Overdraft protection as HSBC has recently been updated to be more consumer friendly after the bank agreed to pay a $30 million settlement to resolve numerous improper overdraft fee allegations.

Even though a settlement was reached for the HSBC overdraft fee class action lawsuit, there still may be consumers affected by overdraft fees that allegedly incurred from overdraft protection at HSBC.

The HSBC overdraft fee class action lawsuit alleged that the bank had allowed customers to use their debit cards to make purchases, even though their accounts were overdrawn. This would ultimately result in overdraft fees at $35 per overdraft, which compromised the financial situations of many consumers.

In addition, the previous overdraft protection at HSBC had utilized a software program to index transactions based on amount rather than date. This would drain the accounts at a faster pace, and would result in more overdrafts.

“[I]f a customer has an account with a $50 balance and makes four transactions of $10 and one later transaction of $100 the same day, HSBC debits the transaction from the account largest-to-smallest, thus subjecting the customer to four overdraft fees. Conversely, if the $100 transaction were debited last (in the order it was made), the customer would only be subject to one overdraft fee,” according to the HSBC overdraft fee class action lawsuit.

Overview of Overdraft Protection at HSBC

Overdraft protection is supposed to provide consumers a flexible line of financial relief when their accounts become temporarily overdrawn. When a transaction is presented that would overdraw the account, the bank loans money or transfers funds from a secondary account to cover the transaction. An overdraft fee may then be incurred, and the consumer pays the total amount back at a later time.

However, HSBC and other financial institutions have been allegedly abusing overdraft protection to charge extra fees against consumers for years. The overdraft protection at HSBC allegedly left consumers facing a maximum of three overdraft fees per day.

This means that HSBC could potentially charge up to $105 per day at $35 per overdraft, after the account was already overdrawn. HSBC had reportedly reached a “secret deal” with state plaintiffs in March 2015 to allegedly avoid the federal class action lawsuit. Last October, New York Supreme Court Judge Eileen Bransten had granted initial approval of a $30 million settlement.

At this point in time, the bank maintains that it had conducted no wrongdoing and that the previous overdraft protection at HSBC did violate any state or federal laws. However, the bank agreed to the settlement terms in order to conclude the litigation.

The HSBC overdraft fee class action settlement applies to all HSBC customers in the United States who incurred one or more overdraft fees in alleged result of the overdraft protection at HSBC. The class period is between Dec. 17, 2004 and June 30, 2010 for consumer accounts, and Dec. 17, 2004 and Nov. 30, 2011 for business accounts.

It is important to note that consumers who had an HSBC account and was closed due to a negative balance and is still insufficient despite settlement payment are not eligible. Current HSBC consumers should review bank statements that show their transaction history, and should be vigilant for any potential improper overdraft fees.

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