An overdraft fee is any fee charged to an account when a consumer is paying for an item at a time when their bank account has insufficient funds to cover the item.

Overdraft fees are incurred on each purchase made, so they can add up quickly and leave customers with a large debt to repay.

Many complaints have recently alleged that Capital One NA and other financial institutions may have manipulated the order of customers’ transactions in order to make them incur the maximum number of overdraft fees, thereby causing significant financial damage to account holders in order to increase profits.

Unfair Overdraft Fees

Since July 1, 2010, banks like Capital One are required to ask new customers if they wish to opt in to overdraft protection. There is no legislation regarding how much money can be charged for overdraft fees and many consumers are not aware of their options when it comes to overdraft occurrences.

Many financial institutions like Capital One offer their account holders overdraft protection plans, touting them as providing peace of mind and convenience. In theory, these plans protect consumers by providing that the bank will not refuse a check or debit card transaction for insufficient funds.

This service may save consumers from embarrassment, inconvenience, and in some instances, even criminal prosecution. Of course, these plans are not free – typically banks and credit unions will charge a customer on average $31 per transaction.

For instance, Capital One offers an overdraft protection program for personal banking account holders called Free Savings Transfer. According to the Capital One website, this program is offered to its 360 Checking customers and advertises the program as a free option where customer funds can be transferred directly from a savings account to cover a checking account overdraft, only as long as there are enough funds in the savings account to cover the entire overdraft.

Capital One also allows account holders to apply for an Overdraft Line of Credit, where the customer pays interest on the amount borrowed for any incurred overdraft.

Still, consumer complaints allege that credit unions and banks like Capital One will “re-order” a customer’s transactions so as to inflate the amount owed in overdraft fees. This means that if a series of transactions post on a particular day, the bank will process the largest transaction first no matter when it occurred that day.

Additionally, check holds and debit card authorizations may cause delays that can trigger overdraft fees even when the customer’s actual balance hasn’t gone negative.

Capital One Overdraft Fees Class Action Lawsuit Investigation

An investigation into excessive overdraft fees and other potentially improper fees charged by Capital One and other financial institutions has been launched.

In April 2015, Capital One agreed to settle an overdraft fees class action lawsuit for nearly $32 million that alleged the bank improperly re-numbered customer debit transactions from highest to lowest in order to maximize overdraft fee charges.

Consumers who suspect they are being charged improper overdraft fees by Capital One or another financial institution may want to consider speaking with an attorney, who can help determine if the charges were proper or improper and get advise about possibly bringing an overdraft fees lawsuit.

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