Overdraft protection at Meriwest Credit Union and other financial institutions may have been designed to make members pay more in overdraft fees.

According to consumer advocates, members may not fully understand the terms of overdraft protection at Meriwest when they first sign up for their accounts, putting them at risk for incurring more overdraft fees than they would have otherwise. In other cases, customers may not be given adequate notice of their option to opt out of the overdraft program.

These tactics can force customers to pay overdraft fees for a program they may never have wanted—or even understood—in the first place.

What is Overdraft Protection?

It’s common practice for banks and credit unions to offer what they call overdraft protection programs. These programs, including overdraft protection at Meriwest, afford customers a certain amount of cushion when they overdraw their account.

Instead of rejecting transactions that would overdraw the account, overdraft protection at Meriwest and other banking institutions allow customers to actually pay these transactions successfully, despite not having the money in their account to cover the payment. In return for this protection, customers are charged an overdraft fee on top of the transaction to cover the transfer of funds.

Undoubtedly, many bank and credit union customers have found overdraft protection to be a useful program. However, certain financial institutions have been caught structuring their overdraft fee practices to wring the most money they can out of their customers, or even trick them into signing up for an overdraft protection program they do not have all the information about.

In some cases, overdraft fees may be extremely high, and banks may even purposely reorder transactions to ensure they charge their customers the most in overdraft fees that they possibly can.

Deceptive Overdraft Practices

Banks rake in billions each year from their overdraft fee programs alone—so much so that critics say overdraft protection programs have essentially become their own side industry.

There are a few approaches that banks and credit unions can use to get even more money out of their customers through overdraft protection programs.

When customers are initially signing up for an account, employees may either misrepresent the full scope of the overdraft program, fail to explain the details, or downplay the high prices. Customers may find that they are not even given a chance to opt out of overdraft protection, and they may not even know that this option is available.

A bank or credit union can even intentionally reorder customer transactions to force them to pay more in overdraft fees. Normally, banks process customer transactions chronologically, the order in which they are made. But some institutions can purposely reorder transactions before processing, sometimes ordering them from highest to lowest payment.

Reordering can have a surprisingly significant effect on overdraft fees. By processing larger transactions before smaller ones, the institution can cause the account funds to be depleted sooner, causing more subsequent transactions to qualify for an overdraft fee.

Indeed, if all the large payments come first, each sequential payment that a customer makes is more likely to overdraw the account. Each payment on an overdrawn account will incur its own, individual overdraft fee.

Filing a Lawsuit Over Overdraft Protection Programs

Some customers who have been affected by deceptive practices have begun filing lawsuits against their banks and credit unions. If you have been subjected to unfair overdraft practices through overdraft protection at Meriwest or another financial institution, you may be able to join a class action overdraft fees lawsuit.

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