Overdraft programs are marketed as protection for your bank account. But in just one year, Americans were reportedly hit with a whopping $15 billion in overdraft charges alone.

According to a report from the Consumer Financial Protection Bureau (CFPB), the government’s consumer financial watchdog, the average protected account was linked with $450 in overdraft charges. Of course, for some it was far less, but for others it may have been even more.

Unfortunately, those who are the most dramatically affected by these overdraft charges are often those who can afford them the least. According to the director of the CFPB, “our study shows that most consumers who frequently overdraft are financially vulnerable.”

The CFPB has been keeping an eye out for unfair overdraft charges and practices from banks all across the country. Santander Bank was fined $10 million for illegally forcing consumers to pay overdraft charges, as well as signing customers up for overdraft protection programs in the first place without their consent.

And overdraft charges are on the rise. The annual total in overdraft charges is up to $15 billion this year, up from $11.2 billion in 2015.

What is Overdraft Protection?

Overdraft protection programs are by now a standard feature at banks and credit unions all over the country. Overdraft programs can give customers extra padding in their checking accounts, allowing them to have money transferred to cover transactions even after they would have otherwise hit the bottom. This service is offered in exchange for a set overdraft fee.

But at some financial institutions, high overdraft charges and deceptive practices can cost consumers a substantial amount in overdraft charges. Overdraft charges vary from state to state and bank to bank, and the average fee is around $31, but some banks charge even more.

Every time a customer overdraws their account, they are hit with a pre-set amount in overdraft charges. However, overdraft fees compound. This means that for any additional transaction on an overdrawn account, a new fee is added. These overdraft charges can quickly add up.

This can have an extremely severe impact, especially for those customers who are already suffering from financial trouble and more consistently have less money in their accounts.

Unfair Overdraft Charges & Practices

There are several ways a bank can incur excessive overdraft charges. Back when a customer originally signed up for their account, they may not have been told all the details of the bank’s overdraft program, while others may not even be informed that they could opt out of the program in the first place.

Some banks reportedly make a practice of deliberately reordering transactions to collect more in fees. Banks can skew the order of customers’ transactions to charge the most overdraft fees possible.

Some banks may be reordering transactions from highest to lowest rather than chronologically, which makes each successive transaction increasingly more likely to overdraw the account. A large fee processed earlier can tip the account to overdraw earlier. With even more transactions following, more overdraft fees are allowed to compound, leaving customers to pay much more in overdraft charges than they expected.

Filing a Lawsuit Over Deceptive Overdraft Charges

HSBC Bank, Capital One, and other financial institutions are currently under investigation for potentially unfair overdraft protection policies. Last year, HSBC Bank settled a massive class action regarding its overdraft fee policies for $32 million.

If you have been affected by deceptive overdraft charges or practices from HSBC Bank, Capital One, or another bank, you may be able to file a class action lawsuit.

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