Many consumers have overdraft protection on their bank or credit union accounts without knowing exactly what that protection entails.

Overdraft protection generally means that if a consumer does not have enough money in an account to cover a transaction, the credit union will cover it. The protection comes with a catch, though, often in the form of a hefty fee.

Most credit unions, including the North Carolina State Employees Credit Union (SECU North Carolina), offer overdraft protection programs in which the financial institution will pay for the transaction and charge the customer a fixed “overdraft” fee, typically ranging from $25-$35 dollars per transaction.

Information about the specifics of overdraft protection plans are usually posted on the credit unions’ websites. The websites often present overdraft protection as a beneficial service to the customer, when in fact, some of the fees that accrue can cause significant financial damage to a customer.

SECU North Carolina credit union’s website states that the credit union offers overdraft protection with no fees for two separate days per years, but customers must enroll through the Overdraft Fee Free Days Program.

Other SECU credit unions may offer overdraft programs that consumers must opt in to, advertised as a secure, convenient safety net. They also offer customers an option to link their checking account to a line of credit or savings account, stating while there are no fees for this service, there may be interest charges.

Misleading Overdraft Protection Practices

Since July 1, 2010, SECU credit unions such as the North Carolina state credit union must ask customers to choose overdraft protection rather than enroll automatically. Yet despite this and other federal rules on overdraft fees that went into effect in 2010, many SECU credit unions may be using deceptive overdraft practices including:

• Misleading marketing for overdraft programs that are designed by the credit union to increase overdraft fees, but which the credit union refers to in consumer-positive terms such as “Overdraft Protection,” “Courtesy Pay,” or “Overdraft Coverage”
• Posting transactions from high to low, rather than in chronological order, in order to increase the number and amount of overdraft fees when the account is overdrawn
• Providing inaccurate balances to customers, leading them to unknowingly overdraft their account
• Delaying the processing of deposits
• Determining overdraft fees based on inaccurate balances

Credit Union Overdraft Fees Class Action Lawsuit Investigation

By law, overdraft protection programs are optional.  Failure by an SECU credit union or other financial institution to offer an opt-out or adhere to a consumer’s wishes with respect to overdraft protection is grounds for legal action.

A credit union class action investigation has recently been launched in response to consumer reports that many financial institutions like SECU North Carolina credit union (also known as North Carolina State Credit Union) may be improperly deceiving consumers with their overdraft fee practices.

Consumers who suspect they are being charged improper credit union overdraft fees may want to speak with an attorney, who can help determine if the charges were proper or improper and advise about possibly bringing a credit union overdraft fee lawsuit.

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