Unfair Overdraft Protection Charge Can Frustrate Consumers

Customers of banks and credit unions may be victims of questionable overdraft protection charge practices.

An overdraft protection charge is a fee that a bank or credit union charges to move money in order to pay for a transaction in the event of insufficient funds. This transfer may be from a linked checking account or the result of a loan. Overdraft protection charges may also be known as insufficient funds fees, courtesy pay fees, or something similar.

Overdraft protection charges typically range from $15 to $40 and banks allow anywhere from one to seven charges a day, ending with a possible total of $15 to $280 in overdraft protection charges per day.

Reports suggest that many banks and credit unions have been steadily raising overdraft protection charges to counteract the effect of fewer consumers overdrawing their accounts.

Additionally, consumers have reported that their transactions have been processed out of order in an effort to maximize overdraft protection charges. Purposefully processing transactions out of order is just one of several possible deceptive overdraft practices that credit unions and banks have allegedly used. Banks have also been accused of continuously allowing their customers to overcharge to their checking accounts regardless of insufficient funds, bringing about additional overdraft protection charges.

As of Aug. 15, 2010, financial institutions are prohibited from charging overdraft protection charges to customers unless they have opted-in to an overdraft protection program. However, banks and credit unions are still allowed to charge when checks or recurring electronic payments overdraw an account, even when the customer didn’t opt-in to overdraft protection.

There is no legislation or regulation regarding how much money can be charged for overdraft protection charges, meaning customers who opt into the program could still pay up to $35 for transactions that take them even $5 into overdraft.

Despite regulation intending to protect consumers against unnecessary overdraft protection charges, many institutions try to work within the loopholes to charge more. Several of these banks are within the scope of an overdraft fees class action investigation.

Banks and credit unions that are part of this investigation include HSBC, Capital One, First Hawaiian Bank, UMB Bank, Bank of Oklahoma, People’s United Bank, Commerce Bank, Pentagon Federal Credit Union, Boeing Employees Credit Union (BECU), Alliant Credit Union, First Technology Federal Credit Union, Star One Credit Union, America First Credit Union, Digital Credit Union, Vystar Credit Union, and American Airlines Federal Credit Union.

The Consumer Financial Protection Bureau has been investigating overdraft fee practices and may release new rules intending to protect consumers from unfair practices. However, new regulation does not help those who have already faced excessive overdraft protection charges. In these cases, consumers are turning to class action lawsuits to seek compensation for unfair overdraft protection charges.

Several banks have faced class action lawsuits over deceptive overdraft practices in recent years. Lawsuits against banks and credit unions may be filed over failure to disclose fee policies, mismanagement of funds, or other improper financial practices. In several cases, the overdraft protection charge class action lawsuits ended in settlements. Despite litigation against these actions, unfair overdraft protection charges may continue.

Join a Free Extended Overdraft Fee Class Action Lawsuit Investigation

If you have a checking account at one of the banks listed below and you were hit with an extended overdrawn balance charge or extended overdraft fee, you may be entitled to compensation.

• Fifth Third Bank
• BOK Financial
• Bank of Hawaii
• First Hawaiian Bank
• Capital One
• Bank of America
• TD Bank
• Citizens Bank
• People’s United Bank

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