First Hawaiian Bank overdraft practices have come under fire as financial institutions are being closely examined.

The standard overdraft practices are clumsily worded and unclear, with phrases such as, “We pay overdrafts at our discretion, which means we do not guarantee that we will always authorize and pay any type of transaction.”

First Hawaiian Bank overdraft practices’ outline goes on to say “we typically do not pay overdrafts if your account is not in good standing, or you are not making regular deposits, or you have too many overdrafts.”

The online information does not clarify how many overdrafts are “too many.”

The standard overdraft practices only cover checks and other transactions made using your checking account number and automatic bill payments.

In order for First Hawaiian Bank overdraft practices to cover everyday debit card transactions and ATM transactions, you must sign up for DebitPlus, which “costs you nothing until you use it.”

The overdraft fee of $30 can be applied for “paying or returning unpaid an overdraft created by check in-person withdrawal, or certain electronic means.”

In addition, a one-time Continuing Overdraft Notification Fee of $10 can be added to overdrafts that are not cleared within seven calendar days.

Fortunately, there is a fee limit. An account won’t incur more than five overdraft or returned item fees on any one day, even if the number of overdrafts exceeds five on that particular day. That limit does not apply to the $10 Continuing Overdraft Notification Fee.

First Hawaiian Bank Overdraft Practices Not Unique

According to Pew Charitable Trusts, banks more than doubled their revenue from fees and service charges between 1984 and 2015. Banks actually began to view fees as a way to diversify their sources of revenue.

“Income from fees for services has grown considerably over time,” states Pew’s website. “In 1984, fee revenue was small compared with income earned from interest. By 2015, this gap had narrowed substantially.”

Fees gained in popularity because of increased competition from deregulation and technological advances. These factors encouraged banks to find new revenue sources to maintain their profit margins.

First Hawaiian Bank overdraft practices are not unique in the sense that they make the business a lot of money.

According to Pew, U.S. banks reported more than $11 billion in overdraft fee and non-sufficient funds revenue, amounting to nearly two-thirds of all consumer deposit account fee revenue.

Only 18 percent of account holders pay 91 percent of these fees, and most of these customers earn less than $50,000 per year. Twenty-five percent of them pay a week’s worth of income in overdraft fees to financial institutions annually.

The Consumer Financial Protection Bureau (CFPB) reports that of all the ways a transaction can be made, debit cards hold the lowest median value, $24, of financial transactions that lead to overdrafts.

Pew analyzed CFPB’s research and found that “debit card transactions are the preferred tool of the most financially vulnerable bank customers. Because overdraft fees are flat and fixed – they are the same whether an account is overdrawn by $10 or $100 – debit card overdrafts bear the most disproportionate penalty because they tend to be the smallest transactions.”

ATTORNEY ADVERTISING

The choice of a lawyer is an important decision and should not be based solely on advertisements.