Something that has plagued bank customers in the past is still getting some traction in court. Capital One bank customers have alleged that their bank charges unfair Capital One overdraft fees, and a new lawsuit is addressing that same allegation.

Recently, in New York, a woman filed a Capital One overdraft fees lawsuit claiming the banking giant was unfair in the way they charged her for overdraft fees.

Plaintiff Tawanna R. says that she had a positive balance in her bank account. When she made a few transactions that enacted the Capital One overdraft fees that she incurred, she claims that her fees were exacerbated by the fact that Capital One “reordered” her transactions.

What is Transaction Reordering?

When checking account transactions are posted to someone’s account, the account owner often rightly assumes that those transactions would be posted in the order that they were made.

For example, if a cup of coffee was purchased first for $5 and a transaction at a retail establishment was made later for $75, the bank customer should assume that those transactions would be posted in the order they were made: the $5 transaction first and then the $75.

However, some banks, including Capital One, have been accused of reordering those transactions. They might post transactions to an account in order of highest to lowest amount rather than chronologically.

If this is the case, an account owner might unknowingly overdraw his or her account because he or she thought that the lower transaction was being posted first.

Why does Transaction Reordering Hurt the Customer?

The reason why transaction reordering hurts the customer is that banks often charge overdraft fees per overdrawn transaction. Reordering transactions, in some cases, may cause a customer’s account to be overdrawn more quickly than if the transactions were posted chronologically.

In the previous example, if the $75 charge was posted first, and that overdrew the account, both transactions would face overdraft fees instead of just one if they were posted in order of occurrence.

In many cases, those who are charged overdraft fees assume that the bank has their best interest in mind; they presume the bank will post their transactions in the order that they were made.

In the case of Tawanna, the District Court had originally agreed that Capital One had the right to assess such Capital One overdraft fees from her. However, an appeals court recently reversed this judgment and gave this lawsuit a second chance.

This Capital One overdraft fees case has come down to what the word “pay” means. If the court determines that “pay” refers to the time that the bank authorized the transaction (i.e. at the store’s POS system), then it is in Tawanna’s favor. If the court determines that “pay” means the point at which the bank and the merchant settle the payment, then it is in the bank’s favor.

Some banks, including Capital One, have been accused of purposely reordering transactions in order to be able to assess the greatest amount of fees from the customer. Banks and credit unions earn hundreds of thousands of dollars off of these fees.

This Capital One overdraft fees lawsuit is Case No. 0:17-cv-01762 in the United States District Court for the Southern District of New York.

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