An investigation concerning allegedly improper credit union overdraft charges has turned its scrutiny towards Patelco Credit Union based in San Francisco.

Members of Patelco have alleged their credit union overdraft charges may be improperly assessed. First, it’s important to note the difference between credit union overdraft charges and non-sufficient fund (NSF) fees.

What is the Difference Between Overdraft Charges and NSF Fees?

According to Investopedia, often the term overdraft charge is used interchangeably with NSF fee when they are two different things entirely. Nevertheless, the situation in which both are assessed is the same—not enough money in an account to cover incoming payments against the account.

If a bank refuses to pay the request for payment and sends it back, an NSF fee is assessed and the payee may also charge a fee to the consumer for its rejection. An overdraft charge, on the other hand, is assessed when a bank or credit union chooses to pay an incoming payment after transferring monies from associated savings or money market accounts or in good faith.

This is where overdraft protection steps in. Since 2010, legally financial institutions must ask you to opt-in or say “yes” to overdraft protection before they can charge you an overdraft fee. As indicated by the Balance, the opting-in is not necessarily a good idea. Rather than rejecting charges against an NSF account, banks will pay them and charge the patron—sometimes unfairly so.

What’s Wrong with Overdraft Fees?

As indicated by a recent Yahoo finance article, banks and credit unions in the digital age have gone to extraordinary means to secure the bottom line. Among those means is the purported reordering of transactions to maximize the ability to charge overdraft fees.

For example, suppose an account holder with $300 in their account makes a $50 purchase at 9 a.m. and a $270 purchase made at 4 p.m. If the $50 item were debited first as one might expect, the balance of the account would still be above zero by 4 p.m. when the second transaction was to be processed. But if the bank processes the $270 transaction first, there will not be enough money in the account to cover the $50 transaction, and it will incur an overdraft fee when it is processed.

If this practice continues without a credit union member’s knowledge, they may find themselves deeply “in the hole” with overdraft fees.

If you were charged overdraft fees or NSF fees by your bank or credit union that you believe are improper for any reason, the attorneys who work with Top Class Actions are ready to investigate these fees on your behalf.

Learn more by filling out the form on this page.

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This article is not legal advice. It is presented
for informational purposes only.