TD Bank Hit with Another Overdraft Fee Class Action Lawsuit

Despite having recently paid $62 million in an overdraft class action lawsuit settlement in 2013, TD Bank N.A. is facing new allegations of continuing to practice illegal overdraft policies to the detriment of their consumers.

Plaintiff Josh Koshgarian filed a new TD Bank overdraft fee class action lawsuit on Dec. 31, 2014, against the New Jersey based TD Bank and Toronto-Dominion Bank, its Canadian parent branch, that despite the recent overdraft class action settlement in a Miami federal court, TD Bank and its parent company have continued to practice “egregious” overdraft schemes to maximize revenues.

The 2013 overdraft class action settlement was established to provide relief to bank consumers who were improperly charged overdraft fees by TD Bank during the Class Period from 2003 to 2010. However, according to the latest TD Bank class action lawsuit, Koshgarian alleges TD Bank continued to collect excessive overdraft fees after the previously established Class Period, leaving hundreds if not thousands of potential Class Members without relief.

According to Koshgarian’s overdraft fee class action lawsuit:

“Significantly, defendants continue to assess overdraft fees based on the improper reordering of debit card transactions from highest to lowest amount and to assess fees even at times when customers would, but for the reordering, have sufficient funds in their account to cover all merchant requests for payment.”

The previously mentioned 2013 overdraft fee class action lawsuit against TD Bank was housed within a larger overdraft fee multidistrict litigation, known as In re: Checking Account Overdraft Litigation, which hit many banks who allegedly practiced illegal overdraft activities. However, Koshgarian claims that among a few other financial institutions, TD Bank stands out because it “continues these practices even after it settled claims of wrongdoing based on these very same practices.”

When a bank consumer’s would bounce, banks used to waive the overdraft fees. However, our current era of overdraft-protection plans has changed the landscape and practices of many banks. In this new overdraft fee class action lawsuit, Koshgarian claims overdraft fees created as much as $17 billion in revenue for banks during the 2007 year alone, demonstrating the lucrativeness of overdraft fee practices.

“The number nearly doubled in 2008, as more and more consumers struggled to maintain positive checking account balances,” Koshgarian alleges in the overdraft fee class action lawsuit. “In 2009, banks brought in $37.1 billion in overdraft charges alone. TD Bank has over $200 billion in assets and over 1300 branches, and has been a notable beneficiary of these staggering overdraft charges.”

Koshgarian further alleges that individuals most likely to maintain a low bank balance are often the poor, meaning that overdraft fees have an unequal effect on consumers depending on their socioeconomic class. By nature, banks like TD Bank have the power to decline a debit card transaction when a consumer has insufficient funds, or also have the option of warning their bank account holders of low funds and the subsequent overdraft fee that will be charged should they proceed with their transaction. However, Koshgarian claims that TD Banks and other financial institutions do not attempt to protect their consumers, and instead proceed with the transaction and then charge their bankers an overdraft fee.

“Even more egregious, customer accounts may not actually be overdrawn at the time the overdraft fees are charged, or at the time of the debit transaction,” the overdraft fee class action lawsuit continues. “In these instances, defendants manipulate and alter the timing of the customer’s transactions, in a manner inconsistent with Defendants’ contractual obligations, in order to maximize overdraft fees imposed on the customer. Thus, it is through manipulation and alteration of customers’ transaction records in a manner inconsistent with defendants’ contractual obligations that defendants maximizes overdraft fees imposed on customers.”

Koshgarian brings several allegations against TD Bank, including claims of  bad faith, breach of contract, violation of the Electronic Funds Transfer Act, and other federal and state-based claims. The plaintiff is seeking injunctive relief and damages for himself and for a Class of similarly situated TD Bank consumers.