HSBC overdraft charges have historically been a substantial financial burden on the bank’s customers.

HSBC settled a class action lawsuit for $32 million in the fall of 2016. The lawsuit alleged the bank posted transactions to customer accounts in an order that maximized HSBC overdraft charges incurred by customers. Even though HSBC settled, the company never admitted wrongdoing and insisted no laws were violated.

Overdraft charges can be a big expense for consumers, but a large profit source for banks. Nearly 40 million consumers paid at least one overdraft fee last year, said a recent report by NBC News.

Pew Charitable Trusts has published analyses of the overdraft industry, which made $33 billion in profits last year.

“The prevalence of fee-based overdraft programs at both large and small banks underscores the need for new policies to prevent ‘courtesy’ overdraft programs from being costly and unsustainable forms of short-term credit for many financially vulnerable consumers,” said Nick Bourke, director of Pew’s consumer finance project. “Regulators should set reasonable limits on overdraft fees and help banks create new small-credit options for those who want them.”

HSBC Overdraft Charges Benefit the Bank, Not Consumers

Although HSBC overdraft charges are promoted by emphasizing its benefits, overdraft protection can be a big liability for some customers. Most consumers would rather not pay a $35 fee that enables them to purchase a $4 cup of coffee.

Many consumers don’t even remember opting in for overdraft coverage, which is sometimes branded with prestigious-sounding monikers.

Because many overdraft fees are incurred through ATM or debit card transactions, banks argue that by permitting these transactions to go through without the account containing the proper funds keeps the customer from the embarrassment of having a transaction turned down.

When reviewing disclosures and bank revenue data as reported to the Federal Deposit Insurance Corp (FDIC), Pew found that service charges such as overdraft fees and fees for non-sufficient funds “have more than doubled while interest income has decreased during the past three decades.”

Pew determined that people who make less than the national median income of $54,000 a year are most impacted by overdraft fees. “These people are likely to be living paycheck to paycheck to paycheck,” said Susan Weinstock, director of the consumer banking project at Pew. Nearly 25 percent of people paying overdraft fees paid the equivalent of a week’s worth of wages to such fees, according to the Pew report.

Consumers should not have to pay excessive HSBC overdraft charges or overdraft fees at other financial institutions due to unfair manipulation of their accounts. If you have paid HSBC overdraft charges, or if any other bank has issued charges that are unfounded or unfair, you could benefit from speaking with a lawyer regarding your legal options for financial compensation.

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