Overdraft fees are costing consumers billions of dollars in banking and credit union fees.

Consumer protection attorneys are investigating the overdraft fees practices of several credit unions including Vystar Credit Union and several others.

For several years, consumer protection groups have been conducting studies that show how automatic overdraft programs are detrimental to consumers. Recently the federal government began looking into the issue as well.

In 2007, the Center for Responsible Lending conducted an extensive study that revealed consumers pay over $17.5 billion annually in overdraft charges. According to Jean Ann Fox, the Director of financial services at the Consumer Federation of America in Washington, D.C., these numbers show that financial institutions like Vystar Credit Union are making a huge profit off their customers.

Fox suggests that the United States is in trouble if banks and credit unions have to depend on overdraft charges in order to stay afloat.

What is Overdraft Protection?

Overdraft protection is a service that allows consumers to make purchases with their debit cards when their accounts have insufficient funds. There are several ways a credit union like Vystar Credit Union can charge overdraft fees.

Customers can have their debit cards linked to a secondary account that automatically transfers money from one account to the other when the account is overdrawn. Credit Unions may charge as much as $5 or more each time this service is used.

Another way a consumer may incur overdraft fees is by setting up a line of credit with the bank to cover overdraft charges. The main charge for this service is in the interest rates charged on the advanced funds. According to the federal overdraft fee studies, a typical interest charged on these advanced loans is 18 percent.

The third way overdraft fees can be incurred is through automatic overdrafts. Federal law currently requires consumers to opt into this protection. Overdraft fees can vary from financial institution to financial institution. In 2007, the national average for a credit union overdraft fee was $29. Vystar Credit Union charges its members $32 for each overdraft charge.

Vystar Credit Union also warns its customers that it may not process transactions in the same order that they were made. This can cause the customer to incur more fees that normal. For example, if a customer has $50 in their account and makes three purchases of $10, $15 and $45 in that order, the customer would incur one overdraft charge for the $45 purchase. But if Vystar Credit Union processes the the charges in reverse order $45, $15, and $10 the customer will incur two overdraft charges.

Consumer protection attorneys are looking for potential plaintiffs to bring overdraft fee lawsuits against various credit unions like Vystar Credit Union. These lawsuits will likely allege that the credit unions violated consumer protection laws. Lawsuits like these can help hold credit unions and banking institutions accountable for their actions. Plaintiffs who bring successful credit union lawsuits may receive compensation for their troubles.

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