Overdraft fees. If you are like many Americans, the term makes you cringe. Most of us have probably happened upon a bank statement and saw those seemingly ever-increasing fees for a relatively small amount that put you in the negative. What are these fees? And what is being done about them?

Overdraft Fees at Banks and Credit Unions

An overdraft occurs when money is withdrawn from an account (usually a checking account) and the account does not have enough money to cover the transaction, causing the balance to become negative. Debit card purchases at a retailer, ATM withdrawals and bill pay services are what’s likely to trigger an overdraft.

Rather than decline your purchase, withdrawal or bill pay, banks and credit unions offer a service where they can choose to honor your transaction, but you will pay the price. The bank essentially puts forth a short-term loan to you, and you are charged an overdraft fee for the service. The median fee for these services is $27, with a range from $10-$38.

As you can imagine, these fees can quickly add up, and many times, multiple transactions will post in a day. Say you’re on your way to work Friday morning and your paycheck will deposit around noon. You have $25 in your checking account and you stop and get gas for $30 and walk into the convenience store for a $6 coffee and breakfast sandwich. The first transaction causes you to drop to $5 in the negative and another $6 in the negative on the second transaction.

For each transaction, you will incur an overdraft fee. If you’re banking with First BanCorp, for example, you will be charged $36 each transaction. So for your $36 purchase, you will be charged a total of $108!

Consumers have started to fight back and say this “short-term loan interest” that is charged in the form of a fee is outrageous, and the Consumer Financial Protection Bureau (CFPB) is a government entity that has been investigating fee practices such as these at financial institutions.

In 2015, overdraft frees were studied by the CFPB and the agency reported that these fees account for 8% of banks’ total net income totaling $11.16 billion in revenue.

“The CFPB is currently looking closely at overdraft practices and will continue to analyze this data to better monitor and understand overdraft programs in the market and the consumer experience,” the CFPB says.

Overdraft Fees at First BanCorp

Upon visiting First BanCorp’s website, one will see an extensive list of overdraft fees, and compared to many other financial institutions, this is one of the more extensive lists for related fees that might be found.

Many banks and credit unions will list a general overdraft fee or insufficient (NSF) fee, but First BanCorp breaks their fee structure down to include multiple types of overdraft fees, and fees on top of fees for the same initial overdraft.

Below is the current menu of overdraft fees from the website:

Overdraft (OD) Item…………………………………………………..$36.00
Each Overdraft (OD) Item when the day’s ending balance is overdrawn by $5.00 or less……..$2.00
Each Insufficient (NSF) Funds Item…………………………………………..$36.00
Continuous Overdraft Fee…………………………………………………….$36.00 for each period of ten (10) days or longer that your account is continuously in overdraft, charged on the tenth (10th) day
Overdraft Equity Credit Line Fee………………………………………………$10.00
Overdraft Transfer from Credit Card………………………………………………..your credit card will incur a cash advance transaction fee. See your Cardholder Agreement.
Overdraft Transfer from Eligible Deposit Account………………………………….$10.00 per transfer

Not only does First BanCorp charge for each transaction with no cap on the number of fees per day mentioned, if your balance continues to stay in the negative without being resolved for more than ten days, additional fees will be imposed.

Overdraft fees are not only assessed on checking account transactions at First BanCorp, they also list fees for credit lines, credit cards and deposit accounts as well.

Overdraft Fee Lawsuit Information

Lawyers have launched investigations into the overdraft practices of banks and credit unions. If you have been charged overdraft fees at First BanCorp or , you may be eligible to join a class action lawsuit investigation to seek legal compensation.

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