Some customers have claimed that overdraft programs at certain banks, including HSBC overdraft policies, may charge customers excessively through deceptive practices.

A lawsuit investigation is currently looking into a number of banks and financial institutions and their policies and practices regarding overdraft fees, including HSBC overdraft policies.

Over the years, overdraft protection programs have become increasingly popular, and they are now a pretty standard feature at banks and credit unions all across the country. However, some financial institutions may be using unfair overdraft practices to take advantage of their customers, charging them excess fees. Overdraft programs, when manipulated like this, can cost consumers a substantial amount.

This is not to say that overdraft programs aren’t useful for anyone—for many, they are undoubtedly a benefit. These programs can offer customers some extra padding for their checking accounts, allowing them to have money transferred to cover transactions even after they would have otherwise hit the bottom and been unable to make the purchase.

Basics of Overdraft Fees

Customers who use their overdraft protection, and draw against a lower than needed balance, are then charged a set overdraft fee, averaging around $31. Some states tend to have higher overdraft fees than others. Banks all across the country, however, have been steadily increasing their overdraft fees for years.

On top of the rising fee itself, overdraft fees are not just a one-time thing, and instead are incurred each time a customer makes a transaction that overdraws their account. Overdraft fees compound—any additional transaction on an overdraft account will in turn bring its own fee, which can quickly add up.

HSBC Overdraft Investigation

Several banks and credit unions are currently under investigation for deceptive overdraft protection practices, but others may be engaging in these tactics as well.

Overdraft class action lawsuits can result in significant settlement amounts. Last year, HSBC Bank settled a class action lawsuit regarding its HSBC overdraft policies for $32 million. The lawsuit alleged that HSBC overdraft practices involved deliberately reordering transactions in order to increase the amount customers would be forced to pay in overdraft fees.

Deceptive Overdraft Practices

Banks can use several methods to charge their customers extra overdraft fees, other than simply raising the fee itself.

Customers generally expect that their transactions will be processed chronologically, in the order in which they are made. But some banks may intentionally re-order transactions to collect more in fees, deliberately skewing the order of customers’ transactions to incur the most fees possible, which adds up quickly.

These banks may purposely re-order a customer’s transactions from highest to lowest rather than from first to last, which makes each transaction increasingly more likely to overdraw an account. This can end up meaning that a large fee processed earlier can tip a customer to overdraw their account earlier, with even more transactions left to be charged an overdraft fee. These overdraft fees then compound, and customers are left with a much heftier sum to pay.

In some cases, customers are simply not informed of how the overdraft program works. When customers sign up for an account, they may not be told all the details of the program or its associated fees. Others may not even be informed that they have the ability to opt out of the overdraft protection program.

Filing an HSBC Overdraft Lawsuit

HSBC agreed to a settlement for a lawsuit last year over some of its old HSBC overdraft policies, namely excessive fees. If you were also affected by these old policies, but did not participate in that HSBC overdraft settlement, you may be able to join a new class action lawsuit investigation.

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