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

Many credit unions, including Fort Worth, Texas-based American Airlines Federal Credit Union, offer overdraft protection programs.

Overdraft protection programs are those wherein the financial institution will pay for the transaction and charge the customer a fixed “overdraft” fee, typically ranging from $25-$35 dollars per transaction.

Information about the specifics of overdraft practices are posted on the credit unions’ websites — often under the guise that this is a beneficial service to the customer. The truth, in fact, is that some of the overdraft fees that can be accrued can cause significant financial damage to a customer.

American Airlines Federal Credit Union Protection

Credit unions were founded in the late 1800s in Europe. Their creation was based on the philosophy of “People Helping People,” and the power of the masses. A successful model, it spread to the United States in the 1900s. Similar to a bank, they offer financial products to their customers. One such product is overdraft protection.

American Airlines Federal Credit Union’s website states that they offer two different options for customers who do not have enough money in their checking account to cover their purchases — a standard overdraft protection they call Bounce Protection that is automatically included with a customer’s account or an enhanced version of Bounce Protection which links to a line-of-credit, savings account or another joint account.

However, American Airlines Federal Credit Union automatically includes customers in their Bounce Protection program.

Advertised as standard overdraft coverage, this overdraft service charges $25 per overdraft item for checking and ACH transactions.  However, the program declines certain transactions that cause an account to overdraft including debit card signature, debit card pin, and ATM transactions.

American Airlines Federal Credit Union also offers a Bounce Protection Plus program– an enhanced overdraft coverage that customers must opt-in to.  While the overdraft program still charges a $25 overdraft fee, the service applies to all customer transactions.

Deceptive Overdraft Practices

Since July 1, 2010, credit unions must ask customers to choose overdraft protection rather than enroll them 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:

• Misleading 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
• Delaying the processing of deposits
• Determining overdraft fees based on inaccurate balances

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 consumer’s 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 American Airlines Federal Credit Union, may be improperly deceiving consumers with their overdraft fee practices.

Consumers who suspect they are being charged improper overdraft fees may want to consider speaking with an attorney who can help determine if the charges were proper or improper and advise about possibly bringing an excessive overdraft fees lawsuit.

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