those practices as “overdraft protection,” “Courtesy Pay,” or “Overdraft Coverage”
• Posting transactions from high to low order in order to increase the number and amount of overdraft fees when the account is overdrawn
• Providing inaccurate balances to customers leading them to unknowingly overdraft their account
• Inserting arbitration provisions in contracts that bar customers from participating in class action lawsuits against the credit union
• Delaying the processing of deposits
• Determining overdraft fees based on inaccurate balances

Credit Union Overdraft Fees Class Action Lawsuit Investigation

By law, overdraft protection programs are optional. Failure by a credit union or other financial institution to offer opt-out or adhere to a consumers wishes with respect to overdraft protection is grounds for legal action.

A credit union class action investigation has recently been launched in response to consumer reports that many of these financial institutions, like Alliant Credit Union, are being deceptive with their overdraft fee practices.

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