Some overdraft protection customers may have been unfairly charged for overdraft fees. For customers of Capital One, a Capital One overdraft settlement has provide some relief from alleged unfair fee billing.

This Capital One overdraft settlement resolved claims that Capital One had manipulated the posting order of certain debit card transactions in a way that increased the number of overdraft fees it could charge its customers.

What is Overdraft Protection?

Overdraft protection is a service offered by a bank or credit union that helps pay for a transaction if a customer’s bank account doesn’t have enough funds to cover it. For a customer who has opted into overdraft protection, if a transaction posts to an account that does not have enough money in it, the overdraft protection will take over and cover the transaction.

Sometimes a customer will have this overdraft protection service linked with a savings account, and sometimes it will be money that the bank allows the customer to borrow. Overdraft protection services provided by a bank or credit union are offered as an opt-in service for customers.

Either way, there is usually a fee involved with overdraft protection services.

In the past, and the reason behind the $31.7 million Capital One overdraft settlement, some customers wondered if they were being charged unfairly for transactions that were overdrawing their accounts.

For example, some banks and credit unions, including Capital One, were accused of reordering their transactions.

One would expect transactions to post to an account in the order they were made. But some banks and credit unions have been accused of changing the order in which transactions post in order to benefit their business.

For example, if a bank were to post a larger transaction first, the account might overdraw more quickly than if an earlier or smaller transaction were posted first. Then, once the account balance is negative, more subsequent transactions will trigger additional overdraft fees. This makes a difference when a customer is being charged fees for each overdrawn transaction.

Most banks and credit unions charge customers a fee of between $25 and $35 per transaction that overdraws an account. If transactions are reordered so that larger transactions post first and the account is drained faster, more fees may occur.

Capital One Class Action

The class action lawsuit against Capital One accused the bank of reordering transactions from highest to lowest in order to charge customers more fees. While the lawsuit was not decided for or against the bank or the plaintiffs, a $31.7 million Capital One overdraft settlement was reached.

Capital One has not admitted any guilt in this lawsuit and asserts that the Capital One overdraft settlement does not insinuate admission of guilt.

Many Capital One customers may have been affected by reordering or other questionable overdraft policies but did not benefit from the Capital One overdraft settlement. If you have been a Capital One customer with a consumer checking account, you may be eligible to participate in a new Capital One class action investigation.

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