Capital One Financial Corporation is a bank specializing in different saving accounts and loans. The bank offers a variety protections including Capital One 360 overdraft protection.

According to the Capital One 360 overdraft protection policy, consumers are given a general overview of different options with their account including:

• Auto Decline: This is the default option, and it doesn’t incur a fee. The bank will generally decline transactions that will cause the account to become overdrawn. However, pre-authorized transactions, like gas refills, may overdraw the account but a fee will not be imposed.
• Free Savings Transfer: Customers must sign up for Capital One 360 overdraft protection by linking their checking account to the 360 Savings or 360 Money Market account. Customers must opt into this service.
• Overdraft Line of Credit: A single transfer will be implemented at the end of the business day to cover overdraft protection if the customer is enrolled.
• Next Day Grace: Customers face a $35 charge per every overdraft transaction, which they can avoid by depositing funds to cover the overdraft amount by the next business day.

Overview of Overdraft Fee Problems

Even though overdraft protection is supposed to help protect consumers against their account from being overdrawn, they may instead be subjected to unfair overdraft charges.

Overdraft protection was originally designed to protect consumers against overdrawing their primary checking accounts by insuring that they would never be turned down during a purchase. With overdraft protection, money is transferred from a secondary account to the customer’s primary account to cover the transaction.

The bank or credit union than imposes a fee for this service, which is often called an overdraft fee or insufficient funds fee. Even though overdraft protection was meant to be a discreet way to protect consumers from the embarrassment of a card being declined, banks and credit unions have been accused of abusing overdraft protection in the last few years.

Consumer advocates allege this could be occurring for some bank customers. More specifically, consumer advocates are concerned that banks may be improperly indexing the customer’s transactions in a way that drains their primary accounts at a faster rate. This can happen when the bank processes debits in the order of largest-to-smallest transaction amount instead of in chronological order.

It is important to note that unless if there is a limit specified in the contract, multiple overdrafts can occur in a single day and can quickly snowball into a larger debt.

There are some lines of protection against improper overdraft protection, including a federal policy that was enacted in August 2010. This policy guaranteed consumers the right of notice and consent when it comes to overdraft protection, and made it illegal for financial institutions to automatically sign up consumers for overdraft protection.

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