Some consumers who have been subjected to significant overdraft fees believe that a future overdraft protection law could block banks and financial institutions from engaging in these behaviors.

Unfortunately, however, in light of the current environment in which a comprehensive overdraft protection law does not exist, those consumers who have already been harmed may only have recourse through litigation.

While some public policy has allowed institutions like Pentagon Federal Credit Union to charge overdraft protection so long as they ensure that the customer opts in, no legislation addresses ordering and reordering of transactions, which enables banks to charge many more overdraft fees.

Since an overdraft protection law does not clarify specifically what the processes currently used by banks to overdraw excessive overdraft fees, consumers may need to take their future into their own hands. There are also hopes that the Consumer Financial Protection Bureau will help.

In the future, an overdraft protection law may be drafted and put into action which clarifies what banks and financial institutions can and cannot do and could even give consumers recourse if excessive overdraft fees are applied to their individual accounts.

Unfair Overdraft Practices

The promise of a future overdraft protection law does little for those consumers who argue that they have already been assessed overdraft fees that were excessive or unfair. As of August 2010, financial institutions are not allowed to charge overdraft fees to consumers unless they have opted in to the overdraft coverage or overdraft protection program.

Unfortunately, a number of different banks and credit unions, including Pentagon Federal Credit Union, are under investigation for charging excessive overdraft fees. Some customers and members allege that they have been unfairly charged overdraft fees and that this type of behavior should be illegal.

Many are pushing for an overdraft protection law which would clarify that it is not appropriate for banks to charge transactions out of order to maximize bank profits. In reordering, banks can charge multiple overdraft fees when there should have been only one. According to numerous bank overdraft fees lawsuits, banks would allow customers to overcharge their checking accounts repeatedly regardless of insufficient funds.

Many of these consumers believe that an overdraft protection law would help to block banks from doing this in the future and will protect other consumers. However, certain bank account holders allege that these financial institutions have engaged in this behavior for a long period of time. By purposely processing transactions out of order, these institutions reap the maximum overdraft fees per each bank account holder.

Consumer advocates are now examining overdraft practices at Pentagon Federal Credit Union and other financial institutions.