NSF Returned Item Fee Charged Multiple Times, Says Plaintiff

A recent class action lawsuit alleges that TD Bank of New Jersey has been charging customers an NSF returned item fee multiple times on a single transaction.

In other words, when the amount of money in an account is insufficient to cover a transaction (such as a paper check or ACH payment) the bank is allegedly putting the charge through again and again, collecting a fee of $30 to $35 for each time the payment fails to go through.  As a result, even a small electronic transaction can incur hundreds of dollars in fees.

Lead plaintiff Mary P. alleges this to be an unfair and deceptive practice.

Overview of the Case

According to the complaint, Mary attempted to make a single ACH transfer via her PayPal account on Sept. 24, 2018. Because her account did not have sufficient funds to cover the payment, Mary says the transaction was refused and she was charged an NSF returned item fee in the amount of $35. Although Mary did not attempt to reinitiate or reauthorize the transaction, she says the transaction was re-submitted and again rejected – for which TD Bank charged her another $35 NSF fee.

Essentially, Mary’s bank made $70 on a single transaction – which it had allegedly resubmitted without her knowledge or authorization.

It was not the last time, says Mary in her lawsuit.

On Oct. 25, 2018, Mary says she attempted to make two small (under $5) transactions with her PayPal account. Again, she says the transactions failed, and she was charged a $35 NSF returned item fee for each attempt. A week later, the bank allegedly resubmitted them – again, without her knowledge or authorization. As a result, she incurred an additional $35 NSF returned item fees for each failed transaction.

This action by the defendant allegedly violates the Deposit Agreement Mary says she signed when she opened her account – that the bank would charge a single $35 NSF returned item fee for each “item,” payment, or transaction that is returned when her balance is insufficient to cover it.

NSF Returned Item Fee vs. Overdraft Fee

Banks and credit unions are allowed by law to collect a fee when a check is returned unpaid or an automatic clearing house (ACH) transaction is refused because of insufficient funds.

This is not the same thing as an overdraft fee. An overdraft fee is charged when a customer has opted in to an overdraft protection program. In this case,  the bank covers the shortage by extending the customer what amounts to a virtual line of credit. A returned item fee is essentially a penalty that is assessed when a customer fails to have enough money to cover a transaction.

Had the plaintiff signed an agreement for overdraft protection, the bank would have covered each transaction for a fee. In Mary’s case, she was penalized multiple times for each single failed transaction.

NSF Returned Item Fee Abuses Are Occurring Throughout the Industry

TD Bank is not the only financial institution that has been charged with this kind of “double dipping.” Other banks around the country are being targeted in class action and individual lawsuits over alleged returned item fee abuses.

Mary and other plaintiffs are claiming breach of contract and are seeking restitution for each wrongfully assessed returned item fee, an injunction preventing TD Bank from violating their depositors’ agreements, and applicable statutory damages.

The NSF Returned Item Fee Class Action Lawsuit is Case No. 18-11176, United States District Court for the Southern District of New York.