Overdraft fees are common annoyances customers experience from their banks or credit unions, which incur when the customer’s account becomes overdrawn. While overdraft fees are commonly practiced in credit unions and big banks, like HSBC bank, some overdraft fees may be improperly charged to customer’s accounts and could potentially trigger legal repercussions.

According to a recent report published by the Consumer Financial Protection Bureau, Americans paid $15 billion in insufficient fund fees for bounced checks and overdrafts in 2016. In addition, the report found that overdraft fees cost United States consumers $3.5 billion on an annual basis, with an average $442 per customer.

Since August 2010, it has become illegal for banks and credit unions to automatically sign-up customers for overdraft protection and that they must sign up themselves. However, a recent online survey conducted in August 2017 by Harris Poll and finance website NerdWallet found that 66% of customers were not aware that overdraft protection was optional.

In addition, many consumers do not know how small a transaction can be and still trigger an overdraft fee. While banks do not charge overdraft fees on purchases of $5 or less, 20% of consumers do not know that overdraft fees can incur in purchase amounts of $20 or less.

Overview of Overdraft Protection

Even with federal law in mind, the CFPB report found that eight million customers who were frequently subjected to overdraft fees had faced $3.5 billion in total.

Even with this troubling statistic, other studies have found that overdraft fees are gradually decreasing. According to a survey conducted by Bankrate.com, overdraft fees have been decreasing by 0.1% within the last year for the first time in two decades.

The average American consumer incurs 2.07 overdraft fees per year, which totals up to $72 each year. However, this cost can quickly accumulate, especially when the fee is added to the purchase amount.

NerdWallet advises consumers in danger of overdraft fees evaluate whether they need to make their purchases immediately, or whether they can wait instead.

Overdraft fees were originally meant to provide a discrete and convenient solution for consumers needing to make quick purchases, but did not have a sufficient balance. When the customer’s primary account becomes insufficient, the bank or credit union steps in and advances the customer enough money to complete the transaction.

The overdraft fee is then paid back at a later time, but a negative balance can quickly accumulate if the customer is not careful. According to the HSBC Bank website, customers can opt for one of several overdraft protection plans.

While standard HSBC overdraft protection pays overdrafts for checks and pre-authorized automatic bill payments, the customer is expected to deposit funds quickly to pay for the overdraft. Alternatively, HSBC Bank offers the Select Credit plan, by giving the customer a line of credit that automatically transfers funds up to an approved credit limit.

Class action lawyers are now investigating overdraft fee practices of several banks and credit unions in the United States, including HSBC bank. Consumers who opted for HSBC Bank overdraft protection and faced some unusual charges can speak to a lawyer to determine eligibility for an overdraft fee lawsuit.

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