The credit union overdraft policy at a Long Island financial institution has raised questions and is the focus of an investigation by private attorneys in anticipation of litigation.

A sizable number of banks and credit unions are being accused of having deceitful practices and misleading policies when it comes to overdraft fees, including processing transactions out of order and charging fees when the account hasn’t been overdrawn.

These practices have drawn scrutiny from the Consumer Financial Protection Bureau. However, new regulation will not provide any immediate relief for consumers who have already been stung by these questionable and allegedly exorbitant fees.

Teachers Federal Credit Union Overdraft Policy

According to its website, TFCU offers a few different overdraft protection plans presented as “an inexpensive, worry-free way” to avoid “costly fees for returned checks.” One of them automatically transfers funds from the account holder’s savings account when the balance of the checking account is insufficient to cover a transaction. TFCU also offers a line of credit of up to $20,000 that members can access through their checking accounts.

The credit union also offers a service it calls Privilege Pay, under which it will honor checks, Bill Pay and ACH transactions that would otherwise overdraw the account.

According its the current Schedule of Fees & Service, TFCU charges $8 for each transfer from a savings or money market account, and $32 for each Privilege Pay transaction.

How Financial Institutions May “Game” the System

In August 2010, new regulations went into effect prohibiting banks and credit unions from charging overdraft fees on one-time debit card and ATM transactions without an account holder’s affirmative opt-in. Put another way, in order to comply with these regulations, credit union overdraft policy must clearly state that a customer has to “opt in” or actually sign up for overdraft protection for these types of transactions before they can be charged for such a service.

The problem for these banks and credit unions is that, since these rules went into effect, and with the increasing use of online banking, customers are overdrawing their accounts much less frequently. This has deprived financial institutions of a lucrative source of revenue.

According to consumer complaints, some institutions have started processing transactions out of order so as to be able to maximize the number of fees that can be charged.

Other Possibly Deceptive Practices

A number of class action lawsuits allege that financial institutions allow customers to overdraw their accounts repeatedly without notification, thereby being able to charge multiple fees. Other complaints claim that bank and credit union overdraft policy at a given institution was not made clear or was confusing or deceptive in some way.

A common complaint stems from the practice of using “available balance” rather than actual balance as a basis for charging overdraft fees. “Available balance” refers to the actual account balance minus pending or pre-authorized transactions. Thus, an account holder may have sufficient funds to cover a transaction and could make a deposit later that day before the pending transaction went through, but would still be charged an overdraft fee.

Those who feel they have been unfairly assessed such fees may qualify to joint a free overdraft fees class action investigation.

If you were charged unfair overdraft fees by your bank or credit union, you could be eligible to participate in a FREE class action lawsuit investigation. If you qualify, an attorney will contact you to discuss the details of your potential case at no charge to you.

Fill out the form on this page now for a free, immediate, and confidential case evaluation.

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