Meriwest Credit Union, a San Francisco Bay area financial institution, is one of several credit unions and banks under investigation for their practices regarding the levying of overdraft fees and management of overdraft protection programs.

According to the credit union’s official website, Meriwest overdraft fees can be assessed an unlimited number of times per day.

Each time an overdraft is paid by the credit union – that is, when the credit union covers payment of a charge the member makes in excess of what the member has in their account – Meriwest overdraft fees are assessed at $35 per event, the website states.

A look at several different banking websites would, on the surface, reveal that a $35 overdraft fee is not unusual by today’s banking standard. What is unusual and gaining attention are the methods by which certain financial institutions arrive at a negative balance.

Meriwest Overdraft Fees Possibly Assessed After Reordering Transactions 

Meriwest overdraft fees are unlimited by their own report. Assuming several transactions destined to be debited from a single patron’s account come in within the same 24-hour period, the credit union has total control which of those transactions are posted first, as they reserve the right to determine the order in which transactions post to the account.

What has come to the attention of consumer advocates, however, is that many financial institutions allegedly process and post the highest value transactions first rather than as they chronologically are presented to them.

With the largest transactions posted first, the likelihood of a zero balance being reached faster increases. Once that happens, each transaction after that incurs overdraft fees until the patron catches the error and puts money into the account to cover the transactions.

This situation is of course more problematic to low-income patrons of the credit union in that just to get the account back up to a positive balance may take all the money they have to live on until their next payday. This sets them up to incur other overdraft charges and creates a vicious circle of debt.

Other Deceptive Practices Under Investigation

Some financial institutions are also under investigation for pressuring patrons to unwittingly sign up for overdraft protection plans at the outset of their accounts to purportedly save them money in fees.

With overdraft protection plans, a savings account or money market account is linked to the main account and money is transferred when the account dips to a negative balance state.

The fees are supposedly less for this transfer of funds, saving the customer money, but the practice of reordering still may be occurring. This allows the financial institution to make a profit off the customer while his savings slips away.

In addition to Meriwest Credit Union, overdraft practices are being investigated among several banks and other financial institutions such as Bank of Oklahoma, Boeing Employees Credit Union, People’s United Bank, Alliant Credit Union, First Hawaiian Bank, American Airlines Federal Credit Union, Commerce Bank, Pentagon Federal Credit Union, UMB Bank, America First Credit Union, HSBC Bank and First Technology Credit Union.

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