Several years ago when interest rates dropped, financial institutions began making money by charging fees, such as the overdraft fees at Star One Credit Union.

According to Pew Charitable Trusts, excessive overdraft fees have become an acceptable practice as banks more than doubled their revenue from fees and service charges between 1984 and 2015.

Banks actually 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.”

Why the Increase in Overdraft Fees at Star One Credit Union?

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

Overdraft fees at Star One Credit Union are big business. Star One offers “Courtesy Pay Service” of $15 per overdraft item. If you choose to cover overdrafts through a credit line loan or a Visa credit card instead, there is an interest charge based on the Annual Percentage Rate.

“Save possible merchant charges and the embarrassment of an inadvertent mistake,” says the website supporting overdraft fees at Star One Credit Union.

Pew examined bank revenue information from the Federal Deposit Insurance Corp (FDIC) and took a close look at fee schedules and disclosure statements of 44 of the 50 largest banks in the United States.

According to Pew, U.S. banks that held assets of more than $1 billion 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.

More than 40 percent of the banks showed they process transactions from the largest to smallest dollar amounts, reducing bank account balances at a faster rate, which results in more overdraft fees.

The standard charge at many banks is $35 fee per overdraft occurrence. Almost 80 percent of banks let ATM and debit transactions incur overdraft fees as well, instead of simply declining the transaction.

Overdraft fees are fixed, meaning the excessive overdraft fee will remain the same whether the account is overdrawn by $10 or $200.

Only 18 percent of account holders pay 91 percent of these excessive overdraft 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. The median overdraft fee was $34. The CFPB says, “Such a loan would carry a 17,000 percent annual percentage rate.”

If you believe you have been charged excessive overdraft fees by Star One Credit Union or any other financial institution, you could be eligible for compensation. A lawyer can help you sort your options.

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