Customers of credit unions and banking institutions are complaining about excessive overdraft fees. Some of the customer complaints allege that their banks and credit unions have been using unfair practices to increase the revenue they collect from overdraft fees.

As such, consumer protection attorneys are investigating the overdraft fee practices of several credit unions across the country, including America First Federal Credit Union and Randolph Brooks Federal Credit Union.

While federal banking regulations do require credit unions and other banking institutions to ask their customers to opt in to overdraft protection, no legislation currently exists to regulate how much can be charged per overdraft transaction.
This means that a customer who overdrafts their account by as little as $1 could still pay up to $35 in fees for the transaction.

The amount of the overdraft fee varies across credit unions like America First Federal Credit Union and Randolph Brooks Federal Credit Union. America First Federal Credit Union charges a $30 fee each time a customer uses their courtesy pay overdraft protection. Randolph Brooks Federal Credit Union charges $24 in fees for each overdraft transaction.

Overdraft Fee Practices

A overdraft fee occurs if a customer has spent more money from their checking account than was actually in it. If a customer has not opted into overdraft protection any charges that overdraft the account will be declined. Overdraft protection allows the customer to complete the transaction but charges a fee for the service.  These fees can be costly, with an average of $35 per overdraft.

Some customers affected by these practices allege that credit unions and banking institutions are using dishonest practices in order to increase revenue collected from overdraft fees. Some of these alleged practices include reordering transactions and authorization holds.

Reordering is a process where rather than processing transactions in the order they occur, financial institutions wait until the end of the day and process the transactions from largest to smallest. This practice can potentially increase the number of overdraft transactions that occur in a day.

For example, if a person has $100 in their account and makes four transactions in the following order $5, $10, $20, and $95, only the final transaction will result in an overdraft fee if the transactions are processed in the order they were spent. But if the largest transactions are processed first the customer would receive three separate overdraft fee charges.

Additionally, authorization holds can also potentially be used to increase banking revenue at the expense of the customer. An authorization hold earmarks funds for a merchant before the transaction is fully processed. The actual processing can occur a few days after the original transaction.

Some customers have complained that banks are back dating transactions to the date the transaction occurred rather than the date the transaction was processed. This means that customers may incur an overdraft fee if they did not have sufficient funds in their account when the transaction hold was released even if they had the necessary funds when the transaction was processed.

Overdraft Fee Lawsuits

Consumer protection attorneys are currently looking for potential plaintiffs to bring overdraft fee lawsuits against various credit unions and banking institutions. Successful lawsuits may help consumers recover some of the funds spent on unnecessary and unethical overdraft fee practices.

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