Despite federal rules on overdraft fees that went into effect in 2010, many credit union customers are still paying excessive overdraft fees.

That’s because they opted-in to overdraft protection programs, which allow customers to use their debit card for purchases even if there is not enough money in the account to cover the payment.

Each overdraft incurs a fee of about $30 to $35. Under the 2010 regulations, credit unions must ask customers to choose overdraft protection rather than enroll automatically.

An overdraft occurs when there is not enough money in an account to cover a transaction, but the credit union pays for it anyway. Transactions include ATM withdrawals and debit card purchases.

Many credit unions offer overdraft protection programs in which the financial institution will pay for the transaction and charge the customer a fee (in addition to requiring repayment the overdraft amount). For most credit unions, the overdraft fee is a fixed amount regardless of the amount of the transaction.

Overdraft Programs are Optional

Since July 1, 2010, credit unions 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, meaning customers who opt into the program could still pay up to $35 for transactions that take them even $1 into overdraft.

Many consumers are not aware of their options when it comes to overdraft. They include:

• Opting out of overdraft protection programs anytime
• Linking a checking account to a savings account
• Asking the credit union if they are eligible for a line of credit or linked credit card to cover overdrafts
• Tracking balances carefully and signing up for low balance alerts to notify you of the risk of overdrawing your account

Class Action Lawsuit Investigation

A credit union class action investigation has recently been launched in response to consumer reports that many of these financial institutions have unfairly raised overdraft fees.

In addition, credit union customers claim they are not fully informed about how the overdraft fees are calculated, which causes confusion.

Consumers claim that many credit union overdraft programs assess fees on the available balance, which, in turn, may cause an overdraft fee to occur even if the actual account balance did not go negative.

Credit union customers say they were misled by the financial institutions when they were not informed of their available balance prior to the transactions that led to overdraft fees.

Some of the top U.S. credit unions include State Farm Federal Credit Union, Bloomington, Ill.; Mountain America Federal Credit Union, West Jordan, Utah; Bank Fund Staff Federal Credit Union, Washington, D.C.; Desert Schools Federal Credit Union, Phoenix; and Logix Federal Credit Union, Burbank, Calif.

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