Credit union and banking customers have been hit with overdraft fees totaling billions within the first quarter of 2015, according to bank records.

The three largest financial institutions–Wells Fargo, Bank of America and JPMorgan Chase–have already collected $2.5 billion in fees related to overdrafts.

Consumer advocate groups believe that both credit unions and banks are charging their customers way too much in overdraft and other fees.

Some financial institutions have fallen under federal scrutiny for unlawful overdraft fee practices, meaning the bank or credit union charged customers who had not opted for overdraft coverage or they charged fees on a deposit advance program after claiming that they would not.

The Consumer Financial Protection Bureau fined Regions Financial $7.5 billion for this practice back in April.

Credit Union Overdraft Fees

The collection of overdraft fees is a common practice for banking and credit union customers. It typically occurs when a credit union customer does not have enough money in their account to make a purchase but the financial institution covers the transaction anyway.

Credit union customers will then be charged a non-sufficient fund fee for the overdrawn account.  If more than one transaction is covered, the credit union or bank will charge a fee for each of the overdraft incidents. Non-sufficient fund fees vary from each financial institution but in general customers are charged $34-$35 per incident.

However, recent allegations from credit union customers has launched a credit union overdraft fee class action lawsuit investigation. According to credit union customers, how overdraft and other fees are calculated and assessed is not fully explained to them.

Customers report that numerous credit unions assess overdraft fees on the available balance which then causes an overdraft fee to occur even if the actual account balance did not go negative.

Credit union customers have also complained that these financial institutions are raising overdraft fee rates faster than banks.

Other credit union practices under scrutiny come from customer allegations of credit unions deliberately processing transactions out of order as a way to charge an overdraft fee.

Customers also claim that they are not informed of their available balance prior to the transactions that lead to overdraft fees.

Financial consultants encourage credit union members to ask for a complete “fee list” so that they can prepare for all of the possible service fees they might be charged for.

Credit Union Class Action Lawsuits

To date, there are at least four California credit unions that face an overdraft fee lawsuit. Financial consultants speculate as to what approach these credit unions will take.

Facing a trial may be considered risky, according to some credit union consultants. If a jury rules in favor of the plaintiffs, the credit union would have to search through years of overdraft fees and reassess them.

Sources state that some of the larger credit unions could be facing tens of millions of dollars in potential plaintiff awards.

Some of the credit unions under overdraft fee scrutiny include:

• DFCU Financial Credit Union, Dearborn, Miss.
• Redstone Federal Credit Union, Huntsville, Ala.
• Onpoint Community Credit Union, Portland, Ore.
• Kinecta Federal Credit Union, Manhattan Beach, Calif.
• Visions Federal Credit Union, Endicott, N.Y.

Contact an overdraft fee attorney if you were charged a credit union overdraft fee and are interesting in joining a credit union class action lawsuit.

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