Bank overdraft fee practices have gotten plenty of attention over the past few years. With the recent financial crisis and the onset of many new banking regulations, some banks and credit unions have sought out other ways to increase revenues.

One such tactic has been to maximize the funds collected through overdraft protection fees. These institutions have engaged in certain practices – considered abusive by many consumer advocates – to increase fee revenue at their customer’s expense.

Such practices include failing to adequately disclose the terms of their overdraft protection policies, or reordering transactions in a way that increases the number of fees.

A class action investigation is now going on to examine the overdraft fee practices at many financial institutions, including People’s United overdraft fee practices. The investigation applies to banks and credit unions, from large nationwide organizations to smaller regional institutions.

Consumer advocates are interested in hearing from customers of these institutions to learn more about their overdraft fee policies and evaluate them for compliance with applicable laws.

People’s United Overdraft Fee Practices

One of the institutions falling within the investigation is People’s United Bank. People’s United offers personal banking, commercial banking, and wealth management services at almost 400 retail locations in six northeastern states.

According to the bank’s website, People’s United automatically includes a standard overdraft processing service with each new checking account.

Under this policy, the bank may choose to pay transactions that would otherwise result in an overdraft. The bank reserves discretion under this policy to cover such transactions or not, so coverage of these overdrafts is not guaranteed.

This default policy applies to checks, certain check-related transactions, and automatic bill payments, including ACH withdrawals. Customers who want the same service for ATM and one-time debit transactions may opt into that coverage.

For this default service People’s United overdraft fee practices include an Overdraft Item Fee of $37. The bank limits assessment of these fees to five per day, and it will not assess this fee if at the end of the day the account is overdrawn by less than $5.

In addition to the default option, People’s United overdraft fee practices apply to two types of overdraft protection.

Customers can use a Personal Credit Line to cover transactions that would otherwise overdraw the account. People’s United may approve a credit line between $500 and $5,000 for this purpose.

The Personal Credit Line works like an automatic loan. People’s United overdraft fee practices include charging the customer interest on the balance advanced under this option.

The other alternative is called Overdraft Protection Sweep. This service links the customer’s checking account to their People’s United savings account. When transactions are presented that would overdraw the checking account, People’s United automatically transfers funds from the linked savings account to cover the transaction.

People’s United overdraft fee practices include a $10 per transaction charge for Overdraft Protection Sweep.

Overdraft Fee Practices Investigation

Whether these or other practices at People’s United comply with applicable laws remains to be seen. Determination of compliance is a detailed process, and as with all things legal, the details matter.

Customers of People’s United who believe they may have been subject to improper overdraft fee practices may qualify to participate in this investigation free of charge.

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