Overdraft protection at New York’s SEFCU and other similar programs may involve questionable practices intended to maximize overdraft fees.

Overdraft protection programs such as SEFCU overdraft protection are commonly offered by credit unions as a way for consumers to protect themselves from denied transactions. With these programs, transactions that would put a checking account into negative prompt the transfer of funds from a savings or credit account into the checking account, covering the transaction. This can be very convenient, but the process is almost always associated with an overdraft fee.

As mobile banking has become more popular, consumers are able to keep better tabs on their balances and therefore overdraft their accounts less frequently. In order to maintain their overdraft revenues, many banks and credit unions have raised their overdraft fees to around $35. These fees can quickly add up to over $100, especially if these institutions implement questionable practices when charges overdraft fees. Consumers who overdraft their accounts are often in a precarious financial situation which is only exacerbated by excessive overdraft fees.

Consumers are concerned that SEFCU overdraft protection and other programs are rigged against consumers in order to maximize overdraft fees. Unfair practices alleged by consumers may include charging overdraft fees to consumers who weren’t aware they had opted into an overdraft protection program. As of August 2010, banks and credit unions are prohibited from charging overdraft fees unless consumers have already consented and affirmatively opted into an overdraft protection program.

Institutions may also be conducting other controversial overdraft practices, including charging an overdraft fee based on available balance opposed to the actual balance. Because the available balance is usually lower than the actual balance on most accounts, using the available balance to calculate fees can result in more overdraft fees being charged.

Other potential violations of regulations include reordering transactions by amount in order to maximize overdraft fees and allowing consumers to repeatedly overdraft their account, resulting in several overdraft fees.

The repeated charging of overdraft fees achieved by deceptive practices can cause serious financial harm to consumers both in the short term and the long term.

The influx of consumer complaints has prompted the Consumer Financial Protection Bureau to investigate the overdraft fee practices across the banking industry. The findings of their investigation may result in new regulations, but these changes could be years down the road. Additionally, even if new regulations are instituted, they will only protect future consumers not the consumers who are currently suffering from unfair overdraft practices.

While the Consumer Financial Protection Bureau investigates overdraft fees, attorneys are doing the same. Legal experts are currently examining SEFCU overdraft protection along with programs at several institutions including Alliant Credit Union, Astoria Bank, Boeing Employees Credit Union (BECU), Educational Employees Credit Union (EECU) of California, Nationwide, State Employees Federal Credit Union (SEFCU) of New York, and Sterling Bank.

Deceptive overdraft programs such as SEFCU overdraft protection have already prompted numerous lawsuits. Litigation against offending institutions often accuses financial institutions of failing to disclose their fee structures, mismanagement of funds, and other deceptive practices.

You may have a legal claim if your were charged excessive overdraft fees by one of these banks or credit unions:

• Alliant Credit Union
• Astoria Bank
• BECU (Boeing Employees Credit Union)
• Nationwide
• Pacific Western
• Patelco Credit Union
• State Employees Federal Credit Union (SEFCU – New York)
• Sterling Bank
• Educational Employees Credit Union (California)

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