Overdraft practices at U.S. financial institutions have been receiving an increasing amount of attention due to reports that some of these practices have resulted in customers paying excessive amounts for these services, sometimes without even realizing they had signed up for them.

Even when overdraft fees themselves are not particularly high, the way institutions assess them can generate a surprisingly large penalty for the customer.

Some institutions have been taken to task for practices like “reordering,” in which the institution pays debits in the order of largest to smallest. Reordering can deplete the account funds sooner, making more transactions subject to overdraft fees.

The Consumer Financial Protection Bureau has been studying overdraft practices and is currently considering issuing new rules to curb the alleged abuses.

Meanwhile, class action attorneys are investigating these practices at several different banks and credit unions to get an idea of what legal options these institution’s customers and members may have at their disposal.

Investigation Examines Overdraft Practices at America First Credit Union

One of the institutions within the overdraft practices investigation is America First Credit Union. According to the Utah-based credit union’s website, it was originally founded in 1939 in Salt Lake City, Utah.

America First explains its overdraft practices on its website. By default new America First Credit Union members get signed up for a service called Overdraft Service. This pertains to transactions from checks, ACH debits and other payments/withdrawals in the checking account authorized by the consumer.

However, debit card purchases are not covered without the consumer expressly opting in to the service. If members do not opt in, their debit cards transactions will be denied if their checking account does not have sufficient funds to cover the transaction.

Overdraft Service does not apply to debit card purchases or similar debit transactions, unless the member opts in to that service. Regulations effective since 2010 require the member to opt-in before an institution can cover debit card purchases with overdraft protection.

Members may sign up for the Overdraft Service by visiting a branch, signing up online, or calling the credit union customer service number.

America First Credit Union claims to offer the service for added security of having funds available when needed, it is convenient to offer a bridge to overcome a lack of funds and it may serve to eliminate the embarrassment of having a retailer deny your transaction.

While America First Credit Union does not charge members to opt in to the service, it does charge a per-transaction fee of $25 to use the service if your transaction makes the Checking and Line of Credit accounts negative.

This fee applies to a variety of transactions including checks, ACH transactions, other payments and withdrawals or debit card transactions.

“Most members never use Overdraft Service and therefore do not pay fees, but it is nice to know that if it does happen, you are covered,” states America First Credit Union.

Prior to signing up for the service, the credit union encourages members to refer to the disclosure for important details surrounding the service and its use for debit card transactions.

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