An investigation is now looking into whether there are unfair overdraft practices at HSBC Bank.

Boasting around 4,400 worldwide offices, HSBC Bank is one of the largest banking institutions in the world, serving over 45 million customers in 71 different countries.

According to the bank’s website, HSBC Bank offers a service called Select Credit for Overdraft Protection for customers seeking protection from non-sufficient fund overdrafts.

This service, subject to application and approval by HSBC Bank, functions like a pre-approved line of credit that automatically advances the customer a loan in case of overdraft.

HSBC Bank says that Select Credit can help customers avoid returned check fees, merchant fees and other hassles that often accompany bounced checks and declined debit or ATM transactions.

Are There Unfair Overdraft Practices at HSBC Bank?

Select Credit comes at a cost, though. Since it works like a line of credit, advances made using Select Credit accrue interest charges at variable interest rates, which as of this writing vary from 18.24 percent for cash advances to 22.24 percent for checks.

In addition to interest charges, Select Credit transactions incur a transaction charge not to exceed $10 per day for each day an advance is made to pay overdrafts on a checking account.

Penalty fees can also accrue, depending on how the customer uses Select Credit and pays off the resulting debt. Late payments, returned payments and exceeding the credit limit can all incur a $35 fee.

Other Practices Under Investigation

Whether there are unfair overdraft practices at HSBC Bank remains to be seen. Other institutions have been accused of such practices that aren’t immediately apparent from one look at their overdraft protection terms.

Overdraft fees have been big moneymakers for the banks and credit unions that charge them. According to the Consumer Financial Protection Bureau, larger U.S. consumer banks raked in about $11 million in overdraft fees in 2015, accounting for 8 percent of their profits.

Tops on the list of questionable practices is one known as reordering. This practice involves changing the order in which banks post debits to the customer’s account in a way that maximizes the number of transactions that incur an overdraft fee.

Generally, processing larger transactions before smaller ones tends to deplete the account funds earlier, making more of the later transactions qualify for an overdraft charge.

So, for example, a hefty mortgage payment made late in the day could overdraw the customer’s account and incur an overdraft fee, but so could a debit card purchase of a cup of coffee made earlier that morning if the bank changes the order in which it processes the two transactions.

Reordering has already been the subject of a series of overdraft practice class action lawsuits that resulted in over $1.1 billion in settlements. Even so, some banks continue reordering transactions, changing only the ways in which they disclose it to their customers.

Customers who believe they may have been on the receiving end of unfair overdraft practices at HSBC Bank may qualify to participate in the ongoing investigation free of charge.

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