SEFCU overdraft protection policies are being investigated by consumer advocates for compliance with federal banking regulations.

Many banks and credit unions offer overdraft protection to their consumers, which advances funds or transfers money into a checking account from another account if a transaction exceeds the balance of the checking account. This can be convenient for consumers, but there is typically an overdraft fee associated with the service.

With the rise of mobile banking, fewer consumers are overdrafting their accounts, which means that banks and credit unions can rely less and less on overdraft fees to generate profits. To compensate for this decrease in overdraft fees, many financial institutions have increased their overdraft fees to around $35.

These fees can quickly add up to large totals, especially if banks implement deceptive overdraft protection policies.

Consumer advocates are concerned that SEFCU overdraft protection policies, as well as policies at other credit unions, are unfair and rigged to maximize the number of overdraft fees a bank can charge.

Some banks and credit unions have been accused of charging overdraft fees to consumers without overdraft protection, while others have been accused of reordering transactions to maximize the number of times an account is overdrawn. Further allegations suggest that banks and credit unions allow their consumers to repeatedly overdraw their accounts, leading to overdraft fees which stack upon each other and send an account further into the negative.

As of August 2010, banks are not allowed to charge overdraft fees to consumers unless they have already affirmatively opted into an overdraft protection program such as SEFCU overdraft protection. If banks are charging overdraft fees to consumers who have not opted into overdraft protection, they may be in violation of federal regulations.

The Consumer Financial Protection Bureau has been investigating overdraft fee policies across the industry and may issue new regulations based on their findings. However, rulemaking begun under the last presidential administration has been shelved and may not be resumed.

Even if the Consumer Financial Protection Bureau does implement new regulation, consumers currently facing deceptive overdraft practices will not benefit. For these consumers, pursuing litigation against their bank or credit union may be their best chance for recovering compensation.

Numerous banks are under investigation for potentially deceptive overdraft protection policies including Alliant Credit Union, Boeing Employees Credit Union (BECU), Educational Employees Credit Union (EECU) of California, Nationwide, Pacific Western, State Employees Federal Credit Union (SEFCU) of New York, and Sterling Bank (including customers of the former Astoria Bank).

Several lawsuits have already been filed regarding programs at other institutions similar to SEFCU overdraft protection. Legal action often targets undisclosed fee structures, mismanagement of funds, and other financial practices which cause harm to consumers. Some consumers allege that deceptive overdraft policies can cause serious financial harm to consumers due to the excessive negative balances racked up by repeated overdraft fees. These policies can be particularly harmful, plaintiffs allege, when overdrafting occurs due to an already precarious financial situation.

Several overdraft fee lawsuits have resulted in a settlement, providing compensation for harmed consumers. If you or a loved one were harmed by SEFCU overdraft protection policies or another credit union’s overdraft policies, you may be eligible to participate in an overdraft fee lawsuit investigation.

You may have a legal claim if your were charged excessive overdraft fees by one of these banks or credit unions:

• Alliant Credit Union
• Astoria Bank
• BECU (Boeing Employees Credit Union)
• Nationwide
• Pacific Western
• State Employees Federal Credit Union (SEFCU – New York)
• Sterling Bank
• Educational Employees Credit Union (California)

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