Reports indicate that numerous credit unions and banks have been increasing the overdraft fees imposed on debit card balances, checks and ATM withdrawals. Suspicious SEFCU overdraft fees have led to complaints from those who allege these practices caused them unnecessary losses.

Unfortunately, as customers have become savvier about using mobile banking and text alerts to track their account status, some credit unions have turned to questionable overdraft practices to make up the difference in lost revenues. Consumers have complained that some banking overdraft programs, like those at New York’s SEFCU, may violate basic consumer protection rules and standards.

One overdraft fees class action lawsuit was filed about the charging of SEFCU overdraft fees. The plaintiff filed her complaint based on what she believes are deceptive checking account overdraft practices.

Some consumers allege that certain programs like the SEFCU overdraft protection program have led to consumers being wrongfully charged due to unfair overdraft fees.

Consumers say that credit unions are reordering transactions to obtain maximum fees. Once one transaction leaves the account balance below zero, overdraft fees can rack up quickly. Without realizing it, a consumer could be hit with hundreds of dollars in overdraft fees depending on the ordering of the transactions.

Although credit unions are allowed to charge overdraft fees, there are rules about how institutions give customers notice of the program’s terms, including their option to opt out of overdraft protection.  As of 2010, financial institutions cannot charge a member overdraft fees unless that member has chosen to participate in to the overdraft protection or overdraft coverage program. However, some consumers allege they’ve been charged inappropriate SEFCU overdraft fees regardless.

The lawsuit already filed over SEFCU overdraft fees, for example, alleges that in 2009 banks generated more than $37 billion from the charging of overdraft fees on ATM transactions and debit purchases. Credit unions have also been associated with questionable overdraft fee protection policies, since institutions have increasingly relied on the collection of these fees for revenue.

Some consumers argue that the SEFCU overdraft fees are a major source of revenue for the credit union, pointing out that one 2010 report by a Georgetown University law professor indicated that up to seven percent of the gross revenue of credit unions might have been drawn from overdraft fees.

Consumers argue that the charging of SEFCU overdraft fees, however, has to do with the credit union’s use of an internal artificial balance that is used to increase the overdraft fees collected from consumers.

The consumer complaints argue that SEFCU overdraft fees are charged when the credit union uses the balance in a customer’s account minus any anticipated future debits or deposit holds. Consumers refer to this as an artificial balance method. The artificial balance is often lower than the actual balance, making an overdraft more likely.

The plaintiff argues this practice does not comply with the method of charging SEFCU overdraft fees explained in the opt-in contract for overdraft protection.

Some credit union customers argue that this practice of charging overdraft fees, when there is plenty of money in the account to cover a transaction presented for payment, is inconsistent with the terms of the contract that the credit union presents to banking customers, leading to significant losses for account holders.

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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