After the success of several class action lawsuits against banks for overcharging overdraft fees, banks should get the message that unfair practices will not be tolerated.

Still, unscrupulous ways of raking in overdraft fee charges exist even today.

Banco Popular Allegedly Withheld Cash Deposits

Financial institutions such as Banco Popular have been accused of withholding the posting of deposits, even cash deposits, in order to subtract withdrawals first.

Consumers have reported making a cash deposit at Banco Popular followed by paying bills with checks or debit card transactions.

A few days later, the cash deposit still does not show on the account, but those subsequent purchases have gone through, resulting in hefty overdraft fee charges.

Instead of declining debit card purchases that will lead to an account being overdrawn, the bank lets more bad transactions through, allowing the overdraft fee amounts to add up quickly. The bank knows it will not be out any money because your deposit is there; the bank just has not yet posted it.

Overdraft Fee Charges

By posting debits and withdrawals in non-chronological order, banks can greatly manipulate the number of overdraft fee charges they collect.

The Pew Charitable Trust is backing new rules to make sure banks post transactions in a neutral way that doesn’t artificially inflate the number of overdraft fees it collects.

According to a new report by Pew Charitable Trust, 84% of U.S. banks charge overdraft fees when they allow consumers to overdraw their accounts due to insufficient funds.

They also determined the median overdraft penalty fee is $35, which means some banks charge more per overdraft and some charge less.

What Are My Rights?

According to a federal law that went into effect in 2010, banks must give consumers the choice to opt in to a bank’s program that would cover a purchase made when an account had insufficient funds.

Pew researchers found fewer than 50% of the people who had overdrawn their checking accounts in the prior 12 months recalled choosing such an overdraft protection.

“It doesn’t sufficiently protect consumers,” said Susan Weinstock, director of Consumer Banking, The Pew Charitable Trusts.

If a consumer has not opted in to the bank’s overdraft protection program, the debit card transaction would simply be declined if the account did not contain enough money to cover the said transaction.

If a consumer has consented to the coverage, the bank can let the transaction go through and charge a overdraft fee for doing so. That means if you only have $7 in your checking account and pay for a $10 hair cut with your debit card, it could cost you $50 if overdraft fees were added to it.

Pew reported that 68% of consumers said they would rather have a financial debit or ATM transaction declined rather than pay $35 to allow the transaction to go through.

The Consumer Financial Protection Bureau is formulating new rules and regulations regarding the overdraft fee protection practices to better inform and protect consumers, but these changes will take time to implement.

If you have banked with Banco Popular or another financial institution that charged you overdraft fees, you could have a legal claim.

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