TD Bank Hit with Another Overdraft Fee Class Action Lawsuit

A class action lawsuit filed in Pennsylvania federal court accuses TD Bank NA of continuing to improperly charge overdraft fees despite reaching a $62 million settlement over the practice less than one year ago.

Several class action lawsuits related to TD Bank’s overdraft practice were consolidated into multidistrict litigation (In re: Checking Account Overdraft Litigation), which was resolved last year in a $62 million settlement. Those lawsuits alleged that TD Bank employed improper methods in order to maximize overdraft fees. Class Members of the TD Bank overdraft fee settlement included customers who were subjected to the improper practices between Dec. 1, 2003 and Aug. 15, 2010.

“However, many of the complained of practices continued as before, even after the class action settlement,” according to the class action lawsuit filed by Sheila and Emilio Padilla. “For example, TD continues to assess overdraft fees based purely on the improper reordering of debit card transactions from highest to lowest amount and to assess fees even at times when customers have sufficient funds in their accounts to cover all merchant requests for payment.”

The Padillas accuse TD Bank of taking advantage of its customers by attempting to maximize overdraft fees and failing to warn them if they had insufficient funds to complete a transaction. They allege the bank uses sophisticated software programs to generate overdraft fees by maximizing the number of overdrafts per customer.

According to the class action lawsuit, overdraft fees represent approximately 74 percent of the total service charges imposed on U.S. checking accounts. In 2009, banks reportedly collected more than $37 billion in overdraft fees. Overdraft fees disproportionately affect the poor, who are most likely to maintain low account balances. The imposition of overdraft fees further decreases their ability to maintain a positive balance and subjects them to even more overdraft fees.

“Before debit cards existed, banks occasionally extended the courtesy of honoring paper checks written on overdrawn or otherwise deficient accounts for customers who were typically in good standing,” the class action lawsuit says. “Banks extended this courtesy largely because third parties involved in the sales transactions allowed the customer to pay by check, expecting funds to be available and the check to clear. … The same considerations are not present when customers use debit cards.”

The Padillas seek to represent all TD Bank customers who were charged improper overdraft fees after the settlement class period ended on Aug. 15, 2010. The class action lawsuit asserts claims for breach of contract, breach of the covenant of good faith and fair dealing, unconscionability, conversion, unjust enrichment and violation of the Electronic Funds Transfer Act.

The plaintiffs are represented by Richard M. Golomb, Ruben Honik and Kenneth J. Grunfeld of Golomb & Honik PC.

The TD Bank Overdraft Fee Class Action Lawsuit is Padilla, et al. v. TD Bank NA, Case No. 2:14-cv-01276, in the U.S. District Court for the Eastern District of Pennsylvania.